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MEPs on Tuesday laid down their priorities for a broad overhaul of EU banks saying that board members needed to be personally liable when mistakes were made and called for a strong separation between the bank's riskier trading activities and its more conservative lending operation. The adopted text, a contribution ahead of Commission proposals in September, also focuses on needing more competition in the banking sector and further reform of remuneration and corporate governance structures.

Arlene McCarthy (S&D, UK), the MEP steering the position through the economic and monetary affairs committee welcomed the vote saying it sent the right political message to the Commission to come up with ambitious structural reforms. " Today’s vote is a clear message in favour of structural reform to ensure that banking services that are essential to the real economy are separated from the excessively risky activities of traders and investment bankers. Ordinary depositors and consumers must no longer pay for the excessive risks taken by banks with their money.”

The resolution was adopted in committee by 36 votes in favour, 3 against and 4 abstentions. It identifies core principles for structural reform, including:

  • Reducing excessive risks, ensuring competition, reducing complexity and limiting interconnectedness in EU banks by separating banking activities that are essential for the real economy from risky trading and investment activities;
  • Improving corporate governance and creating incentives for banks to establish transparent organisational structures, increasing accountability and reinforcing a responsible and sustainable remuneration system;
  • Strengthen personal liability and liability for board members
  • Ensuring that essential retail activities continue uninterrupted by problems caused by the investment arm of a bank;
  • Risky trading and investment activities should not benefit from implicit guarantees or subsidies, the use of insured deposits or tax payer bailouts;
  • Different sources of funding and separate balance sheets for the retail and investment activities and no capital shifted from deposits and credit activities to risky trading activities;
  • Effective, fair and sustainable competition between banks to ensure a well-functioning and efficient banking sector which facilitates funding to the real economy by ensuring universal access to banking services and reducing the cost of banking services
  • Ensure that in the event of the bank’s failure, depositors can still have access to funds and that essential services credit, payment and deposit activities continue

Next steps

The resolution is now expected to be adopted during the coming plenary session. It will feed into the Commission's work ahead of a legislative proposal scheduled to be presented in September.