How to define Prop Trading

All market professionals know what proprietary trading positions are when they see one. But one has to doubt if regulators - or the politicians pulling their strings - are so perceptive. They also will have to write regulations that are as watertight as possible and define the term so that it fits as many conceivable real-life situations as possible. But consider this: any boring retail bank has by necessity some mismatch between the maturity of assets and liabilities. One could say that this mismatch - and even more the changes to it as market conditions/expectations evolve - constitutes proprietary trading. The lesson is that the elimination of proprietary trading will not by itself solve the problems that are inherent in a banking system that is based on the (false) premise that there will never be market panics and/or that the authorities can always contain them at no or little cost to the taxpayer.