Deloitte_Banking_Industry_Outlook_12_Feb_2014

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2014 Banking Industry Outlook
Repositioning for growth
Agility in a re-regulated world
Australia – February 2014

Contents

Foreword3
Choosing gears in a VUCA environment

5

Finding new ways to differentiate the customer experience

6

Leveraging regulatory pressure to ‘get to strong’

8

Using data for capital efficiency and integrated reporting

11

Building organisational agility for operational effectiveness

14

Supporting growth while bolstering infrastructure

16

Next steps in repositioning for growth

18

Contacts19

2

Foreword
Australia’s banks continue to be the envy of the world based on recent financial performance throughout the Global
Financial Crisis (GFC). Clearly the financial markets have voted in their favour, given that four of the top 20 global banks by market capitalisation1 are based in Australia.
This position has given Australia’s banks a unique
opportunity to focus on the future, while banks in most
other geographies have been busy restructuring their
organisational strategies, operating models, processes,
technologies and balance sheets to comply with regulatory
requirements and sound risk management practices.
Nevertheless the volatile, uncertain, complex and
ambiguous (VUCA) world will continue to escalate,
as the mega trends of an aging population, shifts in
prosperity and wealth, globalisation, technology and
customer empowerment happen even more quickly,
and the innovators continue to disrupt.
To be prepared, the question remains: what investments
are required today for tomorrow? Will they be sufficient
for a VUCA world? Are they focused in the right areas
given the rebound of banks in both the US and Europe?
This year’s Financial Systems Inquiry – the first this
century – is seeking submissions to identify the hurdles
as well as the dynamics needed to support growth in
the economy. It will look at how best to consider the
innovations and technologies that are growing both
domestic and international competitiveness in the sector.
It will explore the obstacles and any catalysts to
funding, focusing again on evaluating essential and
appropriate regulation.

Delivering clarity in scope of jurisdiction and interagency
protocols for regulators such as the prudential regulator
(APRA) and the securities commission, (ASIC) will be
paramount to avoid both duplication of function and
unintentional gaps. There also will need to be a clear
focus on how banking regulators interact with the
wealth management and insurance industries and their
regulators to provide secure futures for the nation.
The recommendations of the Inquiry, if accepted, could
drive much of the outlook for banking, and more broadly
financial services, over the next decade. And although the
implementation of any Inquiry changes are a long way off,
the debate on what these changes should be is already
underway, and will influence the banking outlook for 2014.
Responding to a limited growth environment
Australia’s banks’ main priority in 2014 will be to focus on profitable growth in a limited system growth environment
while they continue to juggle capital constraints and
demands for improved return on equity from shareholders.
The hard yards of the last five years of compliance and
cost management have resulted in stronger organisations;
however operational excellence in both compliance and
cost management will not be enough.
Banks must find a way, through tough choices, to drive
growth in areas in which they choose to excel; all this
in a complex VUCA environment which requires both
agility and innovation. To compete effectively in this
environment, banks are continuing to review the type
of workforce they need, and the influences of their
ecosystems, as well as making decisions about what to
divest or acquire.

As the Inquiry determines its approach and begins its work,
it is important to...
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