New Financial Sector Regulation and the Potential Impact on Growth

Over the past two years, there has been a significant increase in regulations by both international and domestic banks designed to manage the risk-taking behaviors of the banks, improve bank capital quality, and foster economic growth. How does this new regulatory regime impact credit creation and economic growth? And more importantly, what’s the impact of these regulatory rules on the Citi’s ICG group’s profitability and competitiveness among big banks?

To answer these questions, the Capstone team first researched the changes of the regulatory rules since the 2008 financial crisis. The team then took a micro approach through analyzing different business lines of the Capstone client: corporate investment (securitization), transaction (commodities trading), private bank and market, and examined the impact of the regulatory rules on each business line. Lastly, the team took a comparative approach by looking at the client's competitors’ market.

The Capstone project aims to:

• Come up with a way to look at how new regulations would affect Citi’s business.
• Look at how the regulatory environment would encourage exits and/or new opportunities for Citi’s banking and non-banking competitors.
• Analyze the unintended consequence of the new regulatory regime.