Morning Coffee: More Capital Means More Drama on Wall Street

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The Financial Stability Board has finally drawn a line in the sand. It plans to require four of the world’s largest banks – Citigroup, Deutsche Bank, HSBC and J.P. Morgan Chase – to maintain stricter capital requirements than some of their competitors come 2019, potentially limiting their growth and changing the power structure of Wall Street.

Because these four are most central to the global economic system, the FSA proposed that each hold capital equivalent to 9.5% of their risk-weighted assets, compared to 7% for certain other banks. Institutions like Barclays and Bank of America will face capital requirements between the two tiers. BofA, for example, will only be held to an 8.5% cap requirement, despite that fact that it’s a bigger lender than Citi.

“That limits earnings potential for Citigroup, J.P.Morgan and Deutsche Bank compared to Bank of America, all other things being equal, so it’s certainly a competitive advantage for them,” David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business, told Bloomberg.

The capital requirements aren’t yet binding and it’s not clear what effect they may have on compensation and hiring. Nonetheless, firms like UBS have already begun slashing staff in anticipation of having to hold more capital seven years from now.

If the largest lenders were required to meet the requirements by the end of 2011, they would, in combination, fall $484 billion short of the target.

RBS Talks Libor Settlement (WSJ)

The Royal Bank of Scotland is in discussions with a number of regulators in an effort to settle allegations that it manipulated global interest rates.

I-Banking Comp Falls (eFinancialCareers)

The average compensation per investment banking employee dropped at every major bank during the third quarter, compared to the same period a year ago. Deutsche Bank and Goldman Sachs continue to lead the i-banking world in compensation per head.

Evolving Role (eFinancialCareers)

The role of the IT project manager at investment banks has evolved in recent years. Firms are now looking for candidates with hands-on development or business analysis backgrounds.

Cuts are Working (Financial News)

RBS’s markets business reported an 18% increase in profit during the third quarter, a gain made possible by significant staff reductions and other cost-cutting measures implemented over the last year.

Edoma Shuttering (Bloomberg)

European hedge fund Edoma Partners is shutting its doors. Founder Founded Pierre-Henri Flamand, former head of principal strategies at former Goldman Sachs, said that it is simply too difficult to make money in the current environment. Edoma currently employs 20 people. U.K. merchant bank Heritage Capital has also ceased operations.

The Young and the Jobless (Business Insider)

The unemployment rate in Europe for those under the age of 25 now sits at 22.8%, with the usual suspects – Spain and Greece – driving the number upwards.

Still Healthy (Barrons)

Insurance companies, which have been staffing up in 2012, should not have their financial positions threatened by the destruction caused by Hurricane Sandy.

Buzz Around the Office

Lending a Hand (Yahoo)

The San Francisco Giants credited their fans for helping them win a second World Series in just three years. Those same fans lent a literal hand last week during the victory parade, when the car carrying the club’s manager ran out of gas and needed to be pushed the final few blocks.

List of the Day: Asking for a Raise

Like any other workplace activity, asking for a raise is a skill. Here’s how to pull it off while remaining professional.

  1. Schedule a formal meeting and come prepared with a justifiable number in mind.
  2. Don’t compare yourself to others.
  3. Don’t give ultimatums.

(Source: AOL Jobs)

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