The banks were supposed to take less risk after the crisis but where does the new market model leave their buy-side clients?
By Dan Barnes
Parts of the fixed income markets are
proving too expensive for investment banks to engage with.
Consequently the risk they have historically shouldered is
moving on to other players. Capital charges on uncleared credit
derivatives trading are punitive. Interest rate instruments
appear too volatile or unprofitable. So dealers are getting out
of the game.
"A number of institutions have withdrawn
from providing one service or another, whether it is clearing
or a specific product," said Eugene Stanfield, head of
Derivatives Execution & Clearing at Commerzbank. "Clearly
market participants have looked at the business they run, then
at the future of that commercial business proposition against
the backdrop of a changing regulatory environment. But that is
set against a changing client demand, a result of regulation
and maybe some of the market structural change."
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