Surprisingly, little research exists on this question. Another threat to the safety net depends on the extent to which depositors perceive that trouble in a bank's affiliate could cause trouble in the bank itself. In a worst case scenario, problems at a commercial affiliate could cause runs on the bank's deposits. International comparisons We can shed some light on what the U.S. experience might be like by looking at the experiences of Germany and Japan. Germany has a universal banking system that places virtually no restrictions on bank investments or commercial firm investments in banks.
Japanese law does place restrictions on bank equity holdings.
However, banks are alleged to exert more control over corporations than their U.S. counterparts due to the interlocking directorships within the keiretsu system. In Germany and Japan, banks exercise their right to hold equity in commercial firms, but it is unusual for commercial firms to own banks. This lopsided ownership pattern suggests that, in these two countries at least, operating synergies or cost reductions related to product mixes are not the primary motive for banking and commerce relationships. German and Japanese bank investments are often in large companies and appear to be made for the sake of enhancing the banks' monitoring capabilities. This Letter has attempted to lay out the incentives banks might have to engage in commercial activities and to explain why policymakers are hesitant to permit these relationships.