It has taken – and is taking – banks some time to work out how to respond to the new environment. For many, survival was the only immediate priority. Now, the task is to review corporate strategy, business models and operating models, to optimize them in light of new constraints. In this context, the results of our survey, and the conclusions we draw from them, provide an important insight into what is happening in the industry now, and how banks’ priorities are changing.
A couple of key contrasts emerge. One is that banks in the developed world have been hit hardest by the crisis and are having to undertake more fundamental reconsideration of their business models for the future. Banks in Latin America, Africa and Asia, on the other hand, are refining existing strategy to reflect the new external situation. The second contrast is that, as might be expected, those banks which have survived only through the injection of government support or outright nationalization have very different priorities from those which have remained independent. The challenge to their business models has by definition been greater. But they are also having to respond to complex political pressures. All parties hope to see an orderly return of these institutions to the private sector. But the process of achieving this is exposing severe contradictions in banks’ objectives and behavior.
Traumatic though the crisis was, it did not occur in a vacuum. Banks are constantly reviewing and revising their strategy in light of new market conditions, new competition, changing customer expectations and the evolution of technology. When the crisis hit, they were at different stages in this process, and often pursuing different strategic directions. Some may have recently completed major acquisitions. Others may have been pursuing aggressive cost reduction and rationalization. Any understanding of how banks are responding to the crisis has to take into account where they have come from as well as the direction they are now pursuing.
Creating a new mould for banking continues to challenge the industry, in this atmosphere of constraint and uncertainty. Banks have many decisions to make right now, but as usual only hindsight will enable mature judgement.