Global banking outlook: 2013-14

Adapting to the new environment

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Staying flexible while avoiding being overwhelmed by legacy issues will be crucial to survival.

Lower returns on equity have rendered many North American and European banking business models obsolete. The causes are well-known: increased regulation, a slow economy and prolonged low interest rates.

Customers meanwhile are increasingly looking beyond banks for traditional banking services. Shadow banking, peer-to-peer lending and new payment services are all playing a role in this shift.

The result: asset sales, wind-downs and deleveraging continue to increase. The IMF estimated in 2012 that European banks alone will shrink their balance sheets by more than USD2.5 trillion by the end of 2013.

In this environment, staying flexible while avoiding being overwhelmed by legacy issues will be crucial to survival. We are already seeing new strategies by some banks to transform their businesses and carve out a share of the new market:

  • Relying on in-house asset management arms to fund loan requirements of banking customers
  • Partnering with peer-to-peer lending sites
  • Providing white-label services to retailers-as-banks
  • Sharing infrastructure between banks to improve efficiency in rapid-growth markets
  • Developing stronger cybersecurity through cooperation between banks

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