G14 cull October 30, 2012 at 8:54 am
The 14 big OTC dealers are becoming, well, at least 13 and likely 12. UBS is the certain loss, after its announcement of 10,000 job losses and a radical cut of its investment bank. In future UBS IB will focus on advisory, equities trading & FX. The upside, Citi research point out, is ‘potential c. CHF 11B (c. 23% of current market capitalization) of capital release’ – capital which is currently ‘generating sub-par returns’. Perhaps the good gentlemen of Basel, less than an hour on the train from UBS’s headquarters in Zurich, might care to contemplate the fruits of their radical increases in capital requirements for trading activities. Is greater concentration in FICC really a good thing for financial stability?
Update. Bloomberg reports:
The world’s biggest investment banks, which also include JPMorgan Chase and Citigroup, are facing less competition for business after UBS became the latest of Europe’s banks to shrink its operations, saying it will reduce fixed- income trading. RBS, which said in January it would close or sell equity and mergers advisory divisions, was also among victims as Europe’s debt crisis roiled markets and tighter capital rules made some businesses unprofitable.
The 10 biggest investment banks shared $22 billion of fixed income, currency and commodities sales and trading revenue in the second quarter, according to data compiled by Bloomberg Industries. JPMorgan ranked first, followed by Barclays, Citigroup and Deutsche Bank while UBS came in at second to last, the data show…
UBS may be realizing it can’t compete in products such as fixed income trading, which lenders such as JPMorgan and Deutsche Bank already dominate, said Christopher Wheeler, an analyst at Mediobanca SpA in London.
The greater concentration would assume the market doesn’t shrink wouldn’t it?
[...] blog about rules and behavioursMacro capital requirements October 31, 2012 at 6:12 amAfter writing yesterday’s post on UBS, it occurred to me that microscopic capital requirements – which depend on the precise [...]