EU's Hill sticks by bank trading reform, hopes for compromise

LONDON (Reuters) - There are no plans to scrap a draft European Union law on reining in trading risks at big banks but some of the proposed rules could be softened, the bloc's financial services chief said on Tuesday.

The bank structural reform law aims to isolate risky trading so that if a lender goes belly up, depositors are still safe.

Banks have hoped that Brussels would withdraw the draft law, saying Britain, Germany and France are already introducing their own rules to insulate depositors from trading risks at banks.

The European Central Bank is concerned that, as drafted, the proposed new rules could shackle banks' ability to make markets to raise funds for the economy.

"I intend to continue with it," Jonathan Hill, EU financial services commissioner, told a committee of Britain's House of Lords during a discussion on EU rulemaking.

Changes appear inevitable, however.

Hill, whose predecessor proposed the draft law, said EU president Latvia has proposed taking the level of risks from trading more into account when deciding whether trading activities should be separated out.

The original draft bases this decision on a trading volume threshold.

A senior lawmaker from the European Parliament, which has joint say with EU states on the measure, has also proposed softening its impact in several ways, arguing that since the rules were proposed, banks have been made safer in several other ways.

"I am keen to see if we can come up with a compromise that will reduce the risk that there is ... there are some (banks) that are too big to fail, too complex to resolve," Hill said.

A key European Parliament committee is due to hold a vote in March.

(Reporting by Huw Jones; Editing by Susan Fenton)