Banks praised for cutting trading units

Tim Wallace
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CUTTING back risky trading operations has made the world’s biggest banks safer, ratings agency Standard and Poor’s said yesterday.

By reducing the number of illiquid assets on their books, banks have also made it easier for analysts to price their assets and judge risks in the business.

Standard and Poor’s also argued that trading revenues are particularly volatile, so cutting the units back should also make the banks’ performances more predictable.

Although the biggest banks have cut back overall, they have done so at different rates, allowing some banks to gain market share.

JP Morgan has 14.6 per cent of the market in 2013, up from 11.3 per cent in 2010.

Citigroup is in second place with 11.8 per cent of the market, up from 10.7 per cent. And Goldman Sachs is third, but its market share fell from 11.8 per cent to 10.5 per cent.

The analysts warned that some dangers continue to lurk, despite the smaller market. “Trading risks remain significant, and could destabilise banks that don’t manage them properly,” said Stuart Plesser, credit analyst at Standard and Poor’s.