The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.

Banks must accept structural change

"The industry doesn’t seem to realize how few friends it has, or that any politician hoping for re-election could not take the banks’ side."

And still, bankers don’t get it.

The banking industry’s first response to the Obama administration’s so-called plan for bank regulation misses the point. It can decry all it likes Obama's flip-flop towards restricting the scope and size of banks as electioneering and not a serious legislative proposal. It can scoff that the plan will falter before Congressional opposition, as the technical difficulty of defining proprietary trading becomes clear.

The industry doesn’t seem to realize how few friends it has, or that any politician hoping for re-election could not take the banks’ side.

It is too early to assess what final form the Volcker rules will take or their impact on banks’ earnings and capital generation. Many senior bankers privately express horror and outrage but their own analysts take a more sober view, pointing out that earnings from prop trading have shrunk in the past two years anyway, as banks concentrated on customer flow. Banks that made up to 20% of their earnings from prop trading in 2006 and early 2007 now derive maybe 5%.

Hiving off private equity and hedge funds would reduce bank earnings but the disposals might help banks rebuild their capital and investors might put a higher multiple on less risky and volatile remaining earnings.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree