Evolving Banking Regulation highlights figures showing that the return on equity amongst European global systemically important financial institutions (G-SIFIs) has fallen from 16 percent in 2006, to less than six percent in 2011. The report identifies four key challenges for banks:
- Regulatory complexity and uncertainty – Multiple new regulations and reporting requirements face banks, complicated by compliance with many different regulators. Even the regulators are worried about the volume and complexity of the current regulatory landscape. There are conflicting rules and requirements across borders and jurisdictions.
- Diminished returns – Revenues are under severe pressure, while bank costs are rising as a result of regulatory implementation.
- Big data, little use – With reporting requirements to comply with new regulations growing so rapidly, many banks are drowning in data and not necessarily using it very effectively.
- Culture – Banks recognise that culture and behaviours need to change but this cannot be achieved simply by writing new regulations. It requires significant re-plumbing. Banks will need to take difficult decisions and then implement them effectively.
Giles Williams, leader of KPMG's Regulatory Centre of Excellence for Europe, Middle East and Africa. "Institutions with sufficient resources and foresight are now progressing from responding to individual regulatory reforms, to designing the major transformation programmes needed to effect efficient change and position themselves to gain competitive advantage."