KPMG's new report Creating a New Mold for Banking reveals that banks in developed countries, such as the U.S., have been the hardest hit by the crisis and are fundamentally reconsidering their business models, while banks in Latin America, Africa and Asia have been less affected and are refining existing strategies rather than re-writing them.
"Compliance with various regulatory requirements has many financial institutions re-examining and refining their business models," said Tony Anzevino, partner-in-charge of KPMG LLP's (U.S.) Banking and Finance practice. "New regulations such as the Dodd-Frank Wall Street Reform and Consumer Protection Act and Basel III will require banks to hold additional capital, impose additional costs and may reduce returns."
Many banks around the world, especially in the U.S. and Europe, are struggling to develop business models that can restore a measure of stability and growth to their various operations in the aftermath of the financial crisis, according to a new report from KPMG International.
"Post-crisis, the need to focus on revenue replacement also will serve as a catalyst for U.S. banks to re-examine their business models, as some formerly lucrative revenue-generating areas such as the securitization market clearly are not what they used to be," Carl Carande, national account leader of KPMG LLP's Banking and Finance practice, added. "Profitability, or returning to it, is a key objective for U.S. banks and new or refined business models will need to take into account prudent lending and underwriting standards, regardless of what the product is -- card, consumer, commercial -- ensuring that banks are growing within the acceptable parameters they set themselves."
Regulation, Profitability and Capital
According to the KPMG report, the rising pressure of new regulation is a concern for all banks along with a continuing shortage of capital and liquidity. This is resulting in a shifting of focus from growth and revenue to prudent balance sheet management. Banks are streamlining operating models and infrastructure to squeeze out greater efficiencies as the outlook for profitability remains uncertain.
"The current dynamic business environment has caused significant shifts in priorities and business models for banks and requires that they adjust to and actively manage the changes impacting their performance," said Mitch Siegel, a principal in KPMG LLP's Banking and Finance Advisory practice. "As new business and operating models are considered, strategic assessments should be conducted with a focus on creating the implementation roadmap necessary to help move a bank to its desired target environment quickly and efficiently."