A new report has unveiled that global banking which has returned to overall profitability is coming across a new era of overarching regulation requiring banks to commit to full transparency.
The Boston Consulting Group (BCG) study ‘Global Risk 2014-2015: Building the Transparent Bank’ noted that since the beginning of the financial crisis in 2007, for the first time the banking industry has moved beyond recovery and regained overall profitability on a global scale.
The study found that emerging markets are at the forefront of growth, while North American banks are growing again and generating sizable economic profit (EP). The only region where banking still stagnates with little sign of recovery is said to be Europe, including the UK.
BCG senior partner based in Frankfurt 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."
The research found that in 2013, the banking industry overall regained profitability. Banks, averaged globally, created positive EP of €18bn ($24.8 billion), or three basis points as a percentage of total assets, compared with negative EP ranging from -6 to -23 basis points during the previous four years.
Positive performance of banks in North America as well as the Middle East and Africa contributed to the global profit increase and the Asia-Pacific region surpassed all others in positive value creation.
South American banks’ EP remained positive but shrank significantly for the second year in a row and lost ground. In Europe, banks continue to show little sign of recovery, delivering negative economic profit.
BCG’s findings are based on the EP generated in 2013 by more than 300 retail, commercial, and investment banks, representing more than 80% of all banking assets worldwide.