Banks aim to minimize losses from reform

July 17, 2010 | By Jim Kim

The broad contours of financial reform--especially for credit and debit card operations--have been roughly clear for some time. Banks have been busy figuring out every possible angle, with an eye on maintaining revenue or minimizing losses in all areas. The profit hit could be in the 10 percent range, but that may be a tad high as more banks find ways to adjust. In the words of Jamie Dimon, CEO of JPMorgan Chase: "If you're a restaurant and you can't charge for the soda, you're going to charge more for the burger."

The New York Times reports, "At Morgan Stanley, the board will hear strategies on how to adapt when it meets next week. Citigroup has already shed risky investment units forbidden by the bill, freeing up cash it can quickly deploy into new areas. At JPMorgan, 90 project teams are meeting daily to review the rules and retool businesses accordingly." At JPMorgan Investment Bank, a team of more than 100 people are retooling the bank's giant derivatives business for the new era, with an eye on efficiencies. Citigroup has similar projects underway.

Perhaps the most obvious example of forward-thinking revenue recapture activity is the imposition of new fees on checking accounts. Many banks are tweaking their policies. Some will want to wrap it up in the mantle of new services, but it's a revenue play at its core.

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