“There is a widening gap between our economic capital model and the regulatory capital requirement. We have to avoid large amounts of unallocated capital at the top of the house.” – Survey respondent
Stricter regulations are driving banks to rebalance portfolios, rethink market strategies, and raise capital levels and ratios.
For example, as part of re-evaluating their portfolios, banks are exiting more capital-intensive, less-profitable lines of business and geographies. They are also shifting out of more complex, less-liquid instruments into simpler, more-liquid products with less risk.
Top challenges cited include regulatory uncertainty, methodology and culture.
Organizations reported that it is a difficult process to develop the right methodologies to strategically evaluate the portfolio to support business decisions; to allocate and manage capital across business; and to monitor and measure process.
Adjustments to capital across units
Capital management changes
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