Another difference which stems from the different starting points is that, in the ICB proposal, higher capital requirements are recommended for the ring-fenced deposit banks. As will be discussed shortly, the High-level Expert Group was more concerned of strengthening the capitalisation of the trading entity. To sum up the rationale for separation as a regulatory measure, I would emphasize the following four points.
First, as already discussed above, separation is a way of prohibiting banks with insured deposits from engaging in activities whose risks are potentially high and difficult to measure precisely, and which are not essential to deposit banking. Essentially, prohibition of such activities is a way to complement capital requirements in limiting moral hazard which may arise from deposit insurance.