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Good news for consumers as Commission proposes new rules dealing with banks which are "too big to fail"

31/01/2014

On Wednesday the European Commission adopted proposals aimed at those banks which are considered "too big to fail" This was the type of bank that, during the financial crisis, had to receive a bail-out from taxpayers to cover the mistakes made by bankers. This proposal complements a series of ambitious reforms that the EU has put in place in follow-up to the crisis to make sure this doesn't happen again, and to create a sounder, more transparent financial system that works for society as a whole.

The new proposals will bring real benefits for the public and consumers. These include a reduced risk of bank failure and a more resilient banking system. Banks will not be able to take certain types of risk and it will be easier to monitor and supervise their activities. The new rules would prohibit the biggest and most complex banks from engaging in proprietary trading ( i.e. speculative trading using own money as opposed to on behalf of customers), an activity which entails many risks but no tangible benefits for the bank's clients or the wider economy. In addition, if necessary, supervisors would have the power to require banks to separate certain other potentially risky trading activities from their deposit-taking business.

This should result in fewer, less costly bank failures to the benefit of all taxpayers and consumers.