EU 'will recommend investment and retail banking split'

2 October 2012

European banks may have to separate their retail and investment divisions in order to make sure consumers are protected against future financial crises.

Later today (2 October), the European Union advisory group - led by Bank of Finland governor Erkki Liikanen and set up to assess conditions in the economic bloc's banking sector - will publish its recommended reforms to the industry.

And a source with knowledge of the panel's findings has told Reuters that among these plans is likely to be a clause that would force lenders to ringfence their operations.

Such a policy is set to be introduced in the UK and policymakers believe it will provide greater levels of banking stability by ensuring that investment deals that go wrong cannot adversely affect high street banks and their customers.

Meanwhile, financiers perceived to be at risk of encountering fiscal issues could also be required to hold larger capital reserves.

By Claire Archer

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