BRUSSELS--Belgium's central bank said Friday it had "significant
doubts" that a strict ring-fencing of retail banks from investment
firms would be effective in Belgium but that a number of structural
reforms were worth considering.
In an interim report commissioned by the Belgian government, the
bank looked at various proposals for dividing retail and investment
bank activities, including the U.K.'s 2011 Vickers reforms.
The bank said that for several reasons, including the prevalence
of cross-border financial institutions in Belgium and already high
savings level compared to investment, implementing a sweeping
ring-fencing of retail banks may not be effective.
"These issues raise significant doubts concerning the
feasibility of an effective, unilateral application of the Vickers
reform package in a country such as Belgium, where cross-border
banks have a significant presence," the report said.
However, the central bank said there are various elements of the
Vickers reforms that could be effective.
Among the measures the central bank said should be considered is
a strengthening of the bank's powers to step in to resolve a
domestic banking crisis and stricter limits on the intra-group
exposures a Belgian bank can have to its subsidiaries.
The bank also said authorities should consider measures that
would raise the costs of riskier investment-type banking
activities--even without going as far as the Vickers report which
prohibits retail banks from carrying out certain types of
trading.
The bank also said authorities should consider reducing or
removing the tax subsidies on savings to "broaden the channels
through which Belgian savings can be invested in the real
economy."
The bank will now take views from interested parties and said it
will present a final report by the end of the year.
-Write to Laurence Norman at Laurence.norman@dowjones.com
