Banking industry reform - a new equilibrium

Banks are responding vigorously to industry reforms, but their responses need to be framed by the way the world is changing. Otherwise, banks may run the risk of emerging from the crisis recapitalised, restructured, reformed − but irrelevant.

To break out of this, and open the way to new opportunities and a prosperous future, banks need to restore their reputations with the investors, communities and customers they serve, and re-set their investment criteria to reflect new economic realities - especially the prospect of a much reduced cost of equity.

There is a substantial prize for banks that are successful in doing this - a re-rating of their market valuations in the short term, and a strong franchise within a re-shaped and vibrant banking market in the medium to longer term. Contrary to some views, industry reform has not critically undermined the economics of banking, nor rendered unviable any part of it for which there is a legitimate societal need.

Read our insights to find out more about:

• The permanent shift in banking to a ‘new equilibrium’.
• How bank responses could be counter- productive to themselves and to the economy; inviting further intervention.
• How balance sheet deleverage will reduce equity returns, and equity costs, requiring banks and investors to re-set targets and expectations.
• The importance of reinstating ‘economic’ decision tools, in place of regulatory models.
• The benefits of equity financing, and the crucial need for renewed investor confidence and wider stakeholder endorsement.
• The bright future.

Downloads

Part 1 Summary report

Part 2 Detailed report