Econintersect: According to Bloomberg, Germany’s financial regulator, BaFin, has requested Deutsche Bank to run a simulation of the division of their 
commercial banking and trading/investment banking operations into two separate businesses. A German newspaper, Boersen Zeitung, has reported that two banks have been asked to simulate a split, According to Bloomberg. The German action is consistent with proposals circulating in the U.K. and the EU to separate depository and investment banking.
An EU report cited by Bloomberg has called for requiring separately capitalized units for the trading and consumer banking operation.
Experts believe that the cost of doing business for the trading activities would be much increased if they were split from the consumer depository banking function. From the Bloomberg article:
“A hard split of the retail unit from the trading activities would strongly increase funding costs of the investment bank,” said Philipp Haessler, an analyst at Equinet AG who recommends the shares. “A soft split like the French system would be bearable, but the best would be to keep the system like now.”
France has legislation pending which would require that banks fence off trading activities rather than completely divest them.
The U.S. has not progressed as far down the separation of banking function road, although Richard Fisher, Federal Reserve Bank of Dallas president, has outlined such a process just last week.
Sources:
- Deutsche Bank Said to Be Asked by BaFin to Simulate Split (Annette Weisbach, Bloomberg, 22 January 2013)
- Richard Fisher: Simple Market Solution to TBTF (GEI News, 19 January 2013)
