Tapestry Bank Governance Leadership Network Summit 2012

Planning for radical change to business models

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Executives want to know what bank strategies are sustainable over the long term. Yet economic, regulatory, supervisory and political uncertainties have made strategy planning very challenging. To some degree, banks have been waiting on the sidelines to determine what strategic changes they should make in light of new regulation.

The business model question is as critical [a question] as there is in the banking business today.

The industry is likely to see investment banking shrink dramatically and trading activities continue to move out of large banks to exchanges. Banks need to focus on improving efficiency to improve return on equity. And change is coming for retail banking, as banks revisit cross-subsidization and 'free banking' and focus on developing transparent, understandable products.

The time for waiting is over. Numerous, significant strategic and structural changes are taking place in the industry. :

  • Regulatory and supervisory initiatives are transforming the rules of the game for banks.
  • Banking business models will face radical change. Retail banking will change materially, and investment banking will become almost unrecognizable.
  • Boards have to start driving the banks' long-term strategy.