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This article mainly talks about some effects of the policy adopted by regulators on investment banks ’ risk management. On the whole, the author debates that the policy may not easily separate good old-fashioned utility banking from its riskier cousins (investment banks) as it seems.
By realizing the great risk gap between the bank’s huge dealing on foreign exchange and bond-derivative products , cosmopolitan regulators are taking the policy of using a mixture of higher capital ratios, limits in the risks that banks can take and restrictions on the pay and bonuses they offer employees to manage the astonishing risk of bond-derivatives. However, the policy mentioned above does not seem as good as it should be. We can illustrate the implicit logic by casting a few examples. One of these might be the extreme high capital ratio leads to the shrinkage of Switzerland big banks ,and it in turn makes these banks shrift business to American.
Ironically, another example comes that the restrictions on bonuses of investment banks employee may make investment banking even riskier. With a bigger share of salaries now fixed, earnings at European investment banks will become even choppier, and thus prompt them to move to U.S.
What’s more , other European banks have more reasons to move mainly because they faced a significant penalty when raising funds in such a unhealthy financial environments.


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