德勤+2024全球银行和资本市场展望-2024 banking and capital markets outlook

2024bankingandcapitalmarketsoutlook

DeloitteCenterforFinancialServices

Banks’strategicchoiceswillbetestedas

theycontendwithmultiplefundamental

challengestotheirbusinessmodels.Theymustdemonstrateconvictionandagilitytothrive.

Deloitte。

2024

Tableofcontents

bankingandcapitalmarketsoutlook

03...Navigatingthechangingcontoursoftheglobaleconomy

11...ForcesshapingthefutureoftheB&CMindustry

15...Retailbanking:Fortifyingcustomerrelationshipsand

owningagreatershareofwallet

21...Consumerpayments:Grabbingabiggersliceofthe

revenuepieinafast-evolvingecosystem

28...Wealthmanagement:Revampingtheadviceengineforthe

futureofwealth

32...Corporateandtransactionbanking:Enablingefficient

moneyflowsthroughdigitization

39...Investmentbankingandcapitalmarkets:Rejiggering

businessmodelsandleadingwithcutting-edgetechnology

44...Marketinfrastructure:Reinventingbusinessmodelsand

becomingmoreindispensabletoclients

49...

Endnotes

2

KEYMESSAGES

.Aslowingglobaleconomy,coupledwithadivergenteconomiclandscape,willchallengethebankingindustryin2024.Banks’abilitytogenerateincomeandmanagecostswillbetestedinnewways.

.Multipledisruptiveforcesarereshapingthefoundationalarchitectureofthebankingandcapitalmarketsindustry.Higherinterestrates,reducedmoneysupply,moreassertiveregulations,climatechange,andgeopoliticaltensionsarekeydriversbehindthistransformation.

.Theexponentialpaceofnewtechnologies,andtheconfluenceofmultipletrends,areinfluencinghowbanksoperateandservecustomerneeds.TheimpactofgenerativeAI,industryconvergence,embeddedfinance,opendata,digitizationofmoney,decarbonization,digitalidentity,andfraudwillgrowin2024.

.Banks,ingeneral,areonsoundfooting,butrevenuemodelswillbetested.Organicgrowthwillbemodest,forcinginstitutionstopursuenewsourcesofvalueinacapital-scarceenvironment.

.Investmentbankingandsalesandtradingbusinesseswillneedtoadapttonewcompetitivedynamics.Forceslikethegrowthofprivatecapitalwillchallengethissectortooffermorevaluetobothcorporateandbuy-sideclients.

.Early2023shockstoglobalbankinghavegalvanizedtheindustrytoreassesstheirstrategies.Whilebankleadersfocusonproposedregulatorychangestocapital,liquidity,andriskmanagementforUSbanks,thereismuchtobedonetoevolvebusinessmodels.

3

2024bankingandcapitalmarketsoutlook

Navigatingthechangingcontours

oftheglobaleconomy

A

slowingglobaleconomycoupledwithadivergenteconomiclandscapewillchallengethebankingindustryinnewwaysin2024.Althoughrecenteffortstocombatinflationareshowingsignsofsuccessinmanycountries,therisks

broughttolightbysupplychaindisruptions,rewiringoftraderelationships,andongoinggeopoliticaltensionswillcomplicateeconomicgrowthworldwide.Extremeweather-relatedevents,suchasfloods,heatwaves,andhurricanes,mayalsocausesevereeconomicdisruption.

Withthisbackdrop,theInternationalMonetaryFund(IMF)expectstheworldeconomytogrowatnomorethan3.0%in2024.1Advancedeconomies—i.e.,theUnitedStates,theEuroarea,Japan,theUnitedKingdom,andCanada—areforecasttoexperiencetepidgrowthat1.4%in2024.2Butmanyemergingecono-miesshouldseehighergrowthonthebackofstrongconsumerdemand,youngerdemographics,andimprov-ingtradebalances.Inparticular,Indiaisexpectedtohaveoneofthestrongestgrowthrates:6.3%in2024.3

Ontheotherhand,Chinaisfacingapotentialeconomicslowdownwithweakconsumerdemandanddistressedpropertymarkets.TheweaknessinChineseexportsandimportswillnotonlyimpactitstradingpartners,butmaywellchallengesupplychaindynamicsandfurtherweakenglobalrecovery.RecenteffortstoreviveconsumerandcorporateconfidenceinChinacouldinfluenceeconomicgrowthinothercountries,particularlyinAsia.

