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FT Alphaville chat with Colm Kelleher - CFO of Morgan Stanley

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FT Alphaville met with Colm Kelleher, Morgan Stanley’s CFO and Co-Head of Strategic Planning. Given the near constant headlines, it’s not surprising that we spent a good chunk of the meeting talking through potential regulatory changes and their impact on Morgan and the industry. Not surprisingly, Colm thinks higher capital requirements are coming, by way of increased risk-weightings, and he also thinks a hard leverage cap, maybe in the 20x range, will become a reality (he has said MS will likely have leverage in the 14-20x range going forward)...

"While it is understandable given the scare they faced last year, Morgan’s risk culture has been altered in pretty dramatic fashion and this has led to lackluster trading results as markets have rebounded. Management is now in the process of rebuilding the risk culture, especially in FICC, but doing it in a way that makes sense. In an effort to better manage risk, the firm has been pouring a lot of money into its Management Information System since the middle of 2007 in order to effectively track Risk Adjusted Return on Capital (RAROC). Management has found it makes a lot more sense to take risk in the areas where Morgan has an edge as opposed to following competitors or engaging in carry trades..."

Read more at FT Alphaville

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