Why Banking Giants Do Not Shrink

Only a few years ago managers of major banks around the world would somehow reduced heads in shame if they provide investors results as published recently, says Economist. Last week, for example, Deutsche Bank reported a loss of 6.8 bn. Euros for 2015. In the third quarter of 2015 the average return on capital in the largest financial institutions in the world with assets of more than 1 trillion. the dollar was only 7.9%, well below those achieved before the crisis 15-20%. And if the calculations subtracting Chinese banks, the number decreased to 5.7%.

In response to falling profits management of banks follows a similar pattern of response - withdrawal from certain countries or business lines with a stable dose of layoffs. More radical measures such as separating the institutions of smaller, more focused and less heavily regulated units does not seem particularly likely scenarios, the newspaper notes. Moreover, the most powerful financial institutions in the world have barely shrunk in size by the collapse of Lehman Brothers last September. At the end of 2008, 11 mastodon that the international Financial Stability Board (FSB) to the G-20 considered central to the global banking sector had total assets of 22 trillion. dollars, while their value is now 20 trillion. dollars. The assets of the wider group of 30 institutions that FSB describes as "global systemically important banks" in recent years, even actually increased.

Stricter regulations

To prevent new crises, regulators around the world create a bunch of new rules aimed specifically at banks, which are believed to pose the greatest risk to the stability of the global financial system. All banks must now meet the higher capital requirements and to finance most of its activities with equity at the expense of loans, but capital requirements are particularly harsh for the largest institutions. While a smaller bank may be required to maintain buffer capital equivalent to 7% of risk-weighted her assets both at system according to FSB institutions HSBC and JPMorgan Chase rate is 2.5 percentage points higher, and to 2019 minimum ratio for JPMorgan Chase will increase to 11.5%. The aim is not just to ensure that large banks are more secure in view of the cost of saving them as needed, but also to discourage institutions from growing too much.