Liikanen bank reform proposals: reaction from Sharon Bowles MEP

Sharon Bowles (ALDE, UK), who chairs the European Parliament's Economic and Monetary affairs committee, today welcomed the publication of the Liikanen report on "possible reforms to the structure of the EU banking sector". Ms Bowles hoped that the Commission would take on board some of the recommendations, some of which previously pushed for by the EP but also warned of certain pitfalls.

Sharon Bowles MEP said:

"I welcome Commissioner Barnier's willingness to take on board and put forward more legislative proposals on the basis of the Liikanen report.

It is clear there needs to be a new approach to the way in which banks are structured given the impact such institutions can have on the economy, which citizens are still paying the price for now."

Bank activity separation

"The parliament has already been addressing some aspects of separating banks' activities as well as resolution and recovery plans in the context of the capital requirements directive. This has met some resistance, but I maintain it is still the case that such plans need to be in place at an early stage, and then reinforced with subsequent proposals.

"I have long promoted the approach of basing such separation around the resolution and recovery plans and I am glad that this has a place in the Liikanen report."

Bonuses

"It is good to see that the report also confirms the line that I and the Parliament wanted in the previous round of capital requirement legislation (CRD 3). Back in 2010 I proposed bonuses should be paid in subordinated debt, or CoCos, which was watered down as being too radical. We are attempting to undo that watering down in CRD 4, but so far the Commission has not backed the change. Maybe it will now."

Bank governance

"As regards increasing and strengthening bank governance and reporting requirements, again the parliament has already been addressing these in past and present negotiations on capital requirements."


Protecting pensions

"I am somewhat concerned about the implication of suggesting that a lot of the bail-in instruments be held by life insurance companies because that is where people's pensions are. The requirement may see them take the hit if there is a banking problem. I am glad therefore that this is indicated as a point that requires more work. The right line to me seems to look for diversity in holdings.

"I welcome the recommendation for a clear line in the hierarchy of bail-in instruments, this is vital."

Risk

"Finally I am also pleased to see that work is proposed on tail risk and systemic risks in the trading-book assets, this is long overdue. It may also mean looking at accounting rules.

"We in the parliament will, as ever, approach the proposals with ambition and determination."

ENDS

Note to editors:

Contingent convertible bonds ("cocos") are a simple concept: investors earn a fixed coupon in good times, but convert into equity if a bank encounters serious stress.

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