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The separation of investment and retail banking aims to protect the "utility" aspects of day-to-day banking from being endangered by losses sustained by higher-risk investment activities ("casino banking"). This can take the form of a two-tier structure in which a company is banned from doing both activities, or enforcing a legal ring-fence between two divisions of a company. Banks have resisted this separation saying that it increases costs for consumers.
Historically retail banks have used cash deposited by savers for investment activities. Following the Wall Street Crash of 1929 the United States sought to reduce the risk of savings being used to pay losses incurred on bad investments with the Glass–Steagall legislation of 1933 which restricted affiliations between banks and securities firms. This legislation was weakened in the 1990s, culminating in its abolition in 1999 by the Gramm–Leach–Bliley Act. This triggered a spate of international mergers, creating companies so vital to the running of the global financial system that they were "too big to fail". Investment losses in the financial crisis of 2007–2008 threatened to bankrupt these systemically important banks and national governments felt obliged to bail them out at great cost.
Since then governments have tried to reduce the likelihood of future bailouts by separating investment banking and retail banking. The United States response came in the form of the Dodd-Frank Act of 2010, although full implementation of the Volcker Rule that restricts proprietary trading by retail banks has been postponed until at least 2017. In the United Kingdom the 2011 Vickers report of the Independent Commission on Banking has recommended the ring fencing of retail from investment banking by 2019. In the Eurozone the Liikanen report of 2012 recommended a similar ring-fence between the two activities.