It's the regulations, stupid.
The Financial Times reports that Credit Suisse and UBS are prepared to scale back their investment banking operations further if the country’s strict capital rules become even more onerous, their chairmen have said.
'If there is a fundamental change of the regulatory rules then we would have another look at how to recalibrate the business', Urs Rohner, Credit Suisse’s chairman, told the Financial Times.
'I would not deny that there is a danger that if it goes from risk-weighted assets to a much more leverage-focused model, that we would have to make further changes at the investment bank', he added.
Axel Weber, chairman of UBS, said that 'a leverage ratio of 5% would not be a threatening scenario to our plans or strategy', given measures taken in 2012 to cut back its investment bank. However, he also said: 'In a new crisis, we could manage a rundown of the whole investment bank and not endanger the overall bank – but with significant consequences for our business model'.
UBS Investment Bank is currently roughly one third of its pre-crisis size in terms of risk-weighted assets.
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