French and British banks are urging the European Commission to reconsider plans to isolate high-risk trading activities at big banks, warning the move could discourage lending to struggling economies.

The EU’s executive arm published a draft law in January that would ban banks considered “too big to fail” from proprietary trading – making bets on stocks, bonds and commodities for their own accounts.

The reform would also require banks with big high-risk trading activities to separate them from their traditional deposit-taking businesses.

But the French and British banking associations said: “There is a serious risk that the structural reform measures, as currently proposed, would constitute a considerable handicap in financing European companies, thus running counter to the Eu’s efforts to restore growth and improve employment.”

Their letter, dated November 13, to Commission vice president Frans Timmermans, said the shake-up planned in the draft law was unnecessary given this year’s stress tests of European banks and independent British and French measures to limit speculative banking activities.