Switzerland, Italy: Bank Separation Makes Headway
In the wake of the Credit Suisse debacle, the need to reinstate a strict separation of banks along Glass-Steagall criteria in order to avoid future bank bailouts is gaining support in Europe. In Switzerland, the bipartisan coalition that campaigned for bank separation in 2009-2014 is being formed again, while the leading government party in Italy, Fratelli d’Italia, has filed a draft bill on the issue in the Chamber of Deputies.
The latter bill, introduced by FdI faction leader Tommaso Foti and 14 of his colleagues, calls for changing the “Single Act on Banking and Credit” to provide for “a separation between commercial and investment banks”.
A Reuters correspondent who has seen the text, not yet available on the official website, claims that it is a photocopy of what Prime Minister Giorgia Meloni herself had filed in 2018 as opposition deputy, although Foti insists that the current Prime Minister has not been consulted.
On paper, FdI has nine votes out of the entire 26 member Finance Committee, but it can be assumed that at least a few from the four Lega members and the four M5S members (both parties supported bank separation in their 2018 election programs), will back the bill, which would be enough to send it to the floor for a vote.
In Switzerland, the co-president of the Swiss Social Democrats (SP), Cédric Wermuth, has called for bank separation and for a Swiss federal bank based on the model of cantonal banks. The latter were created some 200 years ago, with the aim of providing credit to the community, but, like all commercial banks, they have degenerated in the meantime.
Referring to Postfinance, a federal bank belonging to the state-owned national postal service, Wermuth told CH Media on March 31 that that Postfinance “should be expanded into a bank for SMEs with a public state guarantee”. The Federal supervisory agency Finma should make sure that the new bank does not become involved in speculation, by eliminating speculative products involving proprietary trading and short selling. “You have to close the casino,” he insisted.
According to sources, the Swiss People’s Party (SPP) will support the SP proposal, but the Christian Democrats and the Liberals are against, and they hold a blocking majority in the upper chamber, the Council of States, where canton-elected representatives sit. In 2014, once the bank separation bill had passed the lower chamber, the National Council, it was defeated in the Council of States. Thus, it will be an uphill fight, but one that should inspire other nations as well.