Regulation change could hit returns, says RBS

2 March 2011

Royal Bank of Scotland's (RBS) Asia-Pacific chief executive has expressed concern over the possibility that new regulations could force investment banks to hold an increased amount of capital.

Speaking at the Reuters Future Face of Finance summit in Hong Kong, John McCormick warned that return on equity - which had topped between 20 and 30 per cent prior to the financial crisis - was likely to fall if authorities clamped down.

"For investment banks, it's going to be a real challenge to maintain historic levels of returns on equity," he told delegates.

"As a whole, the return on equity on banking stocks, particularly on investment banking stocks, will go down."

However, Mr McCormack insisted that investment banking remuneration had returned to a more "sensible" level in the wake of the recession and revealed that much of his own bonuses now came in the form of bonds and shares.

His comments came after rival HSBC announced that its profits for 2010 had been somewhat weakened by what chairman Douglas Flint described as an "unacceptable" rise in costs.

By Asim Shah

Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development