Photo Gallery EU Weighs Splitting Up Major Banks
The two co-CEOs of Deutsche Bank, Jürgen Fitschen (L) and Anshu Jain (R), want to turn their company into the world's leading universal bank and see no need to discuss the possibility that they may have to split capital market activities from traditional banking.
Bank head offices in Frankfurt, Germany's financial capital. Change may be looming for Europe's banks. The EU Commission has instructed experts to investigate structural reforms that could lead to splitting up the major banks. Despite numerous reforms in the financial sector, there is one problem regulators have yet to solve: Many banks are so big that no country can afford to allow them to fail. This is why the government bailed out a number of financial companies starting in 2008, a move that allowed major banks like Deutsche Bank to grow even larger.
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The EU Commission asked Erkki Liikanen, the governor of the Bank of Finland to assemble a group of experts to look into reforms. The 11 experts have been instructed to pay particular attention to reforms in the United States and Britain. The US has a rule that largely prohibits banks from engaging in risky trading activity for their own accounts. The Vickers Commission in London has put forward proposals aimed at separating capital market transactions from banking activities that are vital to the functioning of the economy and the financial system, namely the lending and deposit business.
European Commissioner for Internal Market and Services Michel Barnier, a former French cabinet minister, is the most feared of the Brussels commissioners in European financial centers. He is already responsible for more than 30 EU regulations decreeing how banks and other financial market players are to do business in the future.
