A rebound in the hedge fund industry has also helped to boost prime brokerage revenue for the banking industry. Total global hedge fund capital rose for the 11th consecutive quarter during the second quarter to $2.97 trillion.
In 2008 during the crisis, hedge fund capital fell to as low as $1.4 trillion.
Those were dark times for banks globally, particularly in the United States. After JPMorgan rescued Bear Stearns, and Lehman Brothers started wobbling and ultimately failed, hedge funds began pulling money out of U.S. banks.
Preqin's data does not go back to before the financial crisis, but Global Custodian magazine said 44 percent of hedge funds reduced balances with Goldman Sachs and 70 percent pulled back from Morgan Stanley.
Some customers turned to banks perceived as having the explicit backing of their home governments, such as Deutsche Bank and Credit Suisse, and those viewed as having strong credit like JPMorgan.
European banks are suffering because of Basel III capital rules known as "leverage rules" that don't give banks a break for having less risky assets. In prime brokerage businesses, banks finance customers' trades, which tend to be relatively low-risk loans. But the size of the positions can be relatively large, forcing banks to use high amounts of capital to fund the assets.
The Basel III global leverage rules are expected to be finalized next year. The current preliminary Basel minimum is 3 percent, a figure that is expected to be higher for the final rules that become mandatory in the beginning of 2018.
The U.S. set its own rules last year that are more severe than the expected global minimum requirements. U.S. banks have built capital to meet those rules, and now have more than enough, allowing them to take more risk, executives said.
Goldman and Morgan Stanley, which both must have a 5 percent minimum leverage ratio for their holding companies under U.S. rules, have a 9.6 percent and 7.9 percent ratio, respectively, according to regulatory filings as of June 30. Other jurisdictions are requiring levels above the Basel minimums too—Swiss banks are required to have at least a 6 percent leverage ratio.
Individual nations' may calculate leverage differently from one another and from the Basel Committee of global banking supervisors, which sets the Basel capital rules. Under those rules, Credit Suisse has a 3.7 percent ratio, but under Swiss rules, it has a 4.3 ratio, meaning it will have to build capital. Deutsche Bank's leverage ratio is 3.6 percent under Basel rules.