Financial crime and quality of risk management are the top ten banking threats, according to the latest “Banking Banana Skins” report from PricewaterhouseCoopers (PwC) and the Centre for Financial Services Innovation (CFSI).
Providing insight into the greatest risks currently affecting banks worldwide, the 2015 bi-annual report reveals the industry anxieties of 672 bankers, risk managers and industry watchers in 52 countries. 24 threats were identified within the report.
The year’s most notable mover was financial criminality, which shifted from ninth place in 2014 to second. A response to the rise and spread of cyber crime and data theft in an increasingly borderless market, it is closely linked to technology risk (no. 4). Banks’ “hopelessly outdated core banking IT systems”, and growing exposure to competition from “fintech” companies now present major challenges, according to the report.
Concern about the quality of banks’ risk management is also high, with every type of respondent surveyed listing it in their top ten. Although banks and their regulators have invested time and energy in improving the management of risk in recent years, some respondents questioned how effective this has been. Others asked whether, seven years after the crisis, “complacency was beginning to creep into banks’ thinking”. There is increasing concern that banks will incur losses because of inadequate risk management.
Another strong riser in the area of risk management is conduct practices, which leaps to position no. 8 in this survey. Despite strong regulatory pressure and heavy fines, there appears to be little evidence of true cultural change in terms of banks’ business practices. The survey also indicates there is a growing risk that banks will suffer reputational and financial damage from poor sales, customer servicing and other business practices.
Other areas of increased risk recorded in the survey include the rising threat to bank reputations from popular electronic networks. Social media is cited as no. 11 in risks to banks for its power to damage reputation without sound evidence.
Download the full PwC report here.