Structural change in European Banking
- All banks surveyed have discussed structural changes at board level
- For 33% of banks surveyed, business change in response to regulation is the top priority for their boards.
- 90% of GSIBs surveyed said that structural change is either the top or one of the top 3 priorities for the board.
- “Reforms to regulation and resolution are putting pressure on the global model that banks currently employ. Banks are adamant that they still want to operate as a single institution, but to do so banks will have to restructure themselves fairly significantly.”
- Regulatory reform is top ranking external factor affecting bank structure
- Regulatory reform (the aggregate impact of regulation) is highest ranked of the external factors as banks look at structural change, with 71% of respondents identifying it as a top concern.
- Capital and liquidity restraints (42%) and changing customer expectations (37%) were the 2nd and 3rd highest ranked external factors.
- “Dealt with individually, many of the structural changes are seen as manageable, but in aggregate they are swamping the board agenda."
- Cost and efficiency implications are the top internal concern for banks
- Cost and efficiency implications were identified as the top internal concern by 22 of the 38 respondents (58%) and the second top internal concern for GSIBs.
- Only 21% of those surveyed indicated systems and operations as an internal concern and fewer still rated skills to design and deliver change as a concern.
- Structural change is underway but banks will retain the universal model
- ‘Universal banking model’ remains the strategy of choice but business models will change.
- More than 40% of banks surveyed have withdrawn from some products, made disposals in non-core markets and shaken up outsourcing and offshoring arrangements by 2017.
- 70% of GSIBs expect to make disposals in non-core markets, 50% to expand in markets outside of Europe and 50% to withdraw from some products.
- The majority of banks surveyed (68%) currently operate a universal model and intend to retain it, but it will not be the universal banking model as we know it.
- “Reforms to resolution and the introduction of ring-fencing are likely to drive banking groups to a holding company structure with operating subsidiaries that are specialized in certain activities and/or geographies and funded separately from each other.”
How important is the issue of structural business change in response to regulatory reform?
Which of the following external issues are the most important considerations when looking at structural changes to your business?
Which of the following internal issues are of most concern when looking at structural business change?