Trump last week talked about working on “breaking up the big banks”. This refers to reinstating the 21st-century version of the Glass-Steagall Act (1933-1999) – that separated commercial banking from investment banking.

So how does Glass-Steagall V2 impact the Systemically Important Financial Institutions (SIFI), aka “big banks”?

The initial reaction would be to say that amongst the SIFIs with investment and commercial banking operations, the ones with substantial commercial banking operations like Bank of America ($BAC), JP Morgan Chase ($JPM), Citigroup ($C), Wells Fargo ($WFC) would be at a loss (lower profits) as compared to Goldman Sachs ($GS) that has significant investment banking operations, since it would give GS an opportunity to move back to IB with lighter regulations, better competitive position and bigger profits.

But there could be a silver lining to this division of banks – by introducing a structural firewall in operations, the big banks could benefit from lesser capital requirements (these are higher for SIFIs). Commercial banks specifically would be better able to avoid higher capital requirements for conducting non-traditional banking activities. Most importantly, these banks could benefit from better market multiples from divided operations as the markets currently penalize bigger banks with lower multiples as compared to pure-play players. Overall, it could help the broader economy with lesser systemic risk, although it remains to be seen how the Act, by breaking up the banks, would impact the modern day banking which is seamless.

For now, there are too many unknowns – the details of the proposal, it’s passage through Congress, etc. and the markets have calmly shrugged off the news as random “Trump talk”

Read more about the bank stocks here