Government To Require Top Firms To Wall Off Prop Trading

French Finance Minister Pierre Moscovici is set to submit to the cabinet today a bill designed to force the country’s largest banks to fence off proprietary trading activities in dedicated units.

Bloomberg reports that the product of months of discussions between industry and government officials, the bill would require banks including BNP Paribas and Societe Generale to set up walls around market activities that are not necessary to financing the economy, Moscovici said November 15th at a conference in Paris.

President Francois Hollande, who called finance his 'greatest adversary' during his campaign this year, had pledged to overhaul banking by separating deposit-taking from speculative operations. Even so, the government, seeking to preserve a banking model that combines consumer banking with corporate and investment banking, is imposing milder changes than those proposed by the European Union and U.K.

'Most of the capital-market activities, under the disguise of so-called market-making operations, will stay in the deposit bank', said Christophe Nijdam, a Paris-based analyst at AlphaValue. 'This law is not going to protect the French taxpayer'.

The French push to create separate units for the riskiest trading follows recommendations from an EU-commissioned group led by Bank of Finland Governor Erkki Liikanen. Unlike the Liikanen proposals, the French bill will allow lenders to keep market-making operations within the main banking group.

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France to Require BNP Paribas, SocGen to Wall Off Prop Trading

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