Bank top brass to be held liable in EU overhaul of financial services industry

Source: European Parliament

Bank board members must be personally liable for mistakes and banks' riskier trading activities must be clearly separated from their more conservative lending ones, said MEPs on Wednesday, in a resolution setting out Parliament's priorities for a broad overhaul of EU banks.

The non-legislative resolution, an input to Commission proposals due in September, also stresses the need for more competition in the banking sector and for further reform of banks' remuneration and corporate governance structures.

Arlene McCarthy (S&D, UK), the MEP steering the position through Parliament told fellow MEPs "We need to deliver a change in culture... We are not out to ban activities but we want a structured and responsible universal banking model which can ensure funding to the real economy. Banking will always have risks but in a free market economy these should not be borne by very generous tax payer safety nets".

The resolution, adopted by 528 votes to 87 with 73 abstentions, identifies core principles for structural reform, including:

reducing excessive risks, ensuring competition, reducingcomplexity and limiting interconnectedness in EU banks, by separating banking activities that are essential for the real economy from risky trading and investment ones,

improving corporate governance and creating incentives forbanks to establish transparent organisational structures, increasing accountability and reinforcing a responsible and sustainable remuneration system,

strengthening personal liability and liability for boardmembers,

ensuring that essential retail activities continueuninterrupted by problems caused by the investment arm of a bank,

ensuring that risky trading and investment activities do notbenefit from implicit guarantees or subsidies, the use of insured deposits or taxpayer bailouts,

separating sources of funding and balance sheets for retailand investment activities and ensuring that capital is not shifted from deposits and credit activities to risky trading activities,

promoting effective, fair and sustainable competition amongbanks so as to develop a well-functioning and efficient banking sector which facilitates lending to the real economy by ensuring universal access to banking services and redservices and reducing the cost of banking services, and

ensuring that in the event of a bank's failure, depositorscan still have access to funds and that essential services credit, payment and deposit activities continue.

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