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FY360° | Global Banking Returns to Profit as It Enters Era of Overarching Regulation

For the First Time Since the Financial Crisis, Banks Globally Have Moved Beyond Recovery but Now Must Make a “Shift in Mind-Set” to Full Transparency Under Regulatory Reforms, BCG Report Says

Global banking has returned to overall profitability, but it faces a new era of overarching regulation that will require banks to commit to full transparency, The Boston Consulting Group (BCG) says in a new report.

For the first time since the beginning of the financial crisis in 2007, the banking industry has moved beyond recovery and regained overall profitability on a global scale, according to the BCG study Global Risk 2014–2015: Building the Transparent Bank (1). But it found sharp divergence in the performance of regional markets and in their ability to deal with the new regulatory era.

Emerging markets are at the forefront of growth, the study found, while banks in North America are growing again and generating sizable economic profit (EP). Europe, including the UK, remains the only region where banking still stagnates with little sign of recovery.

At the same time, the industry has entered a new era of comprehensive reform and regulatory scrutiny that will require a “shift in mind-set” by banks, the report says.

“A Good-Citizen Approach” by Banks

“Regulation cannot be fought off,” said Gerold Grasshoff, a BCG senior partner based in Frankfurt and an author of the report. “Instead, banks should adopt a good-citizen approach and commit themselves to full transparency, internally and externally,” said Mr. Grasshoff, global leader of the risk management and regulation segment of BCG’s financial institutions practice.

The report is BCG’s fifth annual assessment of the health and performance of global banking. Its findings are based on the EP generated in 2013 by more than 300 retail, commercial, and investment banks, representing more than 80 percent of all banking assets worldwide. EP weighs refinancing costs, as well as operating and risk costs, against income to provide a comprehensive measure of the financial conditions facing banks in an era of risk and overarching regulation.

A Return to Profitability, Except in Europe

The industry overall regained profitability in 2013. Banks, averaged globally, created positive EP of €18 billion ($24.8 billion), or 3 basis points as a percentage of total assets, compared with negative EP ranging from –6 to –23 basis points during the previous four years, BCG’s research found.

The global profit increase was driven by the positive performance of banks in North America as well as the Middle East and Africa. The Asia-Pacific region surpassed all others in positive value creation.

In South America, banks lost ground as their EP remained positive but shrank significantly for the second year in a row. In Europe, and only there, banks continue to show little sign of recovery, delivering negative economic profit.

The new era of transparency will require banks to make competitive, structural, and operational adjustments in order to succeed, the report says.

“Overarching regulation is here to stay,” said Thomas Pfuhler, a principal based in BCG’s Munich office. “But banks can take three steps to assess regulations structurally: identify pressure points, define clear management options, and design a regulatory roadmap for the course ahead.

A copy of the full report can be downloaded at

About features the latest thinking from BCG experts as well as from CEOs, academics, and other leaders. It covers issues at the top of senior management’s agenda. It also provides unprecedented access to BCG’s extensive archive of thought leadership stretching back 50 years to the days of Bruce Henderson, the firm’s founder and one of the architects of modern management consulting.

About The Boston Consulting Group
The Boston Consulting Group (BCG) is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 81 offices in 45 countries.

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Jeudi 11 Décembre 2014