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Banks revamp credit trading models 

January 14, 2014
Christopher Whittall, Reuters

Investment banks are continuing to pare their bloated credit trading operations as dealers take wildly divergent approaches to what has become one of the most capital-intensive activities in the financial industry.

Fixed-income units account for 55% of investment banks' income after growing in importance in the past decade, according to UBS analysts, but there are signs of the trend reversing. The regulatory onslaught of Basel III combined with macroeconomic uncertainty took its toll in the third quarter of 2013 with revenues falling by as much as 50% compared with the prior year.

Hamstrung by hefty capital requirements, spiraling costs and squeezed margins, many firms are moving away from the all-singing, all-dancing credit offering, sparking a debate about what will be the most profitable and sustainable model under the new regulatory regime.

Read more: Reuters

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