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Ring-Fencing in Europe / Part I – The Concept of Ring-Fencing
Ring-Fencing in Europe / Part I – The Concept of Ring-Fencing
Contents
Chapter
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Page
1–22
Titelei/Inhaltsverzeichnis
1–22
Details
23–24
List of Abbreviations
23–24
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25–35
Introduction
25–35
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I. Overview
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II. Current State of Scientific Research
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III. Research Problem
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IV. Research Questions
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V. Scientific Approach
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A. Part I
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B. Part II
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C. The Concept of Ring-Fencing II
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VI. Methodology
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36–99
Part I – The Concept of Ring-Fencing
36–99
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I. Universal Banking Model
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A. Universal banking in Europe
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a. Definition
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1. “The entire range of financial services”
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2. Universal banking after ring-fencing
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b. Dominance
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B. Benefits and costs of universal banking
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a. Benefits
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b. Costs
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1. Access to the safety net: explicit and implicit subsidies
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2. Risk-taking, trading risks, culture and complexity
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II. Changes in the Realm of International Banking
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A. Change of banks’ business models
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a. Environment
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b. Relationship-based banking
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c. Market-based banking
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B. Proprietary trading and market making
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a. Proprietary trading
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b. Market making
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C. Bigger, more complex, more interconnected
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a. Bigger banks
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b. Complexity and interconnectedness
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c. Post-crisis response
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III. Bailouts and Too-Big-to-Fail
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A. Bailouts
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B. Bailout decision and too-big-to-fail
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C. Implicit subsidies
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D. Global systemically important banks (G-SIBs)
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E. Bank Size and TBTF
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IV. Structural Reform and Ring-fencing
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A. Structural reform as an umbrella term
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B. Ring-fencing as a structural reform: the concept of ring-fencing
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C. Ring-fencing and full separation
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a. Digression: The Glass-Steagall Act
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1. Reasons for the adoption of the Glass-Steagall Act
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2. Full separation
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3. Criticism and impact of the Glass-Steagall Act
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b. Differences between ring-fencing and full separation
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D. Ring-fencing and the activities ban
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a. Digression: The Volcker Rule
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1. Section 619 Dodd-Frank Act
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2. Activities ban
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3. Criticism
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b. Differences between ring-fencing and the activities ban
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V. The Basic Rationale and Goals of Ring-Fencing
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A. The basic rationale of ring-fencing
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B. Other benefits of ring-fencing
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a. Resolvability
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b. Subsidies and moral hazard
Details
c. Complexity and size
Details
d. Culture and competition
Details
C. Differences to recovery and resolution
Details
VI. Different Methods of Ring-Fencing
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A. Underlying assumption
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B. Two methods
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a. The defensive method
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b. The containment method
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VII. Attempt at a Definition
Details
A. Origins of the term “ring-fencing”
Details
B. Ring-fencing outside banking regulation
Details
a. From public utility companies to securitisations
Details
b. Results
Details
C. Ring-fencing in banking regulation
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a. Jurisdiction-oriented ring-fencing
Details
b. Activities-oriented ring-fencing
Details
c. Establishing a definition
Details
VIII. Results
Details
100–153
Part II – Legal Developments on EU Level
100–153
Details
I. Liikanen Report
Details
A. Mandate and structure
Details
B. Avenue 1
Details
a. Outline
Details
b. Costs and benefits
Details
C. Avenue 2
Details
a. Outline
Details
b. Costs and benefits
Details
c. Final proposal
Details
D. Results and discussion
Details
a. Reception by stakeholders
Details
b. Criticism of the Liikanen Report
Details
c. Characterisation and method of ring-fencing
Details
II. Commission Draft Regulation
Details
A. Introduction
Details
a. Importance of a harmonized approach
Details
b. Structure
Details
B. Scope of the draft regulation
Details
C. Separation of proprietary trading
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a. Prohibitions
Details
b. Discussion
Details
D. The conditional separation of trading activities
Details
a. Trading activities
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b. Review of trading activities
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c. Separation procedure
Details
E. Rules following a separation
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a. Activities restrictions
Details
b. Subgroups
Details
c. Exercise of power
Details
d. Designation
Details
e. Exemption for the United Kingdom
Details
F. Results and discussion
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a. Characterisation
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b. Implications
Details
c. Reception and criticism
Details
d. Method of ring-fencing
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III. Council of the European Union Negotiating Stance
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A. Introduction
Details
B. Scope
Details
a. Tiers
Details
b. Negative scope
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C. Separation of proprietary trading
Details
a. Mandatory separation
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b. Three-step procedure
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1. First step: prohibition of proprietary trading
Details
2. Second step: exemptions
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3. Third step: identification procedure
Details
c. Results
Details
D. The conditional separation of trading activities
Details
a. Assessment of other trading activities
Details
b. Results
Details
E. Rules following a separation
Details
a. Corporate structure
Details
b. Activity-restrictions
Details
c. Exemption for the United Kingdom
Details
F. Results and discussion
Details
a. Negotiating manifest
Details
b. Watered down
Details
c. Method of ring-fencing
Details
d. Influence of Germany and France
Details
IV. Withdrawal of the File and Alternatives
Details
A. European Parliament
Details
B. Withdrawal
Details
C. Alternatives
Details
a. Starting position
Details
b. Legislative options
Details
c. Existing regimes
Details
1. BRRD
Details
2. SRMR
Details
3. Results
Details
V. Results and Outlook
Details
154–305
Part III – Legal Comparative Analysis
154–305
Details
I. Banking Landscape
Details
A. United Kingdom
Details
a. Importance of the financial centre
Details
b. Number of banks their nature
Details
c. HSBC, Barclays, RBS, Standard Chartered
Details
B. Germany
Details
a. Importance of the financial centre
Details
b. Number of banks and their nature
Details
c. Deutsche Bank
Details
C. Switzerland
Details
a. Importance of the financial centre
Details
b. Number of banks and their nature
Details
c. UBS and Credit Suisse
Details
D. Results
Details
a. Importance of the financial centre
Details
b. Number of banks and their nature
Details
c. G-SIBs
Details
II. Preparatory Work and Legal Sources
Details
A. United Kingdom
Details
B. Germany
Details
C. Switzerland
Details
a. Decision against structural reforms
Details
b. Policy mix and core measure organization
Details
1. Organisational measures
Details
i. Emergency plan
Details
ii. Organisational measures to improve general resolvability
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2. Subsidiarity principle
Details
3. TBTF evaluation
Details
c. Legal sources
Details
1. Banking Act and Banking Ordinance
Details
2. Finma emergency plan assessment
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D. Results
Details
a. Expert commissions
Details
1. National focus
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2. Composition
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b. Legal sources
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1. Primary, secondary legislation, guidance
