Bratislava, 27 August 2008 – The credit crisis has created an unsteady environment for the banking industry, with each day seeming to bring new developments. Banks face a more unsettled industry and economic environment than they have in a number of years. The Global Banking Industry Outlook recently published by Deloitte addresses key challenges which banks shall take into account while shaping their future strategies.

The credit crisis spurred by problems in the U.S. sub-prime mortgage market has placed enormous strains on the banking industry. After rising interest rates and a decline in U.S. housing prices drove increased defaults among sub-prime borrowers, investors rapidly lost their appetite for securities based on sub-prime mortgages and soon for other securitised assets as well. Given the integration of capital markets, the impacts quickly ricocheted around the world, affecting banks, securities firms, and hedge funds in the United States, Europe, and Asia.

With the market turmoil, economic slowdown and anticipated revenue decrease, cost reduction has assumed an even higher priority. Achieving substantial reductions that can be sustained over the long term, and doing so in a way that does not impair company performance and increase its exposure to any risk, will be key to ensuring success going forward.

Furthermore, the reverberations from the credit crisis have led to senior management changes at many institutions. The lack of skilled specialists and able managers with integrity on the marketplace is widely recognised. This has brought home the critical importance of succession planning for the next generation.

Over the last several years, banks have faced a substantial burden responding to a variety of new and more complex regulatory requirements. The global economic slowdown is not going to stop this process but rather speed it up. In this scenario, banks shall adopt an integrated approach that spans different compliance regulatory requirements and increases efficiency while also providing greater control of compliance risks.

“While the financial crisis was felt primarily in the United States and the banks in Central and Eastern Europe have been able to avoid serious issues, the conclusions outlined above generally also apply to our region. Failure to adapt quickly cannot result in success in the current global environment. Hence, even banks in our region should act promptly,” added Mike Jennings, leader of the financial services industry group of Deloitte Central Europe.

Below are the key issues Deloitte believes banks will need to address in the near future in response to the changing environment:

§          Back from the brink: Emerging lessons from the sub-prime crisis.

A number of fundamental issues will be getting a lot of attention – loan underwriting standards, asset valuation methodologies, the adequacy of loan loss reserves and capital, internal controls, the management of off-balance sheet risks, and risk disclosures.

§          Building the next-generation branch.

The role of the branch is changing – from a place to conduct transactions to a centre for advice and sales.

§          Developing your talent pipeline.

Establishing a talent pipeline that identifies and nurtures talented executives over the long run (talent management).

§          Lightening the compliance burden: Integrated compliance and risk management.

Taking an integrated, enterprise-wide approach to compliance requirements can boost efficiency, while at the same time improving risk management.

§          The sustainable bank: Where eco-friendly meets business-friendly.

Capitalising on the substantial business opportunities offered by the “green” consciousness sweeping society.

§          Payments consolidation: Time to act.

Consider organisational changes that transcend traditional silos, creating innovative “hub” architectures that simplify payments systems to reduce costs and increase flexibility.

For the full version of the study visit: www.deloitte.com/sk/banking-outlook-2008

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Deloitte Central Europe is a regional organization of entities organized under the umbrella of Deloitte Central Europe Holdings Limited, the member firm in Central Europe of Deloitte Touche Tohmatsu. Services are provided by the subsidiaries and affiliates of Deloitte Central Europe Holdings Limited, which are separate and independent legal entities.

The subsidiaries and affiliates of Deloitte Central Europe Holdings Limited are among the region’s leading professional services firms, providing services through more than 4000 people in more than 30 offices in 17 countries.

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