News

At the end of January 2014 the European Commission presented its proposal on Structural Reform of Banks. The idea is to separate banks’ riskier trading activities from their deposit taking activities. The proposal however only applies to the banks that are so called “too-big-to-fail, too-big-to-save and too-complex-to-resolve”.

The proposal builds on the Liikanen report but is not as far-reaching. Originally it was proposed that the banks would automatically have to separate their activities but the proposal from the Commission only stipulates that supervisors would have the right to separate the bank’s riskier trading activities from its deposit-taking activities if the activities can compromise financial stability.

According to the proposal, banks can also be banned from proprietary trading, i.e. trading on own account with the sole purpose of profit making. As a third point, the proposal consists of rules on the separation activities and how the bank’s trading entity and deposit-taking entity would be legally, economically and operationally separate.

From an employee perspective there are several parts in the proposal worth a closer look:

Impact assessment

It is positive to note that the employment dimension was part of the impact assessment carried out prior to the publication of the proposal. It is something that we have pushed for in relation to many legislative proposals that have come out in recent times. When carrying out impact assessments on any foreseen measures in regard to a reform of the structure of the EU banking sector, the employment impact must be taken into account.

With this said, we also concluded that out of the whole assessment only two paragraphs relate to the consequences for current employees. The conclusions are lose, such as “likely to have some impact”. As the impact assessments for other stakeholders are more ambitious, we find this lack regrettable.

The question whether separation will create more or less jobs in the industry therefore still remains. To the extent possible, it needs to be ensured that changes foreseen do not lead to cost-cutting falling back on the employment situation and it is therefore important to have all the evidence possible on the table.

Whistleblowing protection

We are happy to see that our detailed and linguistic rectification on the matter has been picked up in this proposal.

These ensure internal procedures for employees through which they can report breaches and they safeguard the confidentiality of both the person reporting the breaches and the person allegedly having committed the breach at all stages of the procedure.

However, we would like to see this protection being applied to all employees including those on a temporary contract and persons outside the traditional employee relationship.

Employees also need to be informed about the rules, possible consequences and the positive value of reporting breaches.

Sanctions

We see it as important that the responsibility lies with the right legal entity. An employee who in good faith has followed internal rules, instructions or practises should not be punished for this. Inadequate routines, training or supervision should lead to responsibility being put on the employer as a legal entity. This is a question of good governance.

It further needs to be ensured that the proposal does not prevent the employee from confidentially discussing conditions and proceedings with a trade union representative.

Remuneration

We agree that remuneration policies should not encourage excessive risk-taking. It is crucial to have remuneration policies and practices in place that are consistent with and promote sound and effective risk management and corporate governance. But it needs to be clarified that the provisions on remuneration are without prejudice to the full exercise of fundamental rights guaranteed by Treaty on the Functioning of the European Union regarding the right of social partners to conclude and enforce collective agreements. Social partners can, and must be allowed to assume the responsibility of sound and sustainable remuneration principles.

Information and consultation

Separation has a significant impact on a banking groups’ legal, organisational and operational structure. Therefore it is imperative that procedures are established for informing and consulting with the employees before and throughout the separation on issues that concern them, such as on working and employment conditions. This should be done according to national law, or where applicable, such procedures can be established through collective agreements or other arrangements provided for by social partners.

It needs to be ensured that employees do not pay the price for the restructuring and in the long-term. We want to ensure that we have a stable financial sector with well-functioning governance structures creating a secure working environment for our members.

No progress is expected on the dossier until the new European Parliament and Commission is in place later this year.