President Barack Obama’s proposals to ban banks from proprietary trading unrelated to serving their customers will have a very uneven impact on the sector.
There is no easy way to identify how much money the major banks make from proprietary trading rather than market-making, brokerage and hedging services on behalf of their customers. The banks do not break out their activities in this way, and the regulators do not collect standardised data.
But it is possible to identify which banks depend most heavily on trading rather than investment or commercial banking activities, and which are therefore potentially most exposed to a tightening of the regulations to prevent proprietary trading unrelated to serving their customers.
The attached charts (see here and here) show the 20 largest banks in the United States by average assets and the share of their adjusted operating income derived from trading activities in the first nine months of 2009. The numbers are taken from the Form Y-9C Consolidated Financial Statements which banks themselves file, published by the Federal Reserve in the form of Bank Holding Company Performance Reports (BHCPR), and used by federal bank supervisors:
Of the biggest banks, Goldman Sachs (55 percent) and Morgan Stanley (36 percent) depend far more than the others upon trading for the lion’s share of their adjusted operating income.