WSJ.com – Germany\u2019s plans for tighter financial market regulations is likely to hit Deutsche Bank DBK.XE -0.75% harder than once expected. That\u2019s because the legislation, which will require big banks to separate retail and investment activities, will be especially stringent when it comes to hedge fund business, where Deutsche Bank is a significant player.<\/p>\n
The legislation requires that the secured business of hedge funds is separated from bank customers\u2019 money, people familiar with the legislation have said. Loans are seen as \u201csecured\u201d when they are backed up with securities, such as assets.<\/p>\n
Berlin\u2019s proposal, coordinated with France, is part of a broader push within the European Union to ring-fence banks\u2019 high-risk activities, and force institutions to hold more capital to shield taxpayers from future bank bailouts. But Germany\u2019s proposal appears to be the most far-reaching so far, with France\u2019s plans, for example, requiring only a separation of the unsecured business of hedge funds.<\/p>\n
The draft law approved Wednesday by the German Cabinet reveals a tough stance, but details remain to be clarified, including which \u201cloan and guarantee transactions with hedge funds\u201d will be prohibited.<\/p>\n