Global banking outlook: 2013-14

Preparing for fundamental restructuring

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Outsourcing might be reaching its limit for some banks, and we expect to see innovation around in-house provisioning and lower cost onshore locations.

Much restructuring to date has been incremental rather than systemic. As a result, stubbornly high cost/income ratios have made plain an institutional cost base that is too heavy to carry. In 2013-14 we expect more banks to opt for large-scale, rather than piece-meal, restructuring.

In an era of greater regulatory oversight, banks will need to demonstrate organizational controls that satisfy internal and external stakeholders. Many companies will recognize the need for a corporate-level compliance function that stands alongside traditional credit and market risk functions.

New structures will also be affected by broader regulatory changes, including the adoption of recovery and resolution plans, structural reforms and OTC derivatives reform.

Outsourcing and offshoring models will receive new attention as banks become increasingly concerned about concentration risk and face pressure to improve control and oversight. In fact, outsourcing and offshoring might be reaching its limit for some banks, and we expect to see innovation around in-house provisioning and lower cost onshore locations.

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