Banks must embrace ‘full transparency’ as new era of regulation dawns, says report

Out-Law News | 03 Dec 2014 | 12:16 pm |

The global banking industry has moved beyond recovery and regained overall profit for the first time since the financial crisis, but the sector must now “make a shift in mind-set” to full transparency under regulatory reforms, according to a new report.

Boston Consulting Group's report, ‘Global Risk 2014-15’: Building the transparent bank', said that emerging markets “are at the forefront of growth, while banks in North America are growing again and generating sizeable economic profit (EP)”.

However Europe, including the UK, “remains the only region where banking still stagnates with little sign of recovery”, the report said.

“At the same time, the industry has entered a new era of comprehensive reform and regulatory scrutiny,” the report said.

Report author and BCG risk management and regulation expert Gerold Grasshoff said: “Regulation cannot be fought off. Instead, banks should adopt a good-citizen approach and commit themselves to full transparency, internally and externally.”

According to BCG, the banking industry overall regained profitability in 2013. “Banks, averaged globally, created positive EP of $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 said 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”, BCG said. “In Europe, and only there, banks continue to show little sign of recovery, delivering negative economic profit.”