The trading assets held by French banks have grown so rapidly that they now nearly equal the GDP of the entire nation, and that’s making the case for the recommendation of a European Union (EU) group: that such assets should be walled off from other banking activities as a means of protection against risk.
Bloomberg reported Wednesday that banking data show that among them, the investment banking units of BNP Paribas, Société Générale, Credit Agricole and Natixis hold 2.05 trillion euros ($2.64 trillion) in trading assets. That includes bonds, equities and derivatives.
Those assets grew 21% from June 2011 to June 2012, and now stand at a two-year high. The total is also just a bit short of the entire GDP of France, which is $2.77 trillion.
“The very growth of these market products creates systemic risk,” said Jean-Paul Pollin in the report. Pollin, a professor at France’s Orleans University, continued, “Interconnections among players rise, even assuming that on the micro level the risks are well checked.”
AdvisorOne reported Tuesday that the EU group’s recommendation was for separation of investment banking from retail banking to lower risk, as well as a higher reserve requirement on property lending. In its report, the group called for “legal separation of certain particularly risky financial activities from deposit-taking banks within the banking group.”