Bank Structural Reform and Reporting and Transparency of Securities Financing Transactions

Thursday 19th June 2014 Written Statements

[The Economic Secretary to the Treasury (Andrea Leadsom)]

This Government have decided to opt in to the justice and home affairs (JHA) provisions within the European Commission’s proposals on structural measures to improve the resilience of EU credit institutions, and on the reporting and transparency of securities financing transactions.

The first proposal aims to improve the financial stability of the EU by reforming the structures of systemically important banks to make them more stable, and by prohibiting them from engaging in proprietary trading activities. The Government are in favour of this proposal as a means to reduce the implicit taxpayer guarantee which stems from the expectation that the largest banks will be bailed out by the taxpayer, which distorts the EU economy. This proposal is made under a legal base of article 114 (title VII) of the treaty on the functioning of the EU.

The proposal on reporting and transparency of securities financing transactions aims to improve the transparency of certain shadow banking activities by imposing reporting, transparency and consent obligations on firms engaging in such transactions. The Government are broadly supportive of this proposal as a means of increasing the transparency of the shadow banking sector and improving the information available to supervisors. This proposal is made under a legal base of article 114 (title VII) of the treaty on the functioning of the EU.

Both measures include a provision requiring law enforcement bodies to co-operate during the investigation of criminal offences. The relevant provisions are article 28(3) of the structural reform proposal and article 20(3) of the SET proposal. The Government consider that these are JHA obligations on which the Government should exercise their right to chose whether or not to participate.

The Government decided to opt in to these provisions. For those member states who choose to lay down criminal sanctions for breaches of the regulation, the provisions would aid international regulatory co-ordination. Trading activities are often cross-border, and will include activities conducted in other member states. Exchanging information with law enforcement bodies in other member states about specific criminal investigations could be helpful in enforcing such sanctions.