Faculteit Rechtsgeleerdheid Academiejaar 2015-2016 IMPLEMENTING VOLCKER, VICKERS AND LIIKANEN COMPARATIVE ANALYSIS OF BANK STRUCTURE REFORMS Masterproef van de opleiding ‘Master in de rechten’ Ingediend door Robin De Vogelaere (Studentennummer 01102334) Promotor: Prof. Dr. Michel Tison Commissaris: Dhr. Maarten Cleppe 2 Acknowledgement I would like to thank the following people for their contribution to this work. First of all, I would like to thank my promoter, prof. Michel Tison, for providing me with an interesting topic for my master's dissertation and for his help during the writing process. Secondly, I would like to thank my father for proofreading the entire text and my girlfriend, Wiebke, for her help with the lay-out. Finally, I would like to thank my friends and family for their support; and in particular Karel, Vincent and Bertrand who were always available to run ideas by and to provide feedback. Table of Content INTRODUCTION......................................................................................................................1 PART I PURPOSE......................................................................................................................5 I. Purpose of the Volcker rule......................................................................................................7 II. Purpose of retail ring-fencing in the UK................................................................................8 III. Purpose of the separation in the Liikanen Report and its application in continental Europe .....................................................................................................................................................9 IV. Comparison and conclusions...............................................................................................11 PART II SCOPE OF APPLICATION.......................................................................................13 I. United States..........................................................................................................................15 II. United Kingdom...................................................................................................................18 A. Core activities..................................................................................................................18 B. Exemptions......................................................................................................................22 C. Requirement for UK deposit-takers that are not ring-fenced bodies...............................23 III. Continental Europe.............................................................................................................24 A. Liikanen Report...............................................................................................................24 B. France..............................................................................................................................25 C. Germany..........................................................................................................................29 D. Belgium...........................................................................................................................31 IV. Comparison and conclusions...............................................................................................32 PART III PROHIBITED ACTIVITIES....................................................................................35 I. United States..........................................................................................................................37 A. Introduction to the prohibition.........................................................................................37 B. Proprietary Trading..........................................................................................................38 1. Trading account...........................................................................................................38 a. Short-term Intent.....................................................................................................38 b. Market Risk Capital Rule........................................................................................39 c. Dealer, Swap Dealer or Security-based Swap Dealer.............................................41 2. Financial instrument....................................................................................................42 C. Exclusions........................................................................................................................43 D. Exemptions......................................................................................................................46 1. Underwriting activities................................................................................................46 a. Relevant activities...................................................................................................47 b. Assessment basis.....................................................................................................50 c. Other requirements..................................................................................................50 2. Market making activities.............................................................................................51 a. Relevant activities...................................................................................................52 b. Assessment basis.....................................................................................................54 c. Other requirements..................................................................................................55 3. Risk-mitigating hedging activities...............................................................................57 4. Other exemptions.........................................................................................................58 5. Limitations to the permitted activities.........................................................................59 E. Conclusion.......................................................................................................................61 II. United Kingdom...................................................................................................................62 A. Excluded activities...........................................................................................................62 1. Dealing in investments as a principal..........................................................................62 2. Commodities trading...................................................................................................64 3. Exceptions to the excluded activities...........................................................................65 4. Derivatives...................................................................................................................67 B. Prohibitions......................................................................................................................69 C. Conclusion.......................................................................................................................71 III. Continental Europe.............................................................................................................72 A. Liikanen Report...............................................................................................................72 B. France..............................................................................................................................72 C. Germany..........................................................................................................................75 D. Belgium...........................................................................................................................76 E. Conclusion.......................................................................................................................80 IV. Comparison and conclusions...............................................................................................81 A. General remarks..............................................................................................................81 B. Comparison of the prohibited activities...........................................................................82 C. Comparison to the Reports and purpose..........................................................................85 PART IV CONNECTIONS WITH ENTITIES CARRYING ON PROHIBITED ACTIVITIES ...................................................................................................................................................87 I. United States..........................................................................................................................89 A. Covered funds..................................................................................................................89 1. Definition of a covered fund........................................................................................89 2. Exclusions....................................................................................................................91 B. Permitted and prohibited relations with covered funds...................................................94 1. Ownership interest in or sponsoring a covered fund...................................................94 2. Permitted investments