NEWS ANALYSIS: Post-crisis rules not having intended effect on banks’ risk profiles
New York — Big Wall Street banks have spent billions of dollars and untold man-hours in recent years transforming their trading desks from hedge fund-like operations trading on their own account into market-making businesses offering a price based on what customers want to buy or sell. But the shift in business model, prompted by reforms following the 2008 financial crisis, has done little to shield banks from suffering big losses when markets move against them, traders and risk managers told Reuters this week. Goldman Sachs’s second-quarter results, which saw earnings rise to $3.95 a share from $3.72 in the same quarter last year, also included the worst commodities trading quarter in its history as a public company, prompting a 2.8% fall in the bank’s stock in the last two days. Bad inventory positions based on wrong expectations of customer demand were partly to blame, chief financial officer Marty Chavez said. In explaining the decline in trading revenue, Chavez compared the bus...
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Subscribe now to unlock this article.
Support BusinessLIVE’s award-winning journalism for R129 per month (digital access only).
There’s never been a more important time to support independent journalism in SA. Our subscription packages now offer an ad-free experience for readers.
Cancel anytime.
Questions? Email helpdesk@businesslive.co.za or call 0860 52 52 00. Got a subscription voucher? Redeem it now.