Globalinflationisexpectedtodropto5.2%in2024,

fromahighof8.7%in2022,aspertheIMF.Incoun-

triessuchastheUnitedStates,thelabormarketand

consumerspendingareshowingsignsofdeceleration

butarestillelevated,challengingthetargetssetby

centralbanks.Infact,theIMFpredictsthatinflation

inalmostallcountrieswillremainabovetargetrates.4

Centralbankswillbefine-tuningtheirmonetarypoli-

ciesthrough2024(figure1).Thefederalfundsratein

theUnitedStatesisexpectedtoremainelevatedator

above550basispointsgoinginto2024butmaydrop

tobetween450and500basispointsinthesecond

halfof2024,accordingtolatestFOMCprojections.5

TheEuropeanCentralBank(ECB)isexpectedtobegin

decreasinginterestrates;inAugust2023,theECB

policyratestoodat3.75%,matchingthepeakin2001.6

Meanwhile,theBankofEnglandisexpectedtolower

thepolicyrateinthefirsthalfof2024afterreachinga

peakof5.75%attheendof2023.7Thestoryissimilarto

theBankofCanada:Ratesshoulddeclineinthesecond

halfof2024aftersurpassing5%,aspertheCanadian

EconomicQuarterlyForecastbyTDEconomics.8In

contrasttoothercentralbanks,theBankofJapanhas

keptthepolicyratenearzero,butitsJuly2023meeting

indicatedthatitwouldtweakthebondyieldcurvecontrol

schemestorespondmorenimblytopricepressures.9

Butgenerally,centralbanks’quantitativetightening

measureswillcontractglobalmoneysupply.Infact,in

theUnitedStates,moneysupply,asmeasuredbyM2,has

beenfallingatitsfastestratesincethe1930s.10

4

Figure1

Interestratesshouldstarttodropin2024Policyinterestratesacrossdifferentgeographies

UnitedStatesCanadaUnitedKingdomEuropeanUnionAustralia

Forecasts

7%

6%

5%

4%

3%

2%

1%

0%

2015

Source:DeloitteCenterforFinancialServicesanalysisofEconomistdatabase,August2023.

2020

2024

2023

2025

2022

2016

2018

2019

2021

2017

Thesechallengeswillresultindivergentandsporadiceconomicgrowth.Someeconomieswillfaceabrighterfuture,whileotherswillstillbefightingstickierinflationandlowgrowth.

Howwillthemacroeconomicenvironmentin2024impactthebankingindustry?

Banksgloballywillfaceauniquemixofchallengesin2024.Eachofthesehurdleswillimpactbanks’abilitytogenerateincomeandmanagecosts(bothinterestcostsandoperationalexpenses).

Depositcostsareheretostay—fornow

Higherinterestrateshavebeenaboontothebank-ingindustry.In2022,netinterestincomeincreasedsignificantlyinmanyjurisdictions,withAmericanandCanadianbankspostingariseof18%yearoveryear(YoY),followedbytheirEuropeanpeersat11%.11

However,elevatedrateswillcontinuetopushfund-

ingcostshigherandsqueezemargins.Thepaceandsteepnessofthecurrentratecycleshavedramaticallyboostedthecostofinterest-bearingdepositsforUSbanks.Butthesecostshaverisenmoresharplyforregionalandmidsizebanks.Forinstance,depositcostsforthelargestbanksstoodat2.2%inQ2

2023,comparedto2.5%forthesmallerbanks.12

Thisisasimilarpatterninothercountriesthathaveexperiencedratehikes.

Goingforward,theglobalbankingindustrymaybehard-pressedtobringdownhighdepositcosts(andlowerdepositbetas)evenasinterestratesdrop.Customerexpectationsofhigherrates,coupledwithincreasedmarketcompetition,willforcemanybankstoofferhigherdepositratestoretaincustomersandshoreupliquidity.Thesituationwillvarybyregion,though.Europeanbanksmaybeabletodecreasedepositcostsmorerapidly,forinstance.TheEuropean

5

2024bankingandcapitalmarketsoutlook

bankingindustryhasnotfacedasmuchcompetitionfrommoneymarketfunds,unlikeintheUnitedStates.DuringthebankingturmoilinMarch2023,inflowsintoEurope’smoneymarketfundstotaledUS$19.3billion,dwarfingincomparisontoUS$367billioninto

theUSmoneymarketfunds.13Similarly,Asianbanks,

inIndia,forinstance,maysustainhigherratesinthewakeofstrongereconomicgrowth.Infact,banksintheAsia-Pacific(APAC)regionareexpectedtooutpace

globalpeersingeneratingstrongernetinterestincome.

