Prime brokers are stated by industry insiders as going through their lists of clients demanding higher fees on trading or a greater share of a fund's business, and at instances advising funds to look elsewhere. Such actions are brought about due to the tough economic environment banks are currently facing, in addition to higher regulatory costs and looming Basel III capital standards that are set to reduce returns on equity.
Small funds which have been struggling to attract client cash ever since the credit crunch look less attractive to the majority of the banks. In many cases now, brokers are trying to shift their focus on biting out on business flow from the bigger players and the more active hedge fund traders. In the beginning of this year the Financial Times had reported that many prime brokers were preparing to pass on increases to the cost of funding to hedge fund clients.