UK: Positioning For a New Financial Landscape - June 2010

Last Updated: 9 July 2010
Article by Deloitte Financial Services Group

Most Read Contributor in UK, August 2017

Foreword

The future of the global financial services industry remains uncertain. While the worst of the financial crisis and economic downturn appears to be past, the competitive landscape remains in flux and the debate about regulatory change continues, with few of the final details agreed upon.

What is certain is that the global financial services industry is experiencing a period of transition, leaving behind many of the practices and products of the pre-crisis era, and moving towards a new financial landscape. However, there are questions as to what preparations institutions are making to position themselves for success in this new landscape.

To shed some light on these questions, Deloitte conducted a survey of over 200 financial services executives from around the world, the results of which are presented in this report. These executives revealed the impact of the crisis – the relationships damaged, the performance curtailed, and the strategies disrupted – and highlighted their future focus around customers and products, strategy and operations, risk and regulation, capital and liquidity, and talent and technology.

Yogi Berra

U.S. Baseball Legend

As this industry transition continues, Deloitte's Global Financial Services Industry network is committed to providing continued thought leadership, surveys and studies on the issues most important to global financial institutions. Deloitte's aim is to help guide clients through these challenging times and provide them with insights useful in preparing for a new financial landscape.

I hope you find this report of interest.

Regards,

Jack Ribeiro

Managing Partner, Global Financial Services Industry

Deloitte Touche Tohmatsu

The damage done

After every catastrophe there is a strong desire to rebuild bigger and better than before. However, there is also an acknowledgment that the first task is to clear away the rubble and assess the damage, before any reconstruction can begin.

The catastrophe of the global financial crisis and economic downturn initially threw many institutions into survival mode. Institutions scrambled to access liquidity, de-risk their assets, and slash operating costs. Carefully constructed strategies and operational activities were thrown into chaos, and executives recoiled at the thought of the damage done to relationships with customers, employees, shareholders, regulators, rating agencies and, of course, the general public.

However, as the dust settles and the rubble is cleared, 89 percent of survey respondents indicate that they have survived the crisis and economic downturn as well as, or better than, expected [figure 1].

As a result, their focus is continuing to shift from survival mode to recovery mode [figure 2]. However, there remains a significant element of caution within this shift. The industry, and the global economy, is still being sheltered by government support in various forms of guarantee, both implicit and explicit, and other forms of protection. In addition, the continued low-interest rate environment means it is difficult to tell how durable the recovery has become, and how the global economy would fare if that low-rate environment were to change.

While over half of survey respondents indicated that they were optimistic about the prospects for their industry over the coming year, the remaining 49 percent point to the uncertainty that exists within the industry and the broader economy [figure 3].

Relationships

When respondents considered the damage that the financial crisis and economic downturn inflicted on their business relationships, there was a difference between the various sectors [figure 4].

The banks led the sectors most concerned about the damage done to their relationship with the general public. Considering that media attention about the crisis has been heavily focused on the banks – a term loosely used by the media to describe everything from mortgage originators to 'Wall Street' traders and hedge fund managers – it is not surprising that public perception is high on the banks' list.

Respondents from the investment management industry led the sectors in worries about damage to customer relationships. While not publically painted as villains quite to the same extent as the banks, there is no doubt that there was damage done each time a customer opened a shrinking investment statement during the period of the crisis.

Surprisingly, the insurance industry respondents led the votes for damage done to employee relations. However, this might be explained by the inclusion of producers and agents in their perception of the broad term 'employees'. As the individuals caught in the turmoil between customers and the insurance companies, it is perhaps not surprising that respondents felt that these producer and agent relationships had been damaged.

Performance

Respondents indicated that the greatest damage done to the performance aspects of their business, as a result of the financial crisis and economic downturn, was that it left them with less ability to generate top line revenue [figure 5]. This response reflects the shrinking or disappearance of a wide range of revenue generating activity. Clearly as mortgage originations ground to a halt there was a corresponding drop in the fees banks expected to make from those transitions. In addition, the drop in demand for policies to insure those houses also impacted the insurance industry.

Furthermore, the freeze in structured products that packaged many of those mortgages into asset-backed securities also had an impact on the fees generated by the industry. Banking respondents also indicated an additional area of performance damage, leading the sector votes on the issue of weakened balance sheets [figure 6].

This is recognition of the damage done by the historic drop in equity prices at many institutions, along with the significant write-down banks were required to make against many assets that had a mortgage element to them.

Strategy

The final area of damage indicated by survey participants was in relation to disrupted strategic goals. The majority of respondents indicated that their plans to expand into other sectors had to be put on hold as a result of the crisis, with the second and third ranked areas of damage being related to new product development and the sustainability of business models [figure 7]

Performing a sector analysis of those second and third ranked answers reveals a difference in response between the banks and other sectors. While insurance, securities and investment management respondents rated their ability to develop new products as having been more damaged than their business model sustainability, the banks voted the opposite, highlighting doubts about the durability of existing bank business models [figure 8].

This is a theme that reveals itself across the entire survey, where banking respondents recognize the need to rethink their business models, particularly as we enter a new financial landscape where cost pressures and the potential for revenue generation have changed significantly.

The silver lining

Of course, every crisis generates not only danger but also opportunity, and so the survey asked respondents to identify what positive aspects may have resulted from the financial crisis and economic downturn. Many institutions have used the crisis as an opportunity to rationalize their business, by controlling costs, trimming talent and cutting customers who have been persistently unprofitable.

Interestingly, respondents based in the European, Middle East and Africa region (EMEA) indicated that a focus on cost reduction was the most positive outcome, while the majority of respondents from North America voted for the opportunity to strengthen their institution's brand [figure 9]. Perhaps this might be explained by the disproportionate number of institutions in North America that failed or were acquired during the crisis, leaving a thinner competitive landscape in which the survivors can further establish their brand.

Certainly the response around competitors leaving the market was dominant in the banking and securities sectors [figure 10], with insurance respondents leading the sector vote when it came to the opportunity to acquire other businesses [figure 11].

This is likely to reflect the trend for insurance consolidation that pre-dated the financial crisis and economic downturn, now accelerated by increased capital requirements and the opportunity to make acquisitions at an attractive price.

Against this backdrop of damaged relationships, performance and strategy – and the opportunity to cut costs, strengthen brands and make acquisitions – what should institutions be focusing on as they position for the new financial landscape? These intentions are revealed in the rest of the survey data, reviewed in the next section.

To view this document in its entirety please Click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.