FRANKFURT, Jan 30 (Reuters) - Germany's new bank rules should not focus on only separating proprietary trading from deposit taking activities, Jan P. Krahnen, a member of the European Union Liikanen bank reform group said on Wednesday.

'I strongly advise against only separating proprietary trading. Proprietary and non-proprietary trading are difficult to distinguish from a regulatory standpoint,' Krahnen, a director of the Center for Financial Studies at Goethe-University in Frankfurt, said in an e-mailed statement.

On Wednesday a draft law from the German finance ministry showed a proposal for only modest reform of its banking sector.

The proposal would compel traditional lenders to separate proprietary trading, but only when the assets associated with these risky activities exceed 100 billion euros or 20 percent of the balance sheet.

In Octoberm an EU advisory group called for banks' traditional deposit-taking business to be legally separated from higher risk activities.

(Reporting By Alexander Huebner; Writing by Edward Taylor) Keywords: BANKRULES LIIKANEN/GERMANY

(Edward.Taylor@thomsonreuters.com)(+49 69 7565 1187)(Reuters Messaging: edward.taylor.thomsonreuters.com@reuters.net)

COPYRIGHT

Copyright Thomson Reuters 2013. All rights reserved.

The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.