Banks face period of ‘diet and discipline’

18 December 2009

Banks are set to face a period of “discipline, diet and detox”, a new survey has claimed.

A study by IBM’s Institute for Business Value (IBV) revealed that more than three quarters of bankers and government officials believe the financial industry’s future returns will be never be as large as amounts taken in the past.

To survive, banks need to rebuild the trust of clients and industry regulators by using an integrated risk management framework, the report claimed.

The research stated that introducing a risk management infrastructure will allow banks to assess financial risks and fraud while improving risk modelling and management at both organisational and systemic levels.

Shanker Ramamurthy, IBM's Global Industry Leader, Banking and Financial Markets, said: “The banks that emerge from the current economic crisis as winners will be the ones that are focused on clients’ success, while the weaker, less focused banks may never recover.”

“But restoring client relationships is only part of the solution - banks must also become far less complex and develop an enterprise-wide view of risk.”

The report also revealed that the operation costs of many banks are unsustainably high.

IBV’s study urged financial institutions to make long-term financial savings by streamlining their IT, front/back office integration and shared services.

By Jim Ottewill

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