I think there have been several structural reforms that have been implemented, especially in the UK for example with ring fencing. The same has not happened in the EU for a number of reasons.
Largely, I think, because politicians believe this is not necessary now that banks are required to hold much more capital. In principal this guards them better against adverse risks.
Secondly, in the EU, we’re relying much more on better resolution, so if the banks were to fail then regulators have much better tools to wind it down so that it doesn’t cost the tax-payers.The bank’s capital is their first line of defense, so if the bank starts to fail, this is what’s used and the equity holders take the first hit.
The resolution tools range from the capacity to restructure the bank’s organization overnight to a bail-in resolution (whereby some debt holders are written down as equity holders and then they have to pay when the banks starts to fail rather than the tax-payers.)
The thinking in the EU is that these two measures supersede the need to ring fence our banks.
Answered by: a German Bank Official
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