The idea is to create a category of rather traditional banks whose customers would be protected by deposit insurance schemes. On the other hand, those banks engaged in riskier and more volatile business could not rely on deposits, nor would they be rescued at the taxpayers’ expense. In addition, the separation could simplify group structures.
This would facilitate risk management and supervisory scrutiny as well as resolution, if need be. However, as the boundaries between various banking activities are fluid it is difficult to draw a clear line between them. Consequently, structural interventions in banks’ business models must be carefully designed. They might help to solve the too-big-to-fail problem, but they are by no means a magic bullet.