High-level Expert Group on reforming the structure of the EU banking sector
Chaired by
Erkki Liikanen


Table of content
LETTER FROM THE CHAIRMAN .......................................................................................................................... I
SUMMARY OF THE PROPOSAL ........................................................................................................................ III
EXECUTIVE SUMMARY .................................................................................................................................... IV
1 INTRODUCTION........................................................................................................................................ 1
2 AGGREGATE EU BANK SECTOR DEVELOPMENTS ...................................................................................... 3
2.1 INTRODUCTION .......................................................................................................................................... 4
2.2 CRISIS NARRATIVE ....................................................................................................................................... 4
2.3 LOOKING BACKWARD: EU BANK SECTOR DEVELOPMENTS LEADING UP TO THE CRISIS .............................................. 11
2.4 IMPACT OF THE FINANCIAL CRISIS ................................................................................................................. 19
2.5 DEVELOPMENTS SINCE THE FINANCIAL CRISIS .................................................................................................. 25
3 DIVERSITY OF BANK BUSINESS MODELS IN EUROPE............................................................................... 32
3.1 INTRODUCTION ........................................................................................................................................ 32
3.2 GENERAL FINDINGS ON THE PERFORMANCE AND RISKS OF DIFFERENT BANK BUSINESS MODELS ................................. 33
3.3 LARGE VERSUS SMALL BANKS ....................................................................................................................... 34
3.4 LARGE AND SYSTEMICALLY IMPORTANT EU BANKS ........................................................................................... 38
3.5 DIVERSITY IN EU BANKING: PUBLICLY INFLUENCED BANKING MODELS, AND COOPERATIVE AND SAVINGS BANKS .......... 56
3.6 CASE STUDIES: ILLUSTRATION OF BUSINESS MODELS THAT FAILED IN THE CRISIS ..................................................... 58
4 EXISTING AND FORTHCOMING REGULATORY REFORMS ........................................................................ 67
4.1 INTRODUCTION ........................................................................................................................................ 67
4.2 AGREED AND PROPOSED REFORMS ............................................................................................................... 68
4.3 STRUCTURAL REFORMS .............................................................................................................................. 83
5 FURTHER REFORMS OF THE EU BANKING SECTOR ................................................................................. 88
5.1 THE ROLE OF BANKS IN FINANCING THE REAL ECONOMY .................................................................................... 88
5.2 THE PROBLEMS IN THE EU BANKING SECTOR .................................................................................................. 88
5.3 EVALUATING THE CURRENT REGULATORY REFORM AGENDA ............................................................................... 91
5.4 DETERMINING THE NATURE OF FURTHER REFORMS .......................................................................................... 94
5.5 THE PROPOSAL ......................................................................................................................................... 99
5.6 THE EUROPEAN INSTITUTIONAL ARCHITECTURE ............................................................................................. 107
5.7 COMPETITION ........................................................................................................................................ 108
5.8 COMPETITIVENESS .................................................................................................................................. 108
REFERENCES ................................................................................................................................................. 110
LIST OF ABBREVIATIONS ............................................................................................................................... 116
APPENDIX 1: AGGREGATE DATA ................................................................................................................... 119
APPENDIX 2: PREVIOUS BANKING CRISES ..................................................................................................... 121
APPENDIX 3: FURTHER DATA ON SAMPLE OF EU BANKS .............................................................................. 123
APPENDIX 4: LITERATURE ON ECONOMIES OF SCALE AND SCOPE ................................................................ 130
A4.1 ECONOMIES OF SCALE—WHAT ARE THE BENEFITS (AND COSTS) OF LARGE BANKS? .............................................. 130
A4.2 ECONOMIES OF SCOPE—WHAT ARE THE BENEFITS (AND COSTS) OF FUNCTIONAL DIVERSIFICATION OF BANKS? ......... 132