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EU Report Bad News for Continent's Biggest Banks

Banks across the European Union could be subject to stiffer regulations.

The European Union banking sector may face future regulations in light of a report about industry reform from the High-level Expert Group. The group was set up by Michel Barnier, the EU commissioner who oversees financial services, in order to determine whether the European Union banking sector

The European Union banking sector may face future regulations in light of a report about industry reform from the High-level Expert Group. The group was set up by Michel Barnier, the EU commissioner who oversees financial services, in order to determine whether the European Union banking sector needed structural reforms.

In the report, the group made several recommendations, including mandating that banks create separate legal entities to run proprietary trading and "other significant trading activities." The report authors said this requirement would not change the Europeans banking model or impede banks' ability to provide various financial services to customers. It would merely serve to keep deposit bank and trading activities separate.

Additionally, the group advocated for the creation of "more robust risk weights in the determination of minimum capital standards and more consistent treatment of risk in internal models."

The Financial Times reported that Barner had publicly announced that the group's advice would be reviewed during a consultation and impact assessment, but the newspaper notes that a law could be written and enacted within just 15 months. "Barnier is super-supportive and has full political backing from many European capitals," an unnamed source - identified as one of the "people close to the process" - said in an interview with the FT.