August 21, 2014 - (Bloomberg) A European Commission plan to separate lenders' consumer and investment-banking arms must be halted, said KPMG LLP, auditor to some of Europe's largest banks.

Proposals to harmonize rules for bank structure across the 28-nation European Union "should be shelved," the accounting firm said today in an e-mailed statement. The plans "will not add significant value alongside other regulatory reforms," KPMG said, while countries including the U.K., France and Germany are already pursuing their own requirements on separating lenders' trading and deposit-taking units.

The proposal for bank-structure reform by Michel Barnier, the EU's financial-services chief, has come under attack on multiple fronts since he presented it in January. Germany, France, Spain, Poland, and Denmark are among at least 10 countries that have challenged the reforms, with some warning that the range of activities to be split off is too wide.

"Financial stability is clearly important, however a balance must be struck between a perfectly stable, albeit lacklustre market, with one that creates the right conditions to sustain economic growth and job creation," Giles Williams, head of KPMG's financial regulation practice, said in the statement.

KPMG provides auditing services to some of Europe's largest banks, including Deutsche Bank AG and HSBC Holdings Plc.

In addition to a proprietary-trading ban, Barnier set out EU-wide standards for splitting up the most systemically important banks that would push certain kinds of derivatives and other trading activities into separately capitalized units.

The separation plan has also hit a legal snag, after in- house lawyers for the EU said that some exemptions built into the proposals needed to be scaled back or the legislation as a whole made more flexible. Lawmakers have said that they expect the discussions on the final form of the measures to last at least a year.

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