Fitch: German Banks Could Drop Hedge Funds

Feb 13 2013 | 12:48pm ET

German plans to enforce a strict separation of retail banking and investment operations, including hedge funds, could lead German banks to simply abandon the latter.

Germany's proposed new bank rules would require that both secured and unsecured investment activities be ring-fenced from customer assets. By contrast, France, which is working with Germany on the new rules, plans only to force the separation of unsecured activities from customer assets.

The full impact of the German bill remains unclear, including which activities precisely will be prohibited. But whatever form they take, banks may simply choose to forego proprietary trading, high-frequency trading and hedge funds entirely, Fitch Ratings suggests.

"Only a few banks would end up putting trading activities into separate subsidiaries," Fitch's Michael Dawson-Kropf told Bloomberg News. The rest would simply give up "restricted activities rather than incur the costs of separation, as the affected businesses make relatively small contributions to earnings."

The draft bill, approved by the cabinet last week, would affect between 10 and 12 banks, most notably Deutsche Bank.

In Depth

Related-Company Fees: Normal Industry Practice or Conflicted Compensation?

Nov 11 2015 | 4:23pm ET

Regulatory agencies as well as investors are increasingly exploring whether certain...


Ferrari Roars in Wall Street Debut

Oct 21 2015 | 4:28pm ET

Shares of supercar maker Ferrari jumped as much as 15 percent to a high of nearly...

Guest Contributor

Private Debt - What is the Opportunity?

Nov 11 2015 | 3:28pm ET

In this contributed article, Rob Allard, founding partner of Firebreak Capital...


Editor's Note

    Oct 21 2015 | 10:41am ET

    One of the most unique charity benefits in the hedge fund industry, A Leg To Stand On's (ALTSO's) Hedge Fund Rocktoberfest - NYC, raised nearly $500,000 last Thursday thanks to the generous support of major sponsors and nearly 1,400 attendees from the Tri-State finance, business and hedge fund communities. Read more…