10-year Yield Has Moved Above 5%, and Markets Are Assigning Around a 90% Probability to a Fed Hike This Week.

“Share currency is strategic power.”

Higher rates initially support banking margins. But they also raise funding costs, increase credit risk, compress valuation multiples and raise the hurdle rate for every acquisition.

The Risiko is therefore becoming simultaneously more strategic and more financially demanding.

Key takeaways

The new battlefield

• Higher rates cut both ways — supporting margins while raising funding costs, credit risk and every acquisition's hurdle rate.
• The next phase will not be won by the institution willing to pay the highest price.
• It will be won by the institution that can maintain the strongest currency of strategic credibility long enough for its preferred architecture to become irreversible.