This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Volcker Rule Will Benefit These Firms: KBW

NEW YORK ( TheStreet) -- The intense regulatory focus on "Too Big to Fail" banks should continue to create opportunities for smaller players and non-banks, according to KBW analysts.

"The implementation of the Volcker rule is likely to be tougher than was thought just a few months ago, the push to move derivatives to exchanges will accelerate, and the continued implementation of higher capital standards for large banks will move merchant banking activities to non-banks, in our view," the analysts said.

The argument to break up big banks has been gaining favor in Washington amid concerns of an ongoing perception in the market of an implied government guarantee for the nation's largest lenders. Trading losses at JPMorgan Chase (JPM - Get Report) amid regulatory and risk-management lapses have also raised concerns that some firms may be "too big to manage" and "too big to regulate."

That has stepped up regulatory pressure to toughen the Volcker rule, which is intended to limit risk by banning banks from proprietary trading and moving derivatives trading to exchanges. The Volcker Rule is meant to contain damage to the wider financial system from a trading firm's failure.

While the analysts do not believe there will be new legislation to break up the banks, they expect the largest banks, particularly those designated to be globally significant, to be in for a "long period of increased regulation, limited profitability and shrinkage."

Increased regulation has, however, created opportunities for smaller firms, the analysts note. The regulation and litigation surrounding mortgages, for instance, has allowed companies such as Ocwen Financial (OCN) to grow market share. Similarly, implementation of consumer banking laws in through the Dodd-Frank bank reform legislation has been cumbersome for the large banks, but has allowed lenders such as Discover Financial Services (DFS)and Signature Bank (SBNY) to gain market share.

In the capital markets space, KBW expects alternative managers such as Blackstone (BX - Get Report), Carlyle Group (CG), Fortress Investment Group (FIG - Get Report) and private equity firm KKR (KKR - Get Report), to benefit in the new regulatory landscape. Exchanges such as Intercontinental Exchange (ICE - Get Report) and brokers Evercore Partners (EVR) and Raymond James Financial (RJF) are also likely to emerge as winners.

-- Written by Shanthi Bharatwaj New York.

>Contact by Email.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
ICE $240.98 0.00%
BX $27.04 0.00%
FIG $4.81 0.00%
JPM $62.56 0.00%
KKR $13.50 0.00%


Chart of I:DJI
DOW 17,750.91 -140.25 -0.78%
S&P 500 2,063.37 -18.06 -0.87%
NASDAQ 4,763.2240 -54.37 -1.13%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs