PARIS |
(Reuters) - Expected tighter capital restrictions on banks will likely trigger a wave of consolidation in the sector by pressuring firms to slim down, a managing partner of investment bank Rothschild & Cie told Reuters.
The cost of carrying more capital will push banks to become more focused on their best-performing business lines, paving the way for asset sales and a move away from diversified business models, Francois Henrot said in an interview.
"The fact the regulator is now forcing them to set (more) capital aside will push them to make a choice," said Henrot, adding banks would no longer be able to afford operating dozens of businesses from property and insurance to payment services.
New proposed rules from the Basel Committee on Banking Supervision, known as Basel III, are aimed at increasing the amount of capital and liquidity banks must hold and lessen the need for more taxpayer bailouts in future crises.
They are due to come into effect by 2012, but uncertainty over their precise content -- which is still at the consultation stage -- has put the brakes on deal-making in the financial sector, said Henrot.
"It's very difficult today to do big transformative deals in the banking sector when you don't know which rule you will be subject to," he said.
