How Dodd-Frank has already pushed Wall Street to change

at 03:37 PM ET, 03/24/2012

Most of the biggest changes under Dodd-Frank haven’t even taken effect. But Wall Street reform has already prompted banks to change — both to comply with the new law and to make a preemptive strike against it, I explain in a print story today:
(Scott Eells - BLOOMBERG)

[T]he biggest financial firms in the United States have already started overhauling and reshuffling their operations in anticipation of the new regulatory regime. Deutsche Bank and London-based Barclays have moved their commercial banks from their U.S. subsidiaries into their global firms to avoid new, more stringent capital requirements — even though they don’t go into effect until July 2015...
Domestic banks have been adapting to the new regulatory regime, as well... Over the past year and a half, J.P. Morgan Chase, Bank of America and Goldman Sachs have closed their stand-alone proprietary trading desks while Morgan Stanley and Citigroup have spun theirs off...
These moves could ultimately prompt the U.S. financial industry to become a relatively less interconnected system of smaller firms — another major goal for the supporters of Wall Street regulatory overhaul. But analysts caution that in complying with the new regulations, banks may also spin off risky activities into darker, less regulated corners of the financial industry. “Activities moving to less supervision and regulatory control, to firms that are outside regulatory purview and that are highly leveraged, may present additional risks that may go undetected,” said [Satish] Kini, [a partner at Debevoise & Plimpton, a law firm that represents financial clients].

Read the whole thing here.

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