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LONDON, April 1 (Reuters) - Being one of the world's top 30banks is not worth the hassle of extra regulatory scrutiny andcapital requirements, according to a poll of financial industryinvestors last week.
Morgan Stanley said 62 percent of investors polled at itsEuropean financial industry conference said the negatives ofhaving a global banking business outweighed the benefits asregulations had "become overbearing" for the largest firms.
Only 28 percent of investors said the benefits of being alarge and truly global firm outweighed the negatives, and 10percent of the 60 people polled were undecided.
"We found it striking that some management teams are seekingto make their businesses simpler, and we believe investors wouldreward the restructuring potential if strategy is clear andperceived as achievable," Morgan Stanley analyst Huw van Steeniswrote in a note to clients on Wednesday.
Thirty of the world's biggest banks are dubbed globalsystemically important banks, or G-SIBs, which must hold between1 and 2.5 percent extra capital from the start of 2016 and alsohave a buffer of debt that can absorb losses, so they are lesslikely to collapse.
These banks, which include HSBC, JPMorgan,Citigroup and China's ICBC, also typicallycome under extra scrutiny from national regulators.
Banks, particularly many in Europe, are cutting down in sizeto save costs and simplify their operations.
"We were struck by how many of the management teams we metare trying to reconfigure their business, whether throughstretching cost cutting goals via digital in the UK and Nordicbanks or shrinking investment banking or addressing balancesheets, such as in Italy," van Steenis said.
He said legacy systems, bad loans and businesses not makingreturns above their cost of capital remained material challengesfor the firms, however.
A majority of investors at the conference said they expectEuropean banks to raise at least 20 billion euros ($21.5billion) more equity this year.
Morgan Stanley said 41 percent of investors polled saidbanks would raise 20-30 billion euros, 9 percent expected themto raise 30-40 billion and 13 percent expected them to raise 40billion or more.
A majority of investors said they expected the EuropeanCentral Bank to require banks it regulates to hold core capitalof at least 11 percent in the future.($1 = 0.9304 euros) (Reporting by Steve Slater; editing by Susan Thomas)
