A recent PricewaterhouseCoopers (PwC) Luxembourg survey has shown that Banking & Capital Markets (BCM) CEOs across the world are facing pressures in a variety of domains.
In 'Creating a Platform for Competitive Regeneration', 176 BCM CEOs across 62 countries were analysed, revealing that the obstacles they face have not been greater since the financial crisis. Challenges to the global economy, poor business performance, the prevalence of Cyber risks, ongoing regulatory burdens and emergent technology have all contributed to this increase in pressure.
The main factors perceived by BCM CEOs to be affecting their banks were cited predominantly as over-regulation, at 87%, followed by geopolitical uncertainty at 81% and exchange rate volatility at 76%. In additon, higher capital charges, liquidity demands and compliance costs have overturned previous perceptions of what represented profitable mainstays in their business.
As a result, more than 66% are expected to embark on cost cutting initiatives over the course of the next year and over 10% of the CEOs surveyed indicated the selling of their majority interest in a business or their exit from a significant market is also imminent.
64% of Banking and Capital Markets CEOs have made plans for significant changes in the way they outline and deal with risk in response to customer and stakeholder expectations, with risk management itself expanding to fundamental changes in markets, business models and transactions. Being able to foresee risk and therefore manage it was highlighted as the key differentiator.
PwC's most recent report, in keeping with previous ones, pointed to technology as a key component in shifting customer expectations, lowered barriers to market entry and expanding competition from FinTech customers. The BCM CEOs in question were almost unanimous in their expectations that this trend will be the most likely to transform customer, regulator and other key stakeholder expectations for the next five years.
"New technology development from Robo advice, Blockchain to Artificial Intelligence should help banks foster a more informed, engaged relationship with customers but it will also cause radical changes to, and cost savings in, operational processes," explained Olivier Carré, partner and Banking Leader at PwC Luxembourg. "While recognition of the prize is obvious from the CEOs surveyed, some banks are already acting fast on this whilst others seem barely to have started. Executing on this successfully needs to be front of mind for all banking CEOs."
The survey also revealed that customer relationship management systems, data analytics and social media communications and engagement were perceived by BCM CEOs to be the three priority domains in which technology would lead to greater engagement with wider stakeholders. Being able to analyse greater quantities of data at faster speeds and with more predictive capabilities could ensure more focused and progressive responses to customer demands and capital market developments.
The limited availability of key skills could pose a threat to growth, according to BCM CEOs. Technology's aforementioned impact necessitates dual banking and digital skills in employees, although as a combination they are in short supply. There exists therefore competition between those attempting to attract such individuals, including FinTech start-ups and technology groups looking to enhance their BCM and financial services market presence.
However, the advance of technology brings with it an escalating platform of cyber and broader financial crime risks, which almost 75% of BCM CEOs viewed as a barrier to growth.
"The CEO agenda remains as full as ever," concluded Olivier Carré. "For them, driving delivery of technology and innovation will be critical in delivering the choice, service and pricing bank customers want. Pressures of economic conditions, regulation, costs, risk management and increasingly Cyber remain intense though. Prioritising all this is a huge challenge. I am regularly suprised about how poorly institutions do this and then execute on their plans. Getting this right now though has never been more crucial for the sector. As one of the CEOs we surveyed noted - the world needs banking but not banks."
Photos by PwC Luxembourg (Left: Olivier Carré)
