7 Aug 2009

To split or not to split?

One of the many possible remedies for the banking crisis is the separation of traditional banking (lending and deposit taking) from investment banking, in particular trading for the bank's own account. While the industry naturally is against Glass-Steagall Mark II there might be a half-way solution in that the large 'universal' banks are allowed to keep their investment banking activities but only if they are held in a completely separate legal entity that has its own funding, risk management etc. In case of failure of the investment bank the traditional banking unit would effectively be ring-fenced.

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