Report: Banks to lose billions from new swaps rules

|By:, SA News Editor

Banks could lose up to $4.5B in annual revenue as new regulations alter how swaps are traded, according to a report from McKinsey & Co. That amount is equal to 35% of the $13B in revenue booked by banks from trading in rate derivatives, and it comes at a time when FICC business is already on the decline.

At issue are new rules requiring swaps trade on electronic systems rather than over the phone ("Thanks, big boy"), and the greater transparency should bite into profits. To counter this, says McKinsey's Roger Rudisuli, banks will have to cut costs and realign teams to focus attention on fewer customers.

The usual suspects make up the 5 largest U.S. swaps dealers: JPM, C, BAC, GS, and MS.