American financial institutions have for decades dominated global wholesale banking, which includes institutional banking activities, such as mergers and acquisition advice, stock and bond underwriting and trading, currency conversions, along with some corporate lending. Now, as the U.S. administration pursues changes in global trade and investors begin to rotate away from U.S. assets, the global order that has strongly favored U.S. markets and financial institutions may be changing.
“The current wave of policy changes has the potential to trigger structural shifts in the real economy and global financial markets,” says Betsy Graseck, Morgan Stanley’s Global Head of Banks and Diversified Finance Research and a co-author of a new report from Morgan Stanley and Oliver Wyman examining the potential impact of recent policy developments in global trade and finance. “Investors will be watching to see to what extent that might challenge U.S. dominance in wholesale banking.”
The Banking Behemoth
The American role in the global financial system is hard to overstate: U.S. ownership makes up 45% of global assets, and the country’s deep and liquid markets account for more than 65% of global trading volume. Consequently, the six largest U.S. banks capture 32% of global wholesale banking revenue and 44% of core investment banking and markets revenue. Both of those figures have risen over the past decade.
There have been significant policy-driven shifts in wholesale banking before, with wide-ranging effects. In the 1970s, after President Nixon pulled the U.S. dollar off of the gold standard, a wave of financial innovation followed, including the creation of hedging instruments for interest rates and currencies. Capital market structure changed, and regional economic integration gained favor, eventually creating the euro zone to address currency volatility in a floating exchange rate system.
Three Paths Forward
The signs that global investors are beginning to rotate away from U.S. assets, seen before and after the administration’s tariff announcements in April, raise the possibility of significant changes in global banking. For example, the U.S. policy shift is catalyzing renewed political support in other parts of the world for capital markets reforms intended to boost their own ability to raise capital and invest savings. Examples of this trend include Europe’s Savings & Investment Union proposal; China’s Nine-Point Guidelines, which aim to increase dividends and improve governance and disclosures; and reforms in Japan, Korea and Singapore that seek to improve corporate governance to promote investor confidence and investment.
While it’s too early to predict outcomes, three possible scenarios give a sense of the scope of change that might be coming.
1. An Increasingly Multipolar World
Under this scenario, tariff and trade negotiations fail to settle conflicting interests, and global financial institutions experience a structural shift similar to that of the 1970s. Investors in Europe and Asia pull back from the U.S. and put more of their capital in their home regions. Long-discussed capital market reforms deepen non-U.S. markets, leveraging domestic savings and previously untapped institutional capital. Growth in Europe and Asia accelerates faster than in the U.S.
In this instance, wholesale banks operating in Europe and Asia see an incremental increase of $80 billion in annual revenue by 2028. Overall wholesale banking revenue rises 15% from 2024 levels, but Europe and Asia lead that growth, with U.S. bank revenue growth lagging.
2. A Deepening of American Primacy
With a more orderly resolution of the current trade turmoil and reduced uncertainty, the gradual transformation and consolidation of wholesale banking of the past 15 years continues. The dominance of U.S. markets and financial institutions increases, helped by deregulatory moves by the Trump administration. Capital market reforms in Europe fail to gain traction, and the U.S. remains an attractive destination to invest and raise capital.
If this occurs, global wholesale banking revenue grows 10% by 2028, and the U.S. global fee pool continues to increase. The large U.S. banks, meanwhile, face rising challenges from non-bank financial companies, regional banks and foreign banks.
3. A Global Contraction
Uncertainty over tariffs persists, or more dramatic trade conflicts develop. This freezes investment and tips the global economy into contraction, which is followed by a period of risk aversion. Some global investors lose confidence in U.S. economic growth and stability, and they reconsider the traditional U.S. role as a safe haven.
In this scenario, global wholesale banking revenue initially drops sharply as M&A, capital markets and trading activity decline. Even with a moderate recovery from the initial shocks, global wholesale banking revenue in 2028 is 4% below 2024 levels. This looks like the aftermath of the global financial crisis, but capital and risk management improvements since 2008 have made the banking industry more resilient.
“A Gravitational Force”
It’s important to note that in all scenarios, the U.S. market and U.S. institutions continue to dominate. It is almost impossible to erase multiple decades of history. U.S. institutions have built meaningful barriers to entry in key businesses: cash equities and prime services; liquid trading across equities and fixed income; advisory; and the integrated advisory and financing model for financial sponsors. Even in the “Multipolar World” scenario, which is the most favorable to non-U.S. institutions, U.S. majors’ share of corporate and investment banking revenues globally declines only 2 percentage points, from 44% to 42%.
Still, there is a lot at stake.
“A single percentage point shift in global asset allocation will drive $1.5 trillion in capital flows, so this period of disruption will create significant opportunity,” Graseck says.
Market participants’ perceptions of how the current situation is most likely to evolve is pivotal, driving meaningful strategic choices, such as whether to invest in U.S. wholesale banking or redirect investment into growing markets elsewhere.
“The U.S. has been a gravitational force in wholesale banking for decades,” Graseck says. “It’s difficult to break the dominant position of U.S. markets and wholesale banks over the medium-term. But geopolitical tensions are beginning to disturb that equilibrium that holds them in that position.”
For deeper insights and analysis, ask your Morgan Stanley Representative or Financial Advisor for the full report, “Defying Gravity: Can Non-US Wholesale Banks Win in the New World Order?”, (June 9, 2025).
