A guide to our regulatory
background

The European Commission issued a Draft Regulation to set out provisions for a prohibition on proprietary trading. EU banks with systemic importance (including all branches and subsidiaries), or any of the following entities with assets of at least €30 billion over the past three years, and trading activities that are at least €70 billion, or 10% of the entity’s total assets.

In the draft Regulation, European subsidiaries and EU branches of third-country banks may be exempt from separation if the Commission finds that they are subject to equivalent separation requirements.

• A bank established in the EU that is neither a parent nor a subsidiary, including all their branches regardless of location;

• A group of entities with an EU parent that includes all branches and subsidiaries, regardless of their location;

• EU branches of banks established in third countries.

Proprietary trading is not exempt from derogation. The prohibition does not apply to banks operating dedicated structures for buying and selling money market instruments for cash management under the draft Regulation.

Article 6(1)(b) prohibits banks subject to the proprietary trading prohibition from owning or investing in hedge funds, or from engaging in proprietary trading or sponsoring hedge funds, so they cannot circumvent the prohibition.