Proprietary trading of securities and derivatives should be legally separated from retail banking with the objective of reducing “systemic risk” in banking activities, it said.
The advisory group led by Bank of Finland Governor Erkki Liikanen was set up by the European Commission in February to investigate bank structures.
Liikanen said today: "Building on the substantial measures already underway, I believe that the group's recommendations would, if implemented, provide for a safer, more stable and efficient banking system serving the needs of citizens, the EU economy and the internal market."
European banks such as Barclays, Germany's Deutsche Bank and France's BNP Paribas, which engage in high-street banking alongside riskier trading in stocks, debt and other
securities would be affected should these proposals be enacted.
Evaluations of the European banking sector in the report also revealed excessive risk-taking and excessive reliance on short-term funding in the run-up to the financial crisis.
Stronger capital requirements were recommended to enhance bank resilience in the future, reducing taxpayers’ liabilities in the event of further bank shocks.
Michel Barnier, the European Internal Market and Services Commissioner, said today: “This report will feed our reflections on the need for further action. I will now consider the next steps, in which the Commission will look at the impact of these recommendations both on growth and on the safety and integrity of financial services."