KOENIGSTEIN, Germany (Reuters) - The chief executives of Deutsche Bank (DBKGn.DE) and JP Morgan (JPM.N) have both rejected the idea of splitting off trading operations from retail operations to make banks safer.
“You lose enormous economies of scale if you separate investment banking,” Deutsche Bank (DBKGn.DE) co-chief executive Anshu Jain told a panel discussion on Monday.
“You solve a problem that does not exist and you create a lot of new ones,” he said in remarks embargoed for release on Tuesday.
JP Morgan CEO Jamie Dimon said a vital step toward bank reform was not a legal split of investment banking from other operations but a framework where banks can be allowed to fail without contaminating the broader economy.
“We have to make sure that a bank fails without costing billions of dollars,” Dimon said, referring to taxpayer money.
In October, a European Union advisory group led by Bank of Finland Governor Erkki Liikanen said banks should split off both trading on their own behalf and “activities closely linked with securities and derivatives”.
The Liikanen group said ring-fencing trading desks would make it easier for the part of the bank that holds savers’ deposits and lends to businesses to keep running even if other bits of the business collapsed.
Jain said the Liikanen proposals could even lead to European banks being disadvantaged. “My concern is that you create an uneven playing field when you abandon universal banks in Europe alone.”
In September, Deutsche Bank announced a new strategy based on closer integration between its investment bank, asset management and wealth management unit.
Deutsche Bank shares dipped in early trading after the Boersen-Zeitung newspaper reported German regulator BaFin had ordered large banks to simulate a break-up. BaFin declined to comment.
Deutsche Bank was down 1.6 percent at 1615 GMT, off earlier lows.
Reporting By Philipp Halstrick; Writing by Edward Taylor; Editing by Dan Lalor