Basel Committee on Banking and Europe’s Bank System
The body responsible for making legislative proposals to the EU decision making authorities, the Basel Committee on Banking Supervision, has recently warned political leaders that a stronger banking system needs to be established in the EU. Following the crisis in Greece, the continent might suffer even larger consequences because of the interconnectedness of banks in the region and especially those concerned with extensive Euro trade. The debt crisis is worsening which implies the need for new considerations of the Committee.
No matter whether you pay through a bank for IT support in London, or you decide to invest in bonds, the two activities are now conducted by universal banking. These means that traditional retail and wholesale banking is merging. In times of crisis, this would mean that the risk taking by banks might be quite more severe because of the availability of personal accounts money and investment money. This exposes to risk not only the personal accounts of millions of people in the Union but also the Union itself because should a bank collapse in this highly inconvenient time, the whole banking system would sustain severe damage.
This is the reason why the Basel Committee is due to make recommendations to the authorities on August 1st when a meeting between financial ministers in the Union would take place (still not officially confirmed though). The body would recommend higher capital requirements, liquidity checks to be conducted more often and a risk taking management exercised by a specially founded commission. However, these changes are coming in a time when Europe’s banks are pretending to be healthy enough to engage in their normal activities. Nevertheless, the element of universal banking remains a problematic banking practice by most of the institutions which implies further difficulties for EU economic recovery.
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