NEW YORK, Aug. 1, 2017 /PRNewswire/ -- Increased costs
as an "unintended consequence" of regulatory reform are leading
many small U.S. broker-dealers and financial advisors to abandon
the municipal finance business, according to Kevin Dunphy, Managing Director and Head of
Public Finance at Mitsubishi UFJ Financial Group,
Inc. (MUFG).
Dramatically declining fees paid to underwriters and lower
municipal bond issuance are other key reasons that small
broker-dealers and financial advisors will continue to exit public
finance, Mr. Dunphy added.
Mr. Dunphy made his remarks on July
18 in New York during the
inaugural session of MUFG Explores, an
issues-oriented series in which MUFG subject matter experts meet
with journalists to discuss current newsworthy topics and
trends.
"One of the biggest impacts of regulatory reform that I see –
really as an unintended consequence – is the demise of the small
municipal finance firm," Mr. Dunphy said.
"These firms suffer disproportionally because the increasing
regulatory costs consume a greater share of their revenue,
significantly reducing profitability.
"Further, when you combine the increasing regulatory costs with
declining underwriting spreads and lower issuance, firms' margins
are under severe pressure. The expectation for lower issuance will
increase competition for the remaining deals and make matters even
worse for these small firms."
As the smaller firms struggle to effectively compete with their
larger, deeper-pocketed rivals, a number of U.S. municipalities are
in danger of losing their most knowledgeable and reliable financial
experts, Mr. Dunphy noted. Many of these firms have particular
expertise in local markets, leaving some municipalities without
access to the bankers that best understand their history and the
intricacies of their needs.
"New compliance requirements decrease the amount of time bankers
and advisors can spend with their clients," he said. "Ultimately,
it will be the municipalities that bear the cost of regulations in
the form of increased costs or rates, and the lack of supply."
Mr. Dunphy has more than three decades of experience as a
municipal banker, including 18 years at Bank of New York as the founder and Head of its Public
Finance and the Government Banking Divisions. He joined MUFG in
2010.
How will we pay for infrastructure needs?
At the roundtable, Mr. Dunphy also discussed the need for
infrastructure spending. "While it is refreshing to hear the new
administration talk about infrastructure investment plans," he
said, "I am still waiting to understand how we will pay for
it."
Mr. Dunphy noted that legislators' promises to upgrade the
nation's bridges, roads and tunnels have been largely more talk
than action. "Over the years, Washington has kicked the can down the road
and, as a result, America's infrastructure is in dire need of
repair, replacement, and new projects," Mr. Dunphy said.
MUFG, one of the world's largest financial institutions, is one
of the biggest lenders in the public finance sector. Providing
credit and complete banking services to governments, public
authorities, and not-for-profits, MUFG has extended more than
$11 billion of credit to public
clients.
Future MUFG Explores roundtables are scheduled to
delve into compelling subject areas including healthcare, retail,
and Latin American finance.
About MUFG Americas Holdings Corporation
Headquartered in New York, MUFG
Americas Holdings Corporation is a financial holding company and
bank holding company with total assets of $150.6 billion at June 30,
2017. Its main subsidiaries are MUFG Union Bank, N.A. and
MUFG Securities Americas Inc. MUFG Union Bank, N.A. provides an
array of financial services to individuals, small businesses,
middle-market companies, and major corporations. As of June 30, 2017, MUFG Union Bank, N.A. operated 361
branches, comprised primarily of retail banking branches in the
West Coast states, along with commercial branches in Texas, Illinois, New
York and Georgia, as well
as 16 PurePoint Financial Centers and two international offices.
MUFG Securities Americas Inc. is a registered securities
broker-dealer which engages in capital markets origination
transactions, private placements, collateralized financings,
securities borrowing and lending transactions, and domestic and
foreign debt and equities securities transactions. MUFG Americas
Holdings Corporation is owned by The Bank of Tokyo-Mitsubishi UFJ,
Ltd. and Mitsubishi UFJ Financial Group, Inc. The Bank of
Tokyo-Mitsubishi UFJ, Ltd. is a wholly-owned subsidiary of
Mitsubishi UFJ Financial Group, Inc., which is one of the world's
leading financial groups. Visit www.unionbank.com or
www.mufgamericas.com for more information.
About MUFG (Mitsubishi UFJ Financial Group, Inc.)
MUFG (Mitsubishi UFJ Financial Group, Inc.) is one of the
world's leading financial groups, with total assets of
approximately $2.7 trillion (USD) as
of March 31, 2017. Headquartered in
Tokyo and with approximately 350
years of history, MUFG is a global network with more than 2,200
offices in nearly 50 countries. The Group has more than 140,000
employees and about 300 entities, offering services including
commercial banking, trust banking, securities, credit cards,
consumer finance, asset management, and leasing. The Group's
operating companies include Bank of Tokyo-Mitsubishi UFJ,
Mitsubishi UFJ Trust and Banking Corporation (Japan's leading trust bank), and Mitsubishi
UFJ Securities Holdings Co., Ltd., one of Japan's largest securities firms. Through
close partnerships among our operating companies, the Group aims to
"be the world's most trusted financial group," flexibly responding
to all of the financial needs of our customers, serving society,
and fostering shared and sustainable growth for a better world.
MUFG's shares trade on the Tokyo,
Nagoya, and New York (MTU) stock exchanges. Visit
www.mufg.jp/english/index.html.
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SOURCE MUFG Americas Holdings Corporation