Another sign of the permanent structural change in New York’s state and city tax base: today’s warning by Fitch Ratings that the world’s largest banks (including NY-based Goldman and Chase) will need to raise $566 billion to satisfy new capital requirements to protect against capital shocks.

The New York Times DealBook notes that the so-called Basel III rules, devised by the global Financial Stability Board, “could reduce the median return on equity to 9 percent from current returns of approximately 11 percent … a potential 20 percent reduction in profitability in the next decade.”

“Single-digit return on equity reasonably could be the rule of the day,” said Martin Hansen, senior director in Fitch’s macro credit research team. “The recent high historical returns may be difficult to achieve.”

About the Author

E.J. McMahon

Edmund J. McMahon is Empire Center's founder and a senior fellow.

Read more by E.J. McMahon

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