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Banking risk management survey 2012 – EY – Banking & Capital Markets - EY - Global

Bank risk management survey 2012

Impact of Basel III

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“We are facing a significant challenge just to achieve technical compliance with the new rules and ratios, let alone reorient the institution for success.”

The new regulations, combined with ongoing complications from the crisis, and macro-economic and geopolitical instability, is causing uncertainty throughout the banking industry. Boards and senor leaders are strategically re-assessing business needs to adapt to the new environment.

The majority surveyed believe the more stringent liquidity and capital requirements will have a fundamental impact on business models and the profitability of the industry if:

  • Returns on equity go down
  • Costs and leverage are reduced
  • Margins go up
  • Significant new investments are made in staff expertise, technology and processes

Despite the long timelines for implementation, the industry has felt pressure from regulators to achieve compliance at a faster rate.

Estimates of margin increase caused by Basel III


Estimates of margin increase caused by Basel III

To comply with the new regulations, 65% of respondents are re-evaluating portfolios, and almost half (45%) report they are moving away from complex, less liquid instruments into more stable asset-based funding sources. One-third of respondents, particularly in Europe, report they are exiting or selling part of their business to reduce the impact of the new rules.

Some are exiting certain countries and moving business back to their home country. Others note the importance of diversifying into new investor bases, such as retail banking and new global markets, to tap new capital and funding sources for long-term planning.

Respondents expect many standard corporate banking products will be impacted and the cost of funding will continue to rise. As a result, there is concern investors will be more hesitant to put money into industries with low returns because of high capitalization.

However, stress testing and risk disclosure transparency are viewed as possible ways to keep investors on-board.


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  • Bill Schlich
    Global Banking & Capital Markets Leader
    +1 212 773 3233
  • Patricia Jackson
    Head of Financial Regulatory Advice for EMEIA Financial Services
    +44 20 7951 7564
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