Capital markets revenue for the banks in this report reached $175bn in FY15, 4% below FY14; 4Q15 accounted for $33bn, down 7% y/y. Equity and M&A/Advisory revenue advanced, but ECM, DCM and FICC all dropped sharply.
The FY15 pre-tax profit was essentially unchanged versus FY14 as a drop in primary profitability – caused by a drop in revenue, rather than an increase in costs – was offset by higher profits in FICC and particularly equities. Most of the banks in this report sharply reduced their FY15 bonus pool – and not just in areas that suffered a drop in revenue – and a few even postponed the announcement of bonuses.
Basel Committee on Banking Supervision released the revised set of trading book rules. The new rules – set to apply from January 2019 – aim to standardise the calculation of market risk by stipulating asset-type allocations into the trading and banking books. This may increase trading book capital charges by up to 40% and – perhaps more seriously – limit the banks’ ability to hedge.