The President yesterday set out plans that would substantially limit the propriety trading the size of America’s biggest banks. But UBS says the affects of the sweeping changes will be felt on this side of the Atlantic.
Although not directly targeted and affected by the “Volcker rule”, analysts warn that there are lots of open questions about how these developments might impact the European wholesale banks.
UBS estimates that less than 10% of group profits for the average European investment bank. It predicts Barclays makes 4.2 per cent of its profits from propriety trading, which could be at risk after Obama’s announcement. This on top of Obama’s financial crisis levy he announced last week, which Evolution Securities says could cost European banks with US exposure 12 per cent of profits.
In fact, Barclays and RBS have already been affected by the announcement – Barclays’ shares dropped to a low of 255.65p today after opening yesterday at 302.5p, and is now at 271.7p. RBS dropped to a low of 10.9p today, down from Thursday’s open of 12.5p and is currently at 11.27p.