EU's Too-Big-to-Fail Bank Bill Won't Be Withdrawn, Hill Says

  • Legislation has been kicking around in Brussels for two years
  • Parliament remains divided on issue of mandatory separation

Jonathan Hill, the European Union’s financial-services chief said he won’t pull the plug on a bill intended to tackle too-big-to-fail banks that’s bogged down in a divided legislature.

Asked in an interview in his Brussels office if he planned to heed calls from some bankers and European Parliament lawmakers to withdraw the legislation, Hill said firmly, “I don’t.”

Jonathan Hill
Jonathan Hill
Photographer: Matthew Lloyd/Bloomberg

The European Commission, the EU’s executive arm, presented a draft bank-structure plan in early 2014 -- before Hill’s tenure as commissioner began -- as a way to boost financial stability by separating banks’ retail operations from riskier investment banking. The Council of the European Union, which represents national governments and forms one half of the bloc’s legislature, reached a negotiating position on the bill in June 2015. But parliament, the other half, has made no progress on the proposal.

A proposal by Gunnar Hoekmark, the parliament’s lead lawmaker on the bill, was rejected by the Economic and Monetary Affairs Committee last May. A tentative compromise subsequently brokered by Hoekmark collapsed later in the year in the face of strong French-led opposition, leaving the committee fresh out of ideas and momentum on how to bridge the gap between the two main political groups, the center-right European People’s Party and the Progressive Alliance of Socialists and Democrats.

‘No Automaticity’

Hoekmark has consistently rejected proposals for the mandatory separation of investment and consumer operations, while the Socialists have pushed for a strong separation trigger in the bill.

“We have told the Socialist group that there shall be no automaticity,” said Hoekmark, a member of the EPP group. “The only option on the table is reasonable legislation based upon risk criteria, or we will reach a point where there is no common solution.”

In fact, Hoekmark said he had rejected a fresh proposal from the Socialists this week. “I prefer no legislation instead of bad legislation,” he said.

And Hoekmark appears to be in no hurry to cobble together a new compromise.

“There is a broader understanding that we must take stock and look at what we have achieved before proceeding with new legislation,” he said. “Let’s analyse the consequences, let’s see if we are lacking, or if we have some over-regulation. 2016 is a good year for such assessments.”

That jibes with Hill’s own approach, which focuses on providing certainty for markets and companies as soon as possible.

“People being in a situation whereby they kind of feel there’s an endless stream of future regulatory proposals coming down the track isn’t good in terms of wanting to create an environment whereby people can get on with making investment decisions, planning, and thinking about running their business,” Hill said.

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