The financial pressure on banks is pulling them into new configurations, some willingly, some less so. Management needs to get a handle on what works and what does not, quickly, says Dan Barnes.
Restructuring can take place on the balance sheet or at an
operational level; there are compelling drivers for banks to do
both right now. A higher cost of capital, lower margins and
increased leverage ratios are all weighing on banks. In
addition, authorities are mandating the restriction of some
trading activities, or their functional separation from retail
Banks are reacting to these drivers. In a report released in
Q2 2013, entitled 'What’s next for the
restructuring of Europe’s banks?’
consultancy McKinsey noted a sell-off of assets by
European banks that need to raise more than €100bn of
equity to meet their current obligations, and the sale of up to
725 business lines.
Firms have been busy spinning their proprietary trading
units out into hedge funds or folding them in to other non-prop
trading units. The cost of technology has been targeted,
with firms increasingly seeking to share the burden of
systems that provide no commercial advantage.
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