RBS Ordered By European Commission To Slow Down In Debt Capital Markets (RBS, SRE)

According to Wall Street Journal, the Royal Bank of Scotland (NYSE: RBS) , specifically their investment banking arm, suffered a major blow after it was forced to agree on regulatory provision on the debt capital markets by the European Union. RBS Group Chief Executive Stephen Hester states that, “The agreement in principle reached with the [European Commission] is clearly more material for the structure of our group than we had hoped.”

The restrictions of the commission will prevent RBS from being ranked higher than fifth in Dealogics global all debt leagues table which includes all debt capital market products and loans but excludes money markets and short term business loans.

As a result, Royal Bank of Scotland is not allowed to grow their market share in the Debt Capital Markets for the next three years. In addition, the bank will likely have trouble hiring talent in investment banking because of their inability to provide large bonuses as dictated by the UK Treasury’s Asset Protection Scheme.

There will be no bonuses for any staff of RBS and Lloyds Banking Group (NYSE: LYG) who earn more than GBP 39,000. Members of the board for both companies have agreed to defer bonuses until 2012. Their joint venture with Sempra Energy, RBS Sempra, will be terminated despite bringing in 6% of revenues to the global markets.

To read the full article click on the link below:
http://online.wsj.com/article/BT-CO-20091103-710265.html