EU proposals ban proprietary trading outright

EU proposals ban proprietary trading outright

Large European banks will be the most affected.

Also on

press release
  • Impact on UK banks limited to prop trading ban
  • Challenge of policing boundaries: Volcker shows complexity of prohibiting prop trading
  • Structural separation will be complicated and costly

Commenting on the European Commission’s proposed regulation to improve the resilience of EU banks, Giles Williams, regulatory partner at KPMG, said:

“The proposed regulation has two main elements; the prohibition of proprietary trading and structural separation of trading activities from insured deposits.

“Although well trailed, the big surprise is the total ban on proprietary trading which goes beyond the original Liikanen proposals. From a UK perspective, this is the only part of the proposals that is likely to affect UK banks. UK banks will never be able to rebuild their propriety trading activities.

“The key challenges for management will be policing the boundary so they don’t stray into proprietary trading and applying the correct dividing line between retail and investment banking. The extremely complex and lengthy regulations introduced in the US to implement the Volcker rule show how difficult this is in practice.

“From a broader European perspective, the proposals would represent a major constraint on how large banks can operate. This marks a further step towards the end of the universal banking model.

“The structural separation of core deposit-taking and trading activities is both complicated and costly. This involves not only the creation of entities that are legally, economically and operationally separate, but also the continuous internal policing of the boundaries between these entities.

“Overall, the European Commission has tried to reconcile these proposals with existing regulations passed in individual member states. The principle of derogation is welcome.  

“These proposals signal an intentional push of risky trading activity into the shadow banking sector, which is likely to be the next target for regulation.”


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For further information please contact

Monica Fiumara,

Senior PR Manager, KPMG

T: +44 (0)20 7694 5674

M: +44 (0)7901 105180


KPMG Press Office: 020 7694 8773


About KPMG

KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with approximately 11,500 partners and staff.  The UK firm recorded a turnover of £1.8 billion in the year ended September 2013. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 155,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.  Each KPMG firm is a legally distinct and separate entity and describes itself as such.

This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.

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