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Top banks 'must adapt to market conditions'

21/11/13

The conventional wisdom is that top banks, the largest players in the market, have managed to deal with the ongoing financial crisis relatively well, while their smaller counterparts struggle to keep their heads above water.

However, a new report from McKinsey & Co has indicated almost 100 of the world's biggest banking groups could be at risk of collapse over the coming years as they are overtaken by rivals and fail to change their operating model to reflect the current conditions.

Some one-fifth of the world's top 100 banks could be takeover targets for their rivals due to their underperformance in the market, reports the Telegraph.

McKinsey is a respected advisor on the banking sector, working with many of the world's largest financial institutions to help them deal with the ongoing changes across the industry.

These concerns were raised in its annual report on the financial services trade, in which it also suggested only ten organisations will be able to adapt in such a way they emerge from the also-rans to become leading banks.

It also called for more firms to utilise a back-to-basics strategy whereby they avoid complicating their approach too much.

"Banks that get caught in these traps are more likely to be among the 20 per cent of institutions worldwide that, in our estimate, may become acquisition targets in the next several years," McKinsey claimed.

Royal Bank of Scotland hired the firm two years ago to help come up with a strategy that focused less on its investment banking arm, indicating a major part of the organisation's approach - it feels that, with global growth dropping, banks should become more focused and less wide-ranging.

McKinsey also called on banks to embrace technology, something which could prove a major divider between those firms that succeed and those that fail in the coming decade.

Investment in cyber-security, automated systems and more could save banking groups billions over the next few years, assuming they are set up effectively.

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