How can banks survive the upcoming years? The traditional business model no longer works because:
1. Low/negative interest rates: Interest rates in many major currencies (euros, CHF, JPY in particular) are low or even negative. This causes lower bid-offer spreads in rates markets because the bid side is bounded by a natural constraint, which is keeping cash.
2. Investor greed/commitment: Investors are looking for higher yield products, which the current market does not offer unless the investor takes up additional risks.
3. Platform dictatorship: Transaction banking and simple spot and forward transactions are taken over by highly competitive platforms. As in social media, platforms
are going to dominate financial transaction business or are already dominating. Margins are coming down.
4. Non-regulated regulators: Regulatory authorities glorify themselves and demand very cost-intensive compliance. A transaction that required one staff member in a bank in the last decade now requires 3–4 staff members. Doing business is strongly discouraged. Nobody checks or limits the self-glorification of regulators.
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Derivatives Technology as a Matter of Survival
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