[Slide 7: The High-level Expert Group’s proposal for mandatory separation within a banking group] First, the group wanted to limit the spill-over of the effects of the deposit guarantee system and any implicit government guarantees to the trading activities of banks.
The deposit bank and trading entity are to stand on their own merits also in terms of capitalisation and funding, even though they could operate within the same banking group. Without separation, the explicit and implicit guarantees would distort the market mechanism and spur the deposit banks to unhealthy expansion in their trading activities.