ROE hurdles cause pricing impasse

tim-gately

Capital is the great constraint on derivatives businesses these days, so it makes sense that their performance should be measured as the revenue bang for the regulatory buck – return on equity (ROE) under Basel III. That sounds simple enough, but while it's easy to set bank-wide or business-wide ROE hurdles, applying them on a trade-by-trade basis is creating a mind-boggling array of problems for pricing and organisation.

"Through the hurdle rates, capital is increasingly becoming the driver of

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