The analysis also says regulators have “drastically understated” the impact the new rules will have on the capital requirements for banks’ trading operations. These divisions already have seen their returns cut by higher capital requirements imposed in the aftermath of the financial crisis.
The latest rules — designed to prevent banks from taking on too much risk as they buy and sell securities from clients — were finalised by the Basel Committee on Banking Supervision this month.
The final draft was less severe than earlier versions, prompting initial relief among banks who had feared massive inflation. The Basel Committee estimates the new rules will increase capital requirements by a median rise of 22 per cent.
But Rebecca Emerson, Oliver Wyman’s UK head, said conversations with clients showed that the banks have widely different estimates of the amount of money it will cost to implement them.
Under the new rules, banks that want to use internal models to measure risk — which carry lower capital requirements than the “standard” method — must now have those models approved desk-by-desk. That is a big change from the current regime, where entire businesses are approved at once.
Ms Emerson said this desk-by-desk approval process may mean that the impact on banks is more dramatic than the Basel Committee expects.
Ms Emerson said some of the “more forward-thinking banks” were already taking action to avoid the severest effects. “Right now they’re already getting out of those products” that are hit hardest by the new rules, she said.
She said single name credit default swaps with low liquidity were one example. Bankers say securitisations are also very expensive under the new rules, even after the latest tweaks.
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