At its core, bank structural reform involves separating retail and commercial banking from wholesale and investment banking, but regulators have developed different means of achieving this objective. Prior to January 29, 2014, there were two main approaches to bank structural reform: the US approach espoused by Paul Volcker and the UK approach espoused by John Vickers. The French and German approaches could equally be described as Volcker-lite or Vickers-lite. The EU Commission, however, has developed a proposal for EU-wide legislation that, by including elements of both the US and UK approaches, would create a third approach to bank structural reform consistent with neither the US approach nor the approaches of the individual EU member states. That proposal is currently being negotiated in Europe.
The argument as to which approach strikes the best balance between the costs and benefits of separating retail from wholesale and investment banking is unlikely to be resolved in the foreseeable future. However, this argument will be academic for the cross-border banks that will have to reconcile the different approaches and for the global investment vehicles which may well have to consider different options for restructuring in order to continue to secure bank investment.
In a three-part GFMI series, we will examine, first, the EU proposal for legislation; second, the UK legislation; and finally the continental approaches of France, Germany and Belgium, comparing each of these approaches to the US legislation. Please join Alexandria Carr of our London office and David Sahr of our London and Washington offices as they kick off our series by comparing the EU’s Liikanen proposal with the so-called Volcker Rule approach adopted as part of the 2010 Dodd-Frank Act in the US.
Mayer Brown’s Global Financial Markets Initiative helps clients deal with the legal and business challenges resulting from the ongoing turbulence in worldwide financial markets. By mobilizing the firm’s global resources from multiple practices and offices, the initiative provides clients with knowledgeable and timely counsel on a broad spectrum of their legal needs.