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Deloitte releases 2020 banking and capital markets outlook

Report suggests banks need to fortify their compliance, innovation, risk management, and talent foundations

Published: 15 January 2020

On 14 January 2020, the Deloitte Center for Financial Services released its 2020 banking and capital markets outlook (the Report) in Beijing today. At the beginning of each year, this flagship thought leadership report from the Center presents a comprehensive, systematic review and summary of the global banking and capital markets landscape and development over the past 12 months. Based on empirical studies, extensive data analysis, case studies and other methods, it also offers explanations and predictions of the trends and direction of global banking and capital markets development in the coming year and beyond.

Banks are addressing the next wave of disruption arising from technological change, an aging population, climate change, the growing dominance of "Japanification" in the global economy, and other factors. Against this backdrop, the Report presents in-depth analysis and discussion of how they should fortify their foundations—regulatory compliance, technological innovation, risk management, and talent transformation—go back to basics and remain true to their identities as banks.

The Report also sets out what to expect in seven primary business segments: retail banking, payments, wealth management, investment banking, transaction banking, corporate banking and market infrastructure. In addition, it presents suggestions for and explores the implications of strategic recalibration for banking and capital markets practitioners.

"Given the combined effects of technological disruption, sweeping changes to the nature of work, demographic shifts, climate change, and growing Japanification, in the next decade the banking sector is set to witness a new wave of disruption that is more forceful and more pervasive any in recent years. These forces could change how banking is conducted, making it more open, transparent, real-time, intelligent, tailored, secure, seamless, and deeply integrated into consumers' lives and institutional clients' operations. But despite this, banks' roles are unlikely to change. Their competitive advantage should continue to reside in their ability to manage risk and complex financial matters. Meanwhile, banks should also be able to conduct business in a highly regulated market, drive innovation to serve client needs, protect clients' privacy, and maintain trust, all at scale," says Deloitte Global Banking and Capital Markets Leader Anna Celner.

"This year's report covers multiple topics, offering forward-looking insights on potential opportunities and challenges faced by the entire banking industry arising from hotspots like M&A, cyber risk, fintech and climate change, as well the uncertainties of US tax reform and maturation of the digital economy. Comparing fintech trends across regions, Asian fintechs have become the new darlings of venture capital. No matter what the next phase of fintech brings in investment terms, business models, or regulations, banks and fintech partnerships will likely continue, leading to new innovations across the industry," adds Dr Val Srinivas, Banking and Capital Markets Research Leader at the Deloitte Center for Financial Services.

"For the third consecutive year, world leaders ranked environmental threats as the biggest risk. The banking industry is not immune. Central banks across the world, including the US Federal Reserve Bank, the European Central Bank, and the Bank of England, are examining the implications of climate change for monetary policy and seeking ways to bolster banks' resilience amid economic disruptions caused by extreme weather. Banks should make climate risk management an independent, robust discipline, similar to credit risk or operational risk. In this regard, boards, CEOs, and chief risk officers can play a crucial role and assume greater responsibility," Srinivas adds.

Addressing the Report, Deloitte China Vice Chairman and FSI Leader David Wu says, "The unique convergence of these drivers should unleash unprecedented change in our society and economy. And, although the purpose of banking across the globe (including in China) will change accordingly, so too will the way banks work. Banks are likely to cater increasingly to a greater good. Bank leaders will also re-examine their aspirations in light of this new reality and fortify their institutions' foundations. On the technology side, we urge the banking industry to go back to basics. That is, fix its data problem before undertaking radical technological transformation and slowly chip away at its technical debt via core modernization. On the talent side, we encourage banks to focus on the human side of transformation. Banks should redefine and redesign jobs based on how intelligent automation impacts the ways work is done. The higher requirements of 'super jobs' should be highlighted to empower current workforces and cultivate future leaders".

"We hope the Report will provide banking top management, directors and supervisors, and regulators in China, with a deeper understanding of the macro outlook for global banking and capital markets in 2020 and the next decade, and serve as a valuable reference for their strategic decisions," Wu concludes.

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