Dubai: World markets tumbled on Friday after US President Barack Obama announced plans for a sweeping overhaul of big banks to avoid overexposure to risky asset classes that led to the global financial crisis in 2008.
Obama's proposal would restrict the size of banks currently seen as 'too big to fail', and it aims to bar institutions from "proprietary trading", which is done by banks for their own profit and is unrelated to customers.
In Friday's stock trading in Europe, big banks were hit by the Obama plan. Credit Suisse, Barclays, Royal Bank of Scotland, Deutsche Bank and others slumped after what was felt as a "shock announcement" in the financial sector. In the US, big financial institutions like Goldman Sachs, JP Morgan and Morgan Stanley already dropped in Thursday’s late trading and continued declining on Friday.
Oil and the dollar also went lower, while gold and treasuries rose. Oil fell below $76 on Friday as commodities across the board remained under pressure. Gold firmed in Europe as the dollar fell.
JP Morgan analysts said that Obama's plan will decrease the overall revenue of the big banks by about $13 billion (Dh47.71 billion) in revenue next year. However, other banks said that Obama's plan won't have too much impact on their business as they have already taken measures to reduce their risk exposure.]
London’s FTSE index was down 0.6 per cent and Germany's DAX lost 0.9 per cent at the end of the day's trade. Wall Street fell for a third day on Friday, with the Dow down 0.65 per cent and Nasdaq 0.82 per cent lower at 1850GMT.
