At this point, $221 billion seems like a bargain. if the results of the regulations really were to diminish the need for future bailouts (a doubtful prospect), this would truly be the most cost-effective regulatory reform ever enacted.
Top banks will need an extra $221 billion (139.6 billion pounds) of capital and see annual profits slump by $110 billion if all proposed regulations to reform the industry are brought in, leading analysts said on Wednesday.
If all the initiatives from regulators are implemented it would cut the average return on equity to 5.4 per cent from 13.3 per cent next year, hurt economic growth and raise costs for bank services, JPMorgan analysts warned.
“The cumulative impact of all the proposed regulation suggests that there is a real risk that we may move from a system that was under regulated to one that is over regulated and that that could cause a significant increase in lending costs and a negative impact on the economy,” Nick O’Donohue, head of research at JPMorgan, said in a research note.
The capital needs of banks would be $221 billion higher in the extreme event that all the reforms were brought in.