Balancing market liquidity: Bank Structural Reform caught between growth and stability
Vanessa Endrejat and
Journal of Economic Policy Reform, 2019, vol. 22, issue 3, 226-241
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.
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