Attempted Socialism wrote:This scenario is what is being prohibited, which is why I am convinced you're misreading the proposal:
A is the investment division of MegaBank. B is the commercial part. Under the two clauses, if A dominates (Over 55%), A and B must be split.
What provision prohibits that? All I see from the first operative clause are provisions which would prohibit any financial institution from conducting any business in bank B unless banks B and R merge. When I read—
- that, henceforth, no investment; act, trade, advice or other related action, may be given or carried out at any financial institution within a Member Nation which, in the normal course of business,earns forty-five percent or more of its net income per fiscal year, from products, services, et.al located within the commercial banking sector.
- that henceforth, no commercial; act, trade, advice or other related action, may be given or carried out at any financial institution within a Member Nation which, in the normal course of business,earns forty-five percent or more of its net income per fiscal year, from products, services, et.al located within the investment banking sector.
I see (1) no activities can be carried out at any financial institution which earns more than 45 pc of its accounting profit from commercial banking and (2) no activities can be carried out at any financial institution which earns more than 45 pc of its accounting profit from investment banking.
That doesn't require a splitting of the two activities. If you split the activities, a pure commercial bank "R" would earn 100 pc of its accounting profit from commercial banking activities and be prohibited from doing any transactions. The sort of bad and overly broad Glass-Steagall regulations that you think happen, if actualised, would force every single institution out of business.
What the proposal catalyses is the dilution of the net income reported the consolidated position of a commercial bank... with non-commercial-bank activities.