A very good reason not to get our hopes up regarding the future performance of bank stocks across the world:
Starting June 30th 2010, Switzerland will impose to its two largest banks, UBS and Credit Suisse, to significantly increase their capital requirements. Following the global banking sector fiasco, the Swiss government needed to rescue UBS at the expense of the country’s public finances. Given the fact that Switzerland has always had a leadership role in regards to international banking legislation, we can reasonably expect that this tendency will be followed across the world. When a bank is forced to increase its capital requirement, it becomes more financially solid. But with less available capital to generate earnings, we can logically expect slower growth in future profits for the banking sector.
