News that UBS are downsizing their fixed income operations, is yet another example of the unintended consequences of the new tougher regulatory and capital requirement regimes coming our way courtesy of Dodd Frank and Basel.
Banks with (sub scale) FICC operations will struggle to deliver the returns demanded for the increased capital required for these businesses, leading to yet further concentration of business in the hands a few super global banks.
Frighteningly, Alex Weber, UBS Chairman told FT that UBS had considered (and rejected the idea) of shutting down the entire investment bank!
As Stefan Krause (Deutsche’s CFO) says in FT:
Investment banks will be either big and global, or small and niche
Here is a link to the excellent Annual review of investment banking by Morgan Stanley and Oliver Wyman.
Discussed here on G14 Cull