Foreign banks fight on in US DCM

Helen Avery
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Competition in US debt capital markets remains fierce despite pressure on European banks to retrench from capital-intensive business lines. Faced with regulatory and funding headwinds, European banks insist they are staying put, and other non-US banks are joining them in the world’s biggest debt market.

During the European debt crisis, there were flashes of hope that the European banks were going to retrench from the US debt market. While there were some pockets of lending that they left, in the end the competitive landscape did not change meaningfully," says the head of a debt capital markets desk in New York.

It had looked inevitable, with the higher cost of dollar funding, increased regulatory capital requirements and domestic pressure to reduce risk and return to core businesses, that the European banks would be forced to scale back in or exit from the US debt capital markets.

There has been some scaling back by some European banks, for sure. But the expected exodus never came. Instead, over the past 12 months, the European banks have been redefining their strategy in US DCM. They have been picking their niches based on either costs or expertise and with a...