Risk 25: Banks prepare for a low-RWA future

Reining-in capital consumption – and then keeping it low – will be the top priority for many banks over the next five years. But it’s not clear how much fat there is to cut, and whether regulators will smile on more innovative schemes

The banking industry has long used return on equity as a measure of success but, in many cases, senior management and business heads only cared about the first part of that ratio – banks were popular with investors, equity was cheap and, frankly, regulations did not require the industry to hold much of it. The picture could not be more different today. With Basel III forcing banks to hold a higher ratio of equity against a sharply increased risk-weighted assets (RWAs) number, dealers say return