The 8 August 2007 – almost exactly 10 years ago – is recognised by some as the start of the 2007-08 global banking crisis. That was the day when French bank BNP Paribas suspended redemptions in three of its money market funds with exposure to US asset-backed securities, sparking concerns about sub-prime assets in the US. Since then global banks have had a rough ride and the banking market we see today is considerably different to pre-2007.

Profits down 23 per cent

Since that crisis, regulation such as the Dodd-Frank Act and Basel III have aimed to stabilise the banking sector, reducing risk exposures and protecting taxpayers. But a report by management consultancy firm Oliver Wyman has also found that profits and returns on equity in the sector are down:

• the revenues of global wholesale banking are down 23 per cent since the global financial crisis – they now stand at US$230 billion, down from US$300 billion 10 years ago; and
• returns on equity have halved from about 20 per cent in 2007 to 10-11 per cent in the past year.

Declining revenues

According to the consultancy firm, much of the decline in revenues is due to lower revenues from credit trading. Its research estimates that:

• credit revenues are down 43 per cent, to US$40 billion from US$70 billion a decade ago;
• macro revenues have declines 18 per cent, to US$70 billion from US$85 billion;
• equities income is down 25 per cent, to US$60 billion from US$80 billion; and
• investment banking division revenues are down 8 per cent, to US$60 billion from US$65 billion.

Cutting costs and assets

The research also found that banks are cutting costs and reducing the assets on their balance sheets:

• front office costs for wholesale banks are about 32 per cent less than in 2006/7, down from US$110 billion to about US$75 billion in 2016;
• the cost of support functions have been cut by 12 per cent (from US$85 billion to US$75 billion);
• assets on bank balance sheets have been cut to about US$11 trillion from US$16 trillion.

Growth of Chinese banks

The shape of the global banking industry has changed considerably in the decade since the 2008 credit crunch. The five biggest global banks (by assets) last year were all Asian, four of them Chinese and one Japanese. In 2007, the five biggest banks were all Western European. However, Oliver Wyman found that the credit crisis wasn't so bad for US banks after all – they have increased their global market share to 50 per cent of industry revenue, up from 40 per cent in 2007.