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2. Principle of legality
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3. Transparency
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c. Chronology
Details
d. Influence
Details
e. Invasiveness
Details
III. Who Is Subject to the Fence?
Details
A. United Kingdom
Details
a. Personal scope
Details
b. Threshold and exemptions
Details
c. Affected banks
Details
B. Germany
Details
a. Personal scope
Details
b. Threshold
Details
c. Affected banks
Details
C. Switzerland
Details
a. Personal scope
Details
b. Threshold and exemptions
Details
c. Affected banks
Details
D. Results
Details
a. Focus of the scope
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b. Personal scope
Details
c. Thresholds
Details
1. Clear cut thresholds?
Details
2. Consolidated basis
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3. Setting the threshold
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d. Other exemptions
Details
e. Affected G-SIBs
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f. Relation to expert commission recommendations
Details
IV. What Activities Fall on Which Side of the Fence?
Details
A. United Kingdom
Details
a. Ring-fenced body
Details
1. Core activities
Details
2. Core services
Details
3. Excluded activities and prohibitions
Details
b. Non-ring-fenced bodies
Details
1. Excluded activities
Details
2. Prohibitions
Details
c. Summary
Details
d. Affected banks
Details
B. Germany
Details
a. Non-ring-fenced body
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1. Excluded activities
Details
2. Exceptions
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b. Ring-fenced bodies
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1. Explicit activity restrictions for the financial trading institution
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2. Other activity restrictions for the financial trading institution
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i. First starting point: Financial service institution
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ii. Deliberate decision or editorial error
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iii. Second starting point: Objectives of the Act
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iv. Limitations
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3. Conclusio
Details
c. Summary
Details
d. Affected banks
Details
C. Switzerland
Details
a. Ring-fenced body
Details
1. Ex ante Separation
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i. Caveat
Details
ii. Mere planning?
Details
iii. Three options?
Details
2. Systemically important functions
Details
b. Non-ring-fenced bodies
Details
c. Affected banks
Details
1. UBS
Details
2. Credit Suisse
Details
3. Conclusio
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d. Summary
Details
D. Results
Details
a. Activities within the ring-fence
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b. Excluded activities
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1. Basis of the exclusion
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2. Activities
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3. Exceptions
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c. Ring-fencing method
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1. Ring-fencing
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2. Method of ring-fencing
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d. Flexibility
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e. Relation to expert commission recommendations
Details
V. Height of the Fence
Details
A. United Kingdom
Details
a. Capital and liquidity
Details
b. Governance
Details
c. Intragroup transactions and exposures
Details
d. Distributions
Details
e. Continuity of services
Details
B. Germany
Details
a. Financial trading institution
Details
1. Proper business organisation
Details
2. Regulatory requirements of the German Banking Act
Details
b. Capital and liquidity
Details
c. Governance
Details
d. Intragroup transactions and exposures
Details
e. Distributions
Details
f. Continuity of services
Details
C. Switzerland
Details
a. Legal sources
Details
1. Emergency plan assessment
Details
2. Resolvability incentives
Details
3. Relation between emergency plan and resolvability incentives
Details
b. Capital and liquidity
Details
c. Governance
Details
d. Intragroup transactions and exposures
Details
e. Distributions
Details
f. Continuity of services
Details
D. Results
Details
a. Elements of the fence
Details
1. Capital and liquidity
Details
2. Governance
Details
3. Intragroup transactions and exposures
Details
4. Distributions
Details
5. Continuity of services
Details
b. Other findings
Details
1. Character
Details
2. Ring-fencing in Switzerland
Details
i. Generally unnoticed
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ii. Special features of the Swiss approach
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iii. Considerable fence
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3. Ring-fencing
Details
4. Practical relevance
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5. Switzerland as a role model for the EU?
Details
VI. Timeline and Full Implementation
Details
A. United Kingdom
Details
B. Germany
Details
C. Switzerland
Details
D. Results
Details
VII. Results and Outlook
Details
306–308
Outlook
306–308
Details
309–342
List of Sources
309–342
Details
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Ring-Fencing in Europe , page 36 - 99
Part I – The Concept of Ring-Fencing
Autoren
Konstantin Oppolzer
DOI
doi.org/10.5771/9783748903451-36
ISBN print: 978-3-8487-6229-3
ISBN online: 978-3-7489-0345-1
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