LONDON (Reuters) - The EU has scrapped a draft law that could have forced the bloc’s biggest banks to split up in order to reduce the risk of them being “too big to fail”, in a rare move that will cheer major trading firms.

FILE PHOTO: European Union flags flutter outside the headquarters of the European Central Bank (ECB) in Frankfurt, Germany, April 21, 2016. REUTERS/Ralph Orlowski/File Photo

A European Union bank structural reform law was proposed in 2014, a relatively late addition to rules rolled out after the 2007-09 banking crisis which resulted in taxpayer bailouts.

It was meant to be Europe’s answer to the U.S. Volcker Rule, a crisis-era measure banning Wall Street banks from speculating with their own money which is due to be scaled back significantly by U.S. regulators.

The EU draft law gave regulators powers to force banks to split off trading activities, but got bogged down over the criteria used to do so.

At the same time the mood among some policymakers was moving from the need for more new rules to nurturing economic growth in a region where the bulk of loans come from banks.

The European Commission said in its new workplan on Tuesday that it was withdrawing the measure with “no foreseeable agreement” in prospect.

“In addition, the main financial stability rationale of the proposal has in the meantime been addressed by other regulatory measures in the banking sector, and most notably the entry into force of the Banking Union’s supervisory and resolution arms.”

Big banks have since had to comply with other rules, such as issuing bonds that can be written down to replenish capital.

Gunnar Hoekmark, the center-right Swede who was steering the measure through the European Parliament, said the EU executive had made the right decision.

“It was my firm belief that splitting up universal banks by separating retail from trade, investment and market making, would create instability and hinder investments and a more dynamic banking sector,” Hoekmark said in a statement.

The European Union decision leaves Britain going it alone with its “Vickers Reform” which forces UK banks to separate out their high-street arms and wrap them with a bespoke cushion of capital from 2019.