When the major global investment banks report their second-quarter earnings in the coming weeks, all eyes will be on the resilience of their capital markets revenues amid the weakening economic and market environment. Their aggregate return on capital currently lags their cost of capital by a distance, and we believe that a key question currently facing the industry is whether this is merely a temporary phenomenon. Standard&Poor's Ratings Services believes that investment banks have yet to demonstrate that they can generate satisfactory and sustainable returns on capital while subject to tougher regulatory requirements and difficult funding conditions. More favorable macroeconomic conditions would support earnings growth, but we see significant short-term uncertainties. In addition, widespread deleveraging (not only by
