An old friend who left the banking industry to be an entrepreneur told me that the finreg will cause the demise of the banking industry. Yes, it will probably reduce the earnings of investment banks as trading in derivatives and other activities deemed "risky" will be curbed. Also, banks are required to hold more capital. But the bulk of such measures will affect the i Banks the most, not consumer banks, not private banking. Corporate banking's margins will be further reduced due to the extra capital required. Since securitisation may be more difficult, loans books may grow more slowly. This is not the Glass-Steagall Act. It is Volker's Act that is a watered-down version of the Glass-Steagall Act.
The bonuses of i Bankers in the US will be curbed for sure. In UK, bankers' bonuses will be scrutinised. But the safe haven remains wealth management and private banking. The only curbs I can see is more restriction on selling derivative products to retail clients. But for the business that caters to the wealthy and sophisticated, it is business as usual.
According to MTI's report published back in 2004, the banking industry is on average the best pay master in Singapore. Only the chemical industry pays more, read Exxon Mobile. Pharmaceuticals used to be a darling too, but their patents are slowly expiring and there are fewer blockbuster drugs produced. Another important trait is that in most industries, the earning power of an employee tapers off after he/she reaches 45. But for industries that rely less on physical strength and more on brain and networking power, earnings continue to rise right up to retirement age.
Entrepreneurship has great rewards and great failures. On average, 70% of start-ups fail and I'm being very generous. No doubt those who make it will enjoy great wealth. But if you multiply probability of success with reward, the expected returns are probably lower.
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