Knowledge & Insight

Outlook for global capital markets

Fri 1 March 2019

A new paper published by Deloitte looks at the transformation that has occurred across global markets since the meltdown of 2008, and explores the structural changes that have placed the banking sector on firmer ground.

Winners and losers

Despite the dire predictions of countless doom-mongers (many of them sensible, well-respected commentators) the global banking sector survived its existential crisis, and the banking system is now larger, more profitable and more resilient than at any time during the past decade. But this process of recovery and re-emergence hasn’t been uniform across the globe. In the US for example, banks lead their European counterparts on many measures of success, thanks in part to the aggressive and highly effective steps taken by policymakers. While in Europe, the banking sector has battled powerful headwinds in the form of structural deficiencies, overcapacity, and low or even negative interest rates.

Global regulatory divergence

A robust regulatory framework is good for stable and sustainable long-term growth, yet in the fight to achieve competitive advantage and drive economic growth, a growing number of countries are taking a shorter-term view, and relaxing regulation to facilitate new business. In the US, policymakers have overturned the Department of Labor’s fiduciary rule, which requires financial institutions to act in the best interest of their clients. While in Europe, sentiment has swung the opposite way, with the General Data Protection Regulation providing sweeping new data protections for EU citizens. And looking ahead, the European Commission is hard at work developing a harmonized regulation rulebook to facilitate an effective banking union.

Technology development

Digital development has been a key driver of profitability over the past decade, as banks continue to migrate off old systems to reap the benefits of more efficient and more agile technologies. Plus there are a wealth of opportunities opening up to early adopters of emerging tech, with machine learning, blockchain and quantum computing promising a whole new dimension of growth. Once again, we’re seeing diverse rates of development across the globe, with some European banks still struggling to shake off their reliance on archaic legacy systems, while US institutions are beginning to develop strategies around Robotic Process Automation and Artificial Intelligence.

Future talent

The way banks recruit, manage and retain talent has always been a critical success factor, and as the way we work continues to evolve, banks’ talent strategies will become even more important.  The gig economy, automation and demographic changes are all having an impact on the future of the workplace, and banks must strive to get ahead of the curve. They must recognise that transferrable skills such as problem solving and speed learning are becoming just as important as traditional industry knowledge. Deloitte talk about the importance of “context-agnostic capabilities” such as the ability to manage change, and according to the output of their global financial survey, this will be vital, as more than 50% of financial services senior executives highlighted the ‘capacity to anticipate change’ as an important asset.

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