OPPOSITES no longer seem as attractive. Universal banks combine the complexities of investment banking with simpler commercial-banking services for individuals and companies. Their proponents argue that the model offers the benefits of diversification, and enables banks to offer a full range of services to their clients. But even their backers are now having second thoughts. Sandy Weill, the man behind the mergers that created Citigroup, the archetypal universal-banking giant, surprised pundits last month by saying that megabanks should be broken up.

In doing so he joined a sizeable list of ex-bankers who seem to have experienced remarkable changes of mind once they have retired, options and bonuses doubtless vested. The converts include two former chairmen of Citigroup (John Reed and Richard Parsons) and David Komansky, a former chief executive of Merrill Lynch.

Their sheer size is not the only thing that makes people fret about universal banks. Many regulators and politicians see scandals such as the LIBOR rate-fixing allegations as evidence that staid commercial banks have been “contaminated” by the culture of the investment banks joined to them. The volatility of wholesale markets—think of the recent losses sustained on credit-derivative positions by JPMorgan Chase—also unnerves people.

Mervyn King, the governor of the Bank of England, said in June that he saw “real merit in pursuing the separation of this utility-type banking from investment banking”. There are calls in America for the resurrection of the Glass-Steagall act, a Depression-era law that split investment and commercial banking. BaFin, Germany’s national watchdog and Deutsche Bank’s home regulator, is reportedly examining the case for segregating the two types of business as well.

Some investors and analysts have also begun arguing the case for breaking up big banks. “You can slice and dice [the numbers] in many ways, but all conclusions mean these companies are worth more dead than alive,” says Mike Mayo, an analyst at CLSA, a broker. “It doesn’t necessarily mean you should kill them off but you should liquidate some bits.” Barclays and Deutsche Bank, for instance, are valued by the market at 30-40% of their book values. JPMorgan Chase trades at a narrower-but-still big discount of about 25%.

Not so fast. A very few universal banks have investment-banking arms with enough scale to stand on their own. But stand-alone investment banks face an even wobblier future than their universal-banking cousins. In the five years since the start of the crisis, the investment-banking arms of large international commercial banks have won a dominant share of key markets such as bonds, currencies and commodities (see chart). That is partly because the number of pure wholesale banks has gone down, but also because they face higher borrowing costs. That discrepancy is likely to widen after recent credit-rating downgrades hit Morgan Stanley, one of the last remaining investment banks, particularly hard. And even if regulators and shareholders were to agree on a separation of the two sorts of banking, it is hard to unscramble the eggs that have gone into making them. Most universal banks with subscale investment-banking arms will neither find buyers (given the current slump in earnings) nor will they be able to wind down these businesses without incurring big losses. Part of the problem is that investment banks may have entered contracts such as swaps or other derivatives that produce risks to the bank that can last 20 years or more. These positions are not easily sold, so their creators are forced to maintain teams of skilled traders and mathematicians to keep hedging, or managing, the risks to the bank. Yet when a bank is winding down its business, it finds it harder to attract and retain people with the right skills. Labour costs soar, since banks must compensate people for the fact that they are working themselves out of their jobs.

The former finance director of a large universal bank says that when his institution looked at winding down its investment bank it “couldn’t find a glide path” that didn’t result in hefty losses. Instead it decided to keep pumping money into its investment-banking business in the hope that it would eventually grow big enough to compete.

Such problems suggest regulators ought to look for more subtle interventions than simply carving banks up. One example might be the “ring fence” approach proposed by an independent commission in Britain, in which banks would have to stump up enough capital and liquidity to support each business but not be forced to choose between them.

Another approach might be for regulators to specify how big investment banks can be compared with commercial banks. A senior investment banker suggests regulators and banks look to biology to judge the relative sizes of the businesses. “You have to say what is the host organism to which the investment bank is attached,” says the banker. “If you can keep the parasite in the right proportion to the host you can have a symbiotic relationship.”