TY - UNPD A1 - Krahnen, Jan Pieter A1 - Noth, Felix A1 - Schüwer, Ulrich T1 - Structural reforms in banking: the role of trading T2 - SAFE white paper series, 33 [Version November 2016] N2 - In the wake of the recent financial crisis, significant regulatory actions have been taken aimed at limiting risks emanating from banks’ trading activities. The goal of this paper is to look at the alternative reforms in the US, the UK and the EU, specifically with respect to the role of proprietary trading. Our conclusions can be summarized as follows: First, the focus on a prohibition of proprietary trading, as reflected in the Volcker Rule in the US and in the current proposal of the European Commission (Barnier proposal), is inadequate. It does not necessarily reduce risk-taking and it is likely to crowd out desired trading activities, thereby possibly affecting financial stability negatively. Second, trading separation into legally distinct or ring-fenced entities within the existing banking organizations, as suggested under the Vickers Report for the UK and the Liikanen proposal for the EU, is a more effective solution. Separation limits cross-subsidies between banking and proprietary trading and diminishes contagion risk, while still allowing for synergies and risk management across banking, non-proprietary trading and proprietary trading. T3 - SAFE white paper series - 33 [November 2016] KW - banking KW - structural reforms KW - prohibition of proprietary trading KW - banking separation Y1 - 2016 UR - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/44000 UR - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-440009 UR - http://safe-frankfurt.de/de/policy-center/publikationen/detailsview/publicationname/-1ae74eb0eb.html IS - November 2016 PB - SAFE CY - Frankfurt am Main ER -