The future of Investment Banking


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

2 Responses

  1. […] have noted before in our white paper on SDPs in a cleared world and also here and here, new regulatory mandates around execution, reporting and clearing will see the value proposition […]

  2. […] Emerging regulations under Dodd-Frank’s execution and clearing mandates and the higher capital requirement ratios under Basel, are driving huge changes in the business models for investment banks. […]

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