In Europe, Basel III will require the credit institutions to have higher core capital in order to absorb the same volume of assets that they have right now, consequently, the return on capital will be lower, with the logical des-incentive for the entry of new investors. On the other hand, in the US, the Volker Rule, is just a new restatement of the old Glass Steagall Act, which protected the financial system by imposing restrictions on the activities carried out by the credit institutions, basically separating the investment banking from the commercial banking activity.
The argument to support this reform is that investment banking exposes the credit institutions to a completely different set of risks compared with commercial banking, with the aggravating factor that these entities are supported by the FDIC or the Federal Deposit Insurance Corporation, so at the end of the day, the excessive risk assumed by the entities through those activities not related to commercial banking may end up being paid with taxpayers' money.
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