The Banker talked to bank chiefs around the world to get their predictions, hopes and concerns for the year ahead.
Bankers are facing 2004 with optimism about the world economy but concerns about some of the regulatory issues. In our annual poll of bank chiefs (see page 52), Bank of America’s chairman and CEO Kenneth Lewis said: “The US economy should grow at a solid 4% during 2004, with favourable implications for the job market and corporate profits. Look for consumer spending, business investment and exports to drive the advance.’’
Powering the world
The US upturn should power the world economy. But regulation will also have a major effect.
Walter Rothensteiner, CEO of Austria’s Raiffeisen Zentralbank Österreich, encapsulated the challenge facing most developed banks in his response, while being more outspoken about the negative side: “The ever-rising regulatory costs will have the greatest impact. Banks have the burden of reporting and compiling financial, monetary and balance-of-payments statistics. The cost-benefit ratio of such statistics is disproportional and deteriorates with new regulations such as Basel II.”
Impact of IAS
The implementation of international accounting standards (IAS) was also mentioned by many respondents.
In Asia, Cambodian Public Bank’s president Tan Sri Dato’ Sri Dr Teh Hong Piow specified the challenges: “Effective systems of supervision to ensure better corporate governance, prudent asset management and market transparency are needed for a healthier Asian banking system.’’
Hong Kong and Shanghai Banking Corporation’s chairman David Eldon underlined that the levels of non-performing loans remain a concern as bankruptcy laws are still inadequate and NPLs are rising again in some countries with healthy and growing economies.
European issues
For central and eastern European banks, European Union accession and economic convergence with Europe are seen as the main external drivers that are increasing competition and eroding profitability.
In terms of specifics, Bjarni Armannsson, CEO of Iceland’s Islandsbanki, noted the concerns about conflicts of interest in banks that provide commercial and investment banking services. Managing this while giving clients an integrated service is a challenge for universal banks.
Banks are facing a difficult year but one that may prove easier than 2003, as the economic scenario is looking distinctly more rosy than at the same time last year.
