Such instruments, pre-crisis, constituted almost 75 per cent of the total capital held by banks in developed countries. These were essentially capital market instruments with some optionalities attached to them. Income composition 14. The overall balance sheet transformation was clearly evident in the increased reliance on nontraditional business activities that generated fee income, trading revenue, and other types of noninterest income.
A significant proportion of bank revenues came from such activities and there was a view that this diversification of income streams was healthier for bank profits. Consequently, there was conscious shift towards larger proprietary books and greater investment in “owning, investing in and sponsoring” hedge funds and private equity ventures.