Globalisation, changes in the regulatory environment and technological innovation are among the drivers that have triggered restructuring throughout the financial services sector. International expansion, increased competition, consolidation, financial distress and strategic re-positioning have become increasingly apparent on a global basis. Managing boards of financial institutions are under ever more pressure to preserve and enhance profitability.
Numerous examples exist of banks, particularly in Asia, that have seen a major part of their equity erased by the impact of non-performing loan (NPL) portfolios. Strong growth in loan portfolios combined with inadequate risk management capabilities created a high vulnerability to the economic downturn that occurred in the late 1990s. In a number of Asian countries and also in several European countries, NPL portfolios still have to be addressed. It is widely expected that such risk issues will continue to impact the industry for several years to come.
