New Size, New Shape, New Role: How Banks Can Rise to the Global Transformation Challenge

Banks are stepping into a new role to meet government, market and management expectations in the post-reform environment. Institutions are now able to plan and prepare for changes to boost their return on equity (RoE) and spur growth. To do this, they must first select an appropriate transformation approach and then decide on which objectives should be met.

Change programs are focusing on three main solutions:

• Cost transformation
• Balance sheet efficiency
• Revitalizing growth momentum

In this report, Accenture identifies how business transformation will help banks maintain their economic and social value while delivering shareholder value.

Download the full report [PDF, 1.72 MB]

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The global financial crisis and its fallout have given rise to the need for change in the banking industry. The crisis revealed serious failures in banks’ growth strategies, risk management and governance practices of the last decade.

Banks are now facing pressures from the economic, regulatory and political domains to fundamentally change. These forces are creating the conditions for radical change extending to economic and social roles as well as business performance. The challenges of achieving these objectives are intensified by uncertainty in a volatile environment.

Against this background, many global banks are now planning change programs that will transform their business and operating models, culture and leadership.

Banks are planning drastic changes to rebuild their RoE. Accenture’s report on how banks can rise to the transformation challenge has identified four emerging transformation approaches:

• Top Down/Bottom Up Approach: Banks execute multiple projects with divisional governance. Their focus is generating ideas to reduce costs and transform operations.

• Cascaded Delivery Approach: Project governance is used to execute multiple transformation projects that deliver specific benefits to businesses.

• Multi-Tower Approach: Divisional governance sets strategic goals for each division and shared service.

• Centrally Driven Approach: Targets and goals for each business and operating platform are governed centrally with a core vision.

These change approaches offer a manageable way to execute change programs with a strong degree of governance.

The new wave of change is targeting shifts in strategy and economics, including smaller balance sheets, higher capital and lower volumes that will require business models to change. The efforts to create sustainable growth can be achieved with change programs that include:

• Cost transformation: Banks are targeting structural costs and inherent costs of doing business, including human capital, distribution networks and IT systems.

• Balance sheet efficiency: Banks are trying to find the most efficient capital use, balance sheet size and funding requirements that will generate sustainable profitability.

• Revitalizing growth momentum: Low growth is challenging traditional business models, but a silver lining lies in innovation. Banks can adapt to the digital marketplace and respond to new customer behaviors to increase profitability.

As the new normal settles in, high performance banking will depend on the ability to transform the organization with a clear execution framework.