Some argue that separating the two types of banking activities would protect the macroeconomically vital task of supplying the real economy with credit and, at the same time, shielding it from investment banking’s inherent risks. They also claim that this would make bank resolution easier.
What I’m wondering, however, is if such a specialised banking system can truly fulfil all the hopes invested in it. Unfortunately, in practice it is not always possible simply to put the good ones into the pot and the bad ones into the crop, to paraphrase the Grimm Brothers.