While only 11% of banking executives globally expect their financial performance to improve significantly over the next 12 months, 60% of banks see the need to invest in new customer-facing technologies to spur growth, according to the EY Global Banking Outlook 2017.
This study of senior executives was conducted among almost 300 banks across Europe, the Americas, Africa and Asia-Pacific (including Australia, Japan, Hong Kong and Singapore, and the emerging markets of China, India, Indonesia and Malaysia).
With current sentiments dampened by generally weaker economic climates, banks’ immediate priorities centre around a defensive “protect and control” mode as they focus on building an agile and sustainable business model for the future.
Of the global respondents, 69% and 66% respectively indicated managing reputational risk, and meeting regulatory compliance and reporting standards as the top two strategic priorities in 2017. This reflects a magnified emphasis on strengthening risk profiles and culture while meeting corporate governance obligations.
The survey also identified two key growth agendas globally: recruiting and retaining talent (63%) and investing in new customer-facing technology (60%). The first initiative appears especially critical for Asia-Pacific institutions as management seeks to secure talent, raise employee engagement and ensure that labour resources are in place to capture growth opportunities, particularly for front-line and digital-related undertakings.
Jan Bellens, EY Global Emerging Markets Leader, Banking & Capital Markets, stresses that banks cannot simply wait for a return to normalcy in order to achieve meaningful profitability. “In the current environment, the global banking industry must innovate in order to grow, institutions need to seek alternative ways to reshape, organize and optimize their businesses, while concurrently meeting regulatory obligations and actively engaging customers,” he says.
Common priorities with some market variations in ASEAN
Generally, in the Asia-Pacific region, enhancing cybersecurity and data security, and meeting capital, liquidity and leverage ratio requirements take precedence as most critical to protecting and controlling the banks’ businesses in the coming year.
There are some slight variations in the focus for banks in Asean. In Singapore, banks are emphasizing on recruiting and retaining key talent, followed by risk management improvements, new customer-facing investments, balance sheet optimization and gender diversity promotion on the management board.
In Malaysia, banks are prioritizing risk management, and asset quality and credit risks improvement, and the ability to meet capital, liquidity and leverage ratio requirements.
In Indonesia, banks are focused on enhancing data and cybersecurity, financial crime management, ways to optimize customer channels and improvements to their risk management, asset quality and credit risks processes.
Bellens explains: “Banks in developed markets are focused more on talent recruitment and retention, and cybersecurity enhancements, while those in emerging markets emphasize more on improvements in risk management, asset quality and credit risks. For the former, it is likely due to increasing competition from the non-banks or FinTechs for talent. For the latter, it reflects their state of development in terms of the banking platforms and readiness of existing processes to adapt to changes in the business environment.”