Friday 29 Mar 2024
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KUALA LUMPUR (March 29): A study found that 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.

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, according to the findings of the survey conducted among senior executives.

The EY Global Banking Outlook 2017 survey covered 286 banks across Europe, the Americas, Africa and Asia-Pacific (including Australia, Japan, Hong Kong, Singapore, China, India, Indonesia and Malaysia).

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, said EY in a statement issued here today.

The survey also identified two key growth agendas globally — recruiting and retaining talent (63%) and investing in new customer-facing technology (60%), said EY.

"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," said EY.

EY Global Emerging Markets Leader (Banking and Capital Markets) Jan Bellens stressed that banks should not 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, organise and optimise their businesses, while concurrently meeting regulatory obligations and actively engaging customers," said Bellens.

EY said that 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.

In Malaysia, banks are prioritising risk management, and asset quality and credit risks improvement, and the ability to meet capital, liquidity and leverage ratio requirements, said EY.

Over in Singapore, banks are emphasising on recruiting and retaining key talent, followed by risk management improvements, new customer-facing investments, balance sheet optimisation and gender diversity promotion on the management board, it added.

"Banks in developed markets are focused more on talent recruitment and retention, and cybersecurity enhancements, while those in emerging markets emphasise more on improvements in risk management, asset quality and credit risks," said Bellens.

"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," he added.

According to the study, banks should focus on five overarching themes within their organisations, namely, reshape (determine preferred business model and restructure operations), control (strengthen three-lines-of-defense model for risk management), protect (minimise internal and external threats), optimise (drive further efficiencies by leveraging application program interfaces and open source and advanced technologies), and grow (invest in staff and customer-facing technology).

"The key to success is to build a better ecosystem, not necessarily a bigger bank. Institutions need to continue to seek new and innovative ways to drive profitability while proactively managing external and systemic risks," said EY's Malaysia Leader (Financial Accounting Advisory Services) Chan Hooi Lam.

"This will include better leveraging and cultivating the talent resources in their organisations to identify ways to optimise and automate existing customer channels for a seamless service delivery and better experience," said Chan.

"New technologies are believed to have been transforming business models and causing disruptions across the financial services value chain. Incumbents may need to move beyond conservative, incremental adjustments toward effectively implementing and executing bolder organisation-wide innovation. Uncertainty in the market should not be an excuse for inaction," he added.

 

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