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Financial markets look to European policymakers 

January 4, 2016

Julien Freund, Global Risk Insights

European policymakers are initiating a smoothing of regulatory burdens on investors. But political risks like the Brexit and a politically motivated Tax on Financial Transactions threaten to counter this tantalizing prospect for financial operators.

Since the financial crisis, bankers have been targeted by an intense regulatory framework — no less than 20 pieces of legislation were introduced by the European Commission since 2007 — including costly compliance rules and mandatory increases in capital requirements. Simultaneously, the recession environment created weak loan growth and shrinking margins for banks and investing firms.

As a result, profitability has been squeezed hard, with lower revenues and weaker returns on assets and equity. Today for instance, JPMorgan generates a return on equity of 12 per cent, which is less than half of the pre-crisis average of 25 to 30.

Public opinion still holds financial market operators on top of the list of those responsible for the crisis, and causing trouble to the industry is popular among left-leaning politicians in Europe. Read more


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