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Capital Law May Cut Bank Profitability to 11%, McKinsey Says

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Lenders may struggle to earn more than an 11 percent return on their equity as they implement rules and capital requirements costing $610 billion over the next seven years, according to a report from McKinsey & Co.

Global regulations, including the mandatory clearing of over-the-counter derivatives and higher capital requirements, may force banks to pass on a “portion of the higher regulatory costs” to customers, the study said. Banks should “conserve capital and boost efficiency” to stay profitable, London-based McKinsey said.