Loansgrowthwillbemodest,atbest

Intermsofloangrowth,weexpectdemandtobemodestgiventhemacroeconomicconditionsandhighborrowingcosts.Bankswillalsolikelycontinuetheirrestrictivecreditlendingpolicies.AccordingtotherecentbanklendingsurveysconductedbytheFederalReserveandtheECB,manybankshavealreadytightenedcreditstandards

acrossallproductcategories.Theyanticipatefurthertight-

eningduetoalessfavorableeconomicoutlookandlikely

deteriorationincollateralvaluesandcreditquality.14

However,theimpactofthemacroeconomicenviron-

mentwillbedisparateacrossloancategories.Consumerspendinghasremainedrobustinmajoreconomies,butasconsumersavingsdeplete,demandforcreditcardandautoloansshouldremainstrong.Atthesametime,acrosstheUnitedStatesandEurope,bankloandemandfromfirmshasdecreasedsignificantly.Bankloanstocorporatesmayweakenintheshorttermbutcouldpickuplaterin2024.(Seesidebar,“Realestatejitters”forcommentaryoncommercialrealestateloans.)

REALESTATEJITTERS

ResidentialmortgageoriginationintheUnitedStatesmayseearobustincreaseincontrasttootheradvancedeconomiessuchastheUnitedKingdom,Germany,andAustralia.However,thecommercialrealestate(CRE)sectorintheUnitedStateswillcontinuetobestressed,andthiswillparticularlyaffectregionalandmidsizebanksthatmaybeoverexposedtoofficespace.Inlightofhigheruncertainty,inflatedpropertyprices,andconcernsaboutdebtrepayments,bankswillbemoreselectiveintheirnewCREoriginationsandrefinancing.Bankscouldalsobeforcedtorealizelossesoncertainloanportfoliosiftherearefiresalesorforeclosuresatalargescale.CREloandelinquenciesarealreadyrising.Thedelinquencyrate(90+dayspastdue)intheUnitedStateshasincreased,from1.84%inQ42022to3.3%inQ1202315

TheEuropeanCREmarketappearstobemoreresilientthantheUSmarket.EuropeanCREloansarelargelyconcentratedamongthelargerbanksthatarewell-capitalized.16TheAPACregionisalsoexpectedtofollowasmoothertrajectory;demandfromthehospitalitysectorshouldsupportgrowthinCREloans,whilemultifamilyresidentialmortgageswilllikelyseeacontinueduptick.

Climatechangeshouldalsoplayanimportantrolein

loandemandandcreditavailability.Accordingtoa

recentEUBanksurvey,17overthenext12months,banks

expectastrongercredittighteningduetoclimaterisks

oncreditstandardsforloansto“brown”firms,whilea

neteasingimpactisexpectedforgreenfirmsandfirms

transitioningtodecarbonization.Firm-specificclimate-re-

latedtransitionrisksandphysicalrisksshouldhavea

muchlargerroleincreditdisbursementsgoingforward.18

6

Thecombinationofhigherdepositcosts,lowerpolicyrates,andsomewhatconstrainedloanpotentialcanadverselyimpactbanks’abilitytogeneratestrongnetinterestmargin(NIM)in2024.Infact,banks’NIMsmay

alreadyhavepeaked,assuggestedbyrecentbankearn-

ings.USandEuropeanbanksshouldexperienceadeclineinnetinterestmarginsin2024(figure2).APACbanksaremorelikelytoenjoystrongernetinterestincomenext

yearwithahigher—andpossiblyrising—rateenviron-

mentinmanydevelopingcountries.Thesenewfactorswilllikelyforcebankstoreassessthetruecostofdepositsandhowtheymaybedeployed.

Morenoninterestincomesourceswillbesoughtout

Banksshouldprioritizenoninterestincomein2024tomakeupfortheshortfallinnetinterestincome.

Noninterestincomeisexpectedtogrowmeaningfullyinthenextfewyears(figure3).Mostbankswillseektoraisefeeincomethroughavarietyofchannels,buttheymayfacesomeconstraintsindoingso.Consumer-focusedfees,suchasoverdraftfees,nonsufficientfundsfees,andcreditcardlatefees,couldattractregulatoryscrutiny.

However,bankswithstrongeradvisory,underwriting,andcorporatebankingfranchisesshouldhavemoreroomtogrowtheirfeeincome.ClearervaluationsandabacklogofdealsshouldleadtohigherM&AandissuanceactivitiesintheUnitedStates,boostingfees.However,reducedvolatilityacrossdifferentproductswillcrimprevenuegrowthinbothequitiesandFICC(fixedincome,commodities,andcurrencies)trading.

Figure2

NIMwilldeclineformostbanksasdepositbetascatchupNIMforselectcountries

UnitedStatesCanadaUnitedKingdomGermanyJapanAustralia

Forecasts

4%

3%

2%

1%

0%

2019202020212022202320242025

Source:DeloitteCenterforFinancialServicesforecastbasedonS&PMarketIntelligencedatabase.

7

2024bankingandcapitalmarketsoutlook

Figure3

Noninterestincomeshouldgrowmodestlyduetohigherfee-basedincome

Noninterestincome/assetsforselectcountries

UnitedStatesCanadaUnitedKingdomGermanyJapanAustralia

1.2%

1.0%

0.8%

0.6%

0.4%

2019202020212022202320242025

Source:DeloitteCenterforFinancialServicesforecastbasedonS&PMarketIntelligencedatabase.

0.2%

0.0%

Forecasts

Sharpeningthecostdiscipline

Withtherisingpressureonrevenuegeneration,costdisci-plinewillbecomeevenmoreofapriority,andpossiblyacompetitivedifferentiatorforbanks.Efficiencyratiohasbeenimprovinginthelastfewyearsglobally(Figure4),butitisexpectedtoinchhigherin2024,duetosluggishrevenuegrowthandhighoperatingandcompensation

expenses.Manybankswillalsocontinuetoinvestintechnologytoremaincompetitive.Attractingtalentinspecializedareassuchasartificialintelligence,cloud,data

science,andcybersecurityshouldbumpupcompensa-

tionexpenses,evenasbanksrationalizeinotherareas.Inaddition,tightlabormarketsandacceleratedwagegrowthintraditionaloffshorelocationsshouldaddtotheindustry’scostpressures.

8

Figure4

Efficiencyratioshaveimprovedamongmanybanksbutwilllikelyfacestiffchallenges

Efficiencyratioforselectcountries

202020212022

Source:DeloitteCenterforFinancialServicesanalysisbasedonS&PMarketIntelligencedatabase.

75%

70%

Kingdom

Germany

Australia

Canada

Japan

United

United

States

50%

60%

55%

65%

Guardingagainstloanlosses

Inthefirsthalfof2023,manybanksraisedtheirprovi-sionsforfuturecreditlosses,anticipatingelevatedloandefaultsfromapandemic-eralow.Forinstance,inQ22023,cumulativeprovisionsforthetop10US

banksroseby26%quarteroverquarter(QoQ).19

Creditqualityisexpectedtodeteriorateascustom-

ers’abilitytopayoffloandiminishes,andthe

fullimpactofinflationandmonetarytighten-

ingisfeltbybusinessesandconsumers.Thereisalreadyevidenceofrisingdelinquenciesincertain

loancategories,suchascreditcardsandCRE.20

Similarly,corporatedefaultratesinthespeculativegrademayalsoincrease.

Whilecreditqualityisdecreasingandshowingstressinspecificsegments,creditqualityasawholeappearstobenormalizingtoprepandemiclevels.Banksarecontinuingtobuildreservestorestorereducedbalancesoverthelastfewyears.Mostlargebanks,globally,seemtohaveadequateliquidityand

strongcapitalbufferstowithstandaseveredown-

turn,asevidencedbyrecentstresstestresultsbythe

FederalReserve,theECB,andtheBankofEngland.21

,

9

2024bankingandcapitalmarketsoutlook

USBASELIIIENDGAMEIMPLICATIONS

TheUSfederalbankingregulatorsrecentlyreleasedanoticeofproposedrulemaking(NPR)onBaselIIIfinalreforms.Theproposedchangesareaimedatimprovingthe“strengthandresiliency”oftheUSbankingsystemandwillimpacttheregulatorycapitalframeworksforbanksaboveUS$100billioninassets(about36banks).Smallerbankswithsignificanttradingactivitywillalsobesubjecttothenewriskframework.Thesechangesareestimatedtoresultina16%increasetoCET1(commonequitytier1)capitallevelsanda20%increasetoRWA(risk-weightedassets)forlargebank-holdingcompanies.22

HighercapitalrequirementsarelikelytodisadvantageglobalbanksdomiciledintheUnitedStatesandconstrainlending,capitalmarkets,andtradingactivitiesofallbanks,possiblybenefittingnonbanksandsmallerinstitutions.Theseexpansive

changes,includingtheapplicationofAOCI,G-SIBsurcharge,anddual-RWArequirements,willleadtohigheroperationalburdens,requiringsignificantinvestmentinriskmanagement,data,

controls,compliance,andvalidationinfrastructure.

Theimpactonbankswithlargerecurringandfee-basedbusinesses,suchascreditcardfeesandinvestmentbankingfees,aspertheFederalReservewillbe“exacerbatedbytheuseofaninternallossmultiplierthatmayresultinanexcessiveoverallcapitalchargeforoperationalrisk.”23Thenewprovisionswillreducefeemarginsforsecuritiesunderwritingandcouldmateriallyreducethedepthofbanks’products.Thiscouldfurtherincreasetransferofservicesandassociatedriskstononbanks/unregulatedsectors.

Thenewruleswillalsorequirebankstofactorinunrealizedgainsandlossesincapitalratiostocomplywiththesupplementaryleverageratiorequirementandthecountercyclicalcapitalbuffer.Intheshortterm,somebanksmaylookatdiminishedbuybacks.Theycouldalsoimpactinvestmentsintechnologyandmarketexpansionstrategies.

TheBaselIIINPRallowsatransitionperiodofthreeyears,startingJuly1,2025.24Theproposedruleswillundoubtedlyevolveinthefuture,butitwillbeimportantforbankstoassessexistinginternalinfrastructureandpotentialstrategicimplications,andengageincontinuousconversationswithregulators.25

Figure5

Bankprofitabilitywillbechallengedin2024

ROAEforselectcountries

UnitedStatesCanadaUnitedKingdomGermanyJapanAustralia

Forecasts

15%

12%

9%

6%

3%

0%

2019202020212022202320242025

Source:DeloitteCenterforFinancialServicesforecastbasedonS&PMarketIntelligencedatabase.

10

CAGRchangeintotalassetsfrom2019to2022

15%

10%

5%

Switzerland

0%

25

-5%

-10%

Bankprofitabilityinmanyregionswillbetestedin2024duetohigherfundingcostsandsluggishrevenuegrowth

(figure5).However,bankswithmorediversifiedreve-

nuestreamsandastrongcostdisciplineshouldbeabletoboosttheirprofitability,andpossiblytheirmarketvaluation,morethanmost.

ThetilttowardAsia

Goingforward,thesizeandscopeofglobalbankingwillchangeevenmore.Theglobalbankingindustryhasalready

seenfundamentalshiftswithChineseandAmericanbanksdominatingtheglobalrankings.Figure6showsthechangesinsize(asmeasuredbyassets)andthenumberofbanksfromeachcountryinthetopglobal100banks.Overthenextdecade,morebanksfromIndiaandtheMiddleEastareexpectedtojointheranksofthetop100,tiltingthebalancetowardAsiaandtheMiddleEast.Indianbankswillgrowtheirbalancesheetsastheeconomygrowsandhugeinvestmentsaremadeindomesticinfrastructure,buttheymaystruggletobreakoutsidetheirdomesticmarkets.Meanwhile,sovereignwealthfundsintheMiddleEastwilllikelyexertstronginfluenceonglobalmoneyflows.

Figure6

AsianandMiddleEasternbanksaregrowingataquickerpaceTop100banksintotalassets

Belgium

India

Canada

UnitedStatesofAmerica

China

Singapore

France

SouthKorea

Spain

Netherlands

Italyen

United

Kingdom

Japan

0

Germany5

lia

1

01

52

0

Austra

NumberofbanksinTop100

Notes:Thesizeofbubblesrepresentsthetotalassetsofthetop100banksineachcountry;UnitedArabEmirates,Qatar,HongKong,Austria,Norway,Finland,andDenmarkhaveonebankeachinthetop100byassets.

Source:DeloitteCenterforFinancialServicesanalysisofRefinitivdatabase,August2023.

11

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s

s

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B

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2024bankingandcapitalmarketsoutlook

Figure7

ThemeshighlightedinDeloitte’s2024bankingandcapitalmarketsoutlook

em

Private

capital

M&A

Source:DeloitteCenterforFinancialServicesanalysis.

Digitizationandexponential

Competitionandecosystem

technologies

Macroeconomicenvironment

inessgme

Regulations

Data

Retailbanking

Consumerpayments

GenerativeAI

Sustainabilityandclimate

Investmentbanking

Wealth

management

Emergingrisks

Customerbehavior

Corporateand

transaction

banking

Talent

Market

infrastructure

Forcesshapingthefutureofthe

B&CMindustry

Notonlyarecompetitivedynamicsshifting,butthepaceandintensitywithwhichrivalsarechallengingbanksisunprecedented.Banksarenowmoreintenselypittedagainsttraditionalandnewrivalsasmorecustomersbecomeopentohavingtheirneedsmetbynonfinancialinstitutions.

I

nadditiontothemacroeconomicfactorshigh-

lightedinthepreviouschapter,thebankingand

capitalmarketsindustrymustcontendwithvari-

ousfundamentalanddisruptiveforceschallenging

incumbentinstitutions’businