Analysts at JPMorgan have calculated that if the full burden of regulatory and political initiatives to crack down on banks’ risks is implemented, it would cut the average return on equity from a projected 13.3% to 5.4%. The conclusion is a stark illustration of what might happen if all of the proposals mooted by governments in the US, UK and France were put into effect globally at the same time as the overhaul of capital and liquidity standards being engineered by regulators on the Basel Committee on Banking Supervision. The authors concede that such an extreme scenario, which would also entail the world’s 16 leading banks (excluding JPMorgan itself) having to raise an estimated $221bn, or $14bn apiece on average, is unlikely to occur in practice.
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