The Moody’s downgrade of 15 banks is a backward-looking review of the strategy that has dominated global banking for the past two decades – expanding into high-margin capital markets operations. It does not get good marks.

There was always a problem inherent in banks such as Deutsche Bank, Barclays, UBS, Bank of America, Credit Suisse and others trying to play in the investment banking world. Yet it took a very long time for a penalty to be applied.

Of course, the question is why it wasn’t applied earlier. Many of the things that Moody’s writes about in its note accompanying the downgrades were evident a long time ago – high volatility came with high margins. Read more