Last Updated Sep 27, 2010 4:26 PM EDT
Researchers at an IBM think tank, the Institute of Business Value, interviewed 54 top financial industry executives around the world and a full half said the new regulations would prompt little or no change in how the industry functions, while another 7 percent saw only "moderate" change in the offing. The remaining 43 percent agreed there would be "significant change."Financial firms even see an opportunity to make money from the changes. The study's lead author, Suzanne Duncan, notes that some banks are exploring forming businesses to advise other firms on how to adapt to the evolving regulatory regime:
"[T]he conversation at these companies is that we can actually make a lot of money on this -- it is happening, lets figure out how we can monetize it," Duncan said.In other words, the banking industry isn't nearly as frightened as it purports to be about the potential impact of Dodd-Frank and of the stiffer capital standards emerging from Basel. At least based on this one survey, I don't detect much fear that these reforms will chill financial innovation, decrease lending and undermine competitiveness, the standard arguments against regulation.
That doesn't mean bankers don't have concerns. Asked "what keeps you up at night," respondents pointed to 1) Uncertainty about their firms' value proposition; 2) Keeping up with data volumes; and 3) Finding ways around regulation. Other significant worries among financial execs centered on shifting to less lucrative businesses, retaining talent, increased economic volatility and ethics, according to IBM.
Item three on that list should come as no surprise. The history of financial services in this country is of companies trying to skirt the rules -- occasionally for the better, usually for the worse. Other findings from the survey, which will be released in full next year:
- 81 percent of financial execs expect industry financial returns to fall a little or stay the same; 13 percent forecast a "significant" decrease; and 6 percent expect them to rise
- Major factors inhibiting financial industry change are "greed," distorted economic incentives and lack of accountability
- Major drivers of change in financial services are increased regulation, dwindling customer trust, and client risk-aversion
- Financial firms cite their top strategic initiatives as making better use of data, creating multi-asset class platforms and eliminating "siloes" of information, such as between wealth and asset management
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