EY Bank Barometer 2017

Trends are now rapidly emerging

The financial crisis of 2008 has shaken the very foundations of international financial services markets and triggered a response of unimagined proportions from regulators and central banks worldwide. For some time now, central banks have felt compelled to take unconventional measures, including the introduction of ultra-low or indeed negative interest rates, and have been veritably flooding financial markets with liquidity.

Regulators, on the other hand, have imposed far stricter requirements on equity and liquidity in a bid to contain systemic risks and enforce compliance with tax and anti-money-laundering law. Switzerland, as a financial services hub, has not escaped unscathed. Bowing to external pressure, it has gradually relinquished banking secrecy and accepted the automatic exchange of information. It has been pushed into a tight corner.

At the same time, fundamental structural change is sweeping through the financial services sector and transforming the value chain. Digitization is a core driver of this change, posing new challenges for banks. What is more, players from other industries are increasingly encroaching on the market and contesting the core business of established banks. At present, this development is mainly affecting payment services, investment advice and increasingly lending intermediation. Are banks ready for these challenges? Do retail banks and wealth managers have the know-how and resources to adapt their business models to the new reality quickly enough?

EY Bank Barometer 2017 provides answers to these questions. In November 2016, we surveyed 120 leaders (executive officers) of a number of banks1 in Switzerland. Our study finds that, at present, banks are chiefly addressing the challenges by raising efficiency and lowering costs. For the most part, they are pursuing these objectives by streamlining their branch networks and downsizing their workforces. However, conventional measures and standard cost improvement programs are not enough. Structural adjustments are needed to ratchet up efficiency in the long term. Such efforts need to capture the full potential of digitization and apply the concepts of industrialization in the organization’s value chain.

Although the financial services sector has so far dealt remarkably well with the challenges and has proven relatively robust, it is important not to lose sight of the trends that are now rapidly emerging

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