Lazard: Regulatory Change ‘Necessary’

December 3, 2011

The CEO of Bermuda’s Lazard Ltd. says regulatory changes to the US banking industry were “necessary” and “appropriate” in the wake of the financial crisis.

“There needs to be some separation of the activities that people do for their own account versus the ones that they do on behalf of clients,” Kenneth Jacobs said yesterday [Dec.2] in an interview on Bloomberg Television. Regulatory changes “were necessary. And I think from that standpoint, they’re appropriate.”

The biggest US banks are grappling with an overhaul of the financial system through the Dodd-Frank Act and the so-called Volcker rule, named for former Federal Reserve Chairman Paul Volcker. The rule, which takes effect in 2012, will limit banks from trading on their own behalf and from investing in private-equity and hedge funds. Officials also are discouraging risk taking and requiring banks to hold more capital and undergo stress tests.

“Wall Street is just not going to be as profitable as it used to be,” he said. “It’s not going to come back to the way it was before 2008. It’s a secular change.”

The market’s expectation for recovery from the financial crisis has been “wildly optimistic,” and there will be a “sustained period of time of sub-par” growth in gross domestic product in the US, Mr. Jacobs said. With slow economic recovery, merger-and-acquisition activity will improve as companies are challenged to grow organically, he said.

Hamilton-based Lazard is the world’s largest independent merger adviser.

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