The world has changed and banks, especially for investment banks. Three contextual factors have changed: i) the future economic cycle will be less buoyant than the previous ii) financial innovations are likely to be less available after the explosion of derivatives markets during the past 30 years iii) finally, and most importantly, the de-regulation has given way to re-regulation.
This has led Credit Suisse to review its ROE target for the medium term from 18 to 15%, which still seems ambitious, down from 20% before the crisis.
not surprising: studies of JP Morgan or consultant Oliver Wyman concluded that the effect of re-regulation would cost about 1 / 3 of EWN. This one has also not given its full potential for the implementation of Basel will add 3 is very significant reforms ahead of OTC derivatives markets, for once more advanced on the other side of the Atlantic.
This recently led Bill Winter, the former Co-Head of Investment Banking of JP Morgan and member of the British Reform Commission on reform of the banking system in Britain, to predict: The best -run banks Will Be Able to generate a ROE of maybe 13 per cent, 20-25 per one hundred Compared With Historically. There Will Be a middle tier is 9, 10, 11 per cent and below Then The Weakest Ones That. "
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