President Francois Hollande will today meet Credit Agricole SA Chief Executive Officer Jean-Paul Chifflet, head of the French banking federation, after parliament approved a bill to separate proprietary trading.
The French senate passed the banking bill yesterday, a day after the lower house cleared the way for its approval. While fighting financial “speculation” was a cornerstone of Hollande’s presidential campaign last year, his plan to segregate the riskiest banking activities is narrower than proposals to the European Union from a group led by Bank of Finland Governor Erkki Liikanen.
The bill makes France the first European nation to seek to move riskier banking activities away from traditional services, trying to take taxpayers off the hook for bailouts and protect depositors in the event of failure. The French plan requires banks including BNP Paribas SA and Societe Generale SA, the country’s largest, to split market activities not needed to finance the economy into separately capitalized divisions.
The French bank bill, prepared by Finance Minister Pierre Moscovici, also makes it mandatory for lenders to segregate holdings in hedge funds into separate units and bans high-frequency trading and own-money bets on agricultural derivatives.
Under the law, the French banking regulator will expand its oversight on winding down failing institutions and a “resolution fund” will be set up to minimize taxpayer losses. The resolution fund, financed by the banking industry, will reach about 10 billion euros ($13 billion) by 2020, according to the finance ministry.