By Agency reporter

Wednesday, 5 Jan 2011                        

The European Union may give regulators power to block new products and limit trading risks at banks deemed too big to fail, as part of plans to protect public finances from future financial crises, Bloomberg reported on Tuesday.

National regulators of cross-border banks may be able to require ”changes to legal or operational structures” if the lender would need ”extraordinary public financial support” during a crisis, according to draft proposals obtained by Bloomberg News. 

The EU is aiming to avoid a repeat of the financial crisis that followed the 2008 failure of Lehman Brothers Holdings Incorporated and resulted in European governments setting aside more than $5tn to support banks. The plans echo calls from the Financial Stability Board for regulators to be able to force structural changes on banks. 

”They are clearly thinking along the lines that, if they believe that any institution is too risky to be salvageable, it should be broken up,” a financial regulation lawyer at Clifford Chance LLP, Simon Gleeson, said in an e-mail.

 

Source: Punch