To Ring-Fence or Not, and How? Strategic Questions for Post-Crisis Banking Reform in Europe

42 Pages Posted: 30 Dec 2014

See all articles by Jens-Hinrich Binder

Jens-Hinrich Binder

Eberhard-Karls-University - Faculty of Law

Date Written: December 30, 2014

Abstract

With the proposals of the United Kingdom’s Independent Commission on Banking (now enacted in legislation), the “ring-fencing” of core banking functions and their legal and commercial insulation against the risks emanating from investment banking has attracted wide-spread attention in both academic and regulatory circles world-wide. This concept is but one emanation of a broader move towards the segregation of commercial and investment banking, which is being accomplished in the United States under the so-called “Volcker Rule” (Dodd-Frank Act, § 619), in a number of Continental European jurisdictions under national legislation since 2012, and promoted within Europe by the recommendations of the Liikanen commission and a recent draft for an EU Regulation on structural measures improving the resilience of EU credit institutions. Moreover, the term has been used to describe older regulatory strategies employed by host-country authorities in cross-border settings, which involve the segregation of local branches and subsidiaries from a multinational banking, with a view to protecting domestic creditors against the fallout from the insolvency of foreign institutions both ex ante and ex post. Against this background, the present paper promotes an integrated, functional understanding of ring-fencing in the context of banking regulation and defines some core strategic questions for future structural reform of the European banking systems.

Keywords: EU banking regulation, Liikanen Report, ring-fencing, structural bank reform, Vickers Commission, Volcker Rule

JEL Classification: G01, G15, G18, G21, G24, G33, K19, K22, K23, L22

Suggested Citation

Binder, Jens-Hinrich, To Ring-Fence or Not, and How? Strategic Questions for Post-Crisis Banking Reform in Europe (December 30, 2014). Available at SSRN: https://ssrn.com/abstract=2543860 or http://dx.doi.org/10.2139/ssrn.2543860

Jens-Hinrich Binder (Contact Author)

Eberhard-Karls-University - Faculty of Law ( email )

Geschwister-Scholl-Platz
Tuebingen, 72074
Germany
++49-(0)-7071-29-76119 (Phone)
++49-(0)-7071-29-35283 (Fax)

HOME PAGE: http://www.jura.uni-tuebingen.de/professoren_und_dozenten/binder

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