Reality Check Time

In descending order of understanding on the subject, regulators, the man on the street and politicians all want banks to shrink. Reality in Europe, however, is that banks should be cutting themselves down to size. Investment banking revenues are expected to be about 30 per cent lower in the second quarter than in the first, and down 15 per cent from a year ago. Some European banks have scale in enough areas to compete with big American rivals. Others need to be brutally honest about their strengths - with themselves and investors. If they are not in the top three in, say, fixed income, currencies and commodities, they should quit and stick to what they do best.