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Matt Levine

Capital Rules Aren't the Only Reason Banking Is Boring

My cheerful assumption that funding models change, but the business of banking is eternal, seems to be wrong.

This morning I proposed a simple speculative model of how banking has been transformed. In this model, the business hasn't changed much, but higher capital requirements have made it less profitable for shareholders: You might make the same amount of money doing the same stuff, but you have to share it among more shareholders. This obviously wasn't the whole story -- banks are also making less money and doing different stuff -- but I suggested that it had some explanatory power.

So I figured I should check it against the facts. And ... nah, not that much explanatory power.