The future of banking

Over the past 18 months financial services have changed fundamentally and permanently. Before the crisis, systemic risk was a subject for abstract theoretical discussions and seen as something for others to worry about. Derivatives, securitisation, risk management and the Basel banking regulations were thought to have made the world a safer place, not a more dangerous one..

Then everything changed. In the PricewaterhouseCoopers1 paper, ‘The Day After Tomorrow’, we offered a perspective on the global financial crisis and examined how the foundations of financial service institutions have been shaken to their core. The speed and intensity with which financial markets changed, combined with the scale and complexity of banking models exposed the structural weaknesses of major players. Some global institutions have disappeared, while only a few are able to survive on their own and gain market share.

Typical reactions to the crisis have been short-term in nature, in many cases driven by the need for survival. Short-term actions alone will not suffice and fundamental questions need to be asked and issues tackled. A few leading institutions are beginning to address those fundamental issues and prepare themselves to prosper in the new world while most have not begun the process. This paper explores a number of these questions, and subsequent papers will examine specific topics in more detail.

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