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Balancing market liquidity: Bank Structural Reform caught between growth and stability

Vanessa Endrejat and Matthias Thiemann

Journal of Economic Policy Reform, 2019, vol. 22, issue 3, 226-241

Abstract: The European Commission’s proposal for a Bank Structural Reform (BSR) aimed at increasing banks’ resolvability through separating risky trading activities from deposit-taking institutions. In contrast to initial plans, the final proposal exempted market-making activities of banks. This exemption, we argue, was brought about by the Commission’s discursive framing of the BSR as a balancing act between stability and growth. Coupled with the incapacity to unambiguously measure the effects of the reform on market liquidity and on growth, this pushed the assessment of market-making from the technical to the political realm, leading to a reproduction of the prevalent market-based banking system.

Date: 2019
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DOI: 10.1080/17487870.2018.1451751

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Handle: RePEc:taf:jecprf:v:22:y:2019:i:3:p:226-241