Belgium Central Bank : Doubts Vickers-Type Bank Reform Would Work
07/06/2012| 05:39am US/Eastern
BRUSSELS--Belgium's central bank said Friday it had "significant doubts" that a strict ring-fencing of retail banks from investment firms would be effective in Belgium but that a number of structural reforms were worth considering.
In an interim report commissioned by the Belgian government, the bank looked at various proposals for dividing retail and investment bank activities, including the U.K.'s 2011 Vickers reforms.
The bank said that for several reasons, including the prevalence of cross-border financial institutions in Belgium and already high savings level compared to investment, implementing a sweeping ring-fencing of retail banks may not be effective.
"These issues raise significant doubts concerning the feasibility of an effective, unilateral application of the Vickers reform package in a country such as Belgium, where cross-border banks have a significant presence," the report said.
However, the central bank said there are various elements of the Vickers reforms that could be effective.
Among the measures the central bank said should be considered is a strengthening of the bank's powers to step in to resolve a domestic banking crisis and stricter limits on the intra-group exposures a Belgian bank can have to its subsidiaries.
The bank also said authorities should consider measures that would raise the costs of riskier investment-type banking activities--even without going as far as the Vickers report which prohibits retail banks from carrying out certain types of trading.
The bank also said authorities should consider reducing or removing the tax subsidies on savings to "broaden the channels through which Belgian savings can be invested in the real economy."
The bank will now take views from interested parties and said it will present a final report by the end of the year.
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