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Basel III set to create a richer array of prime brokers 

January 21, 2015

James Williams, Hedgeweek

On 4 August 2014, the Wall Street Journal reported that Goldman Sachs had commenced culling its hedge fund client roster, offloading managers who simply weren’t generating enough return on equity. Fast forward to 7 December 2014. Reuters reported that Credit Suisse was considering scaling down its prime brokerage business, as Switzerland contemplates imposing a tier one capital ratio of 4 per cent on its banks by 2019, 1 per cent higher than the Basel III ratio.

This is the start of a process of serious soul searching for tier one primes as they weigh up the costs of using balance sheet and to whom this increasingly scarce commodity should be offered. 

Hedge funds that aren’t utilising credit lines, or holding a cash surplus in their accounts will either be asked to leave or face higher charges. Shorting stocks will increase and managers who have historically used significant leverage to run their strategies could be impacted. 

Read More: Hedgeweek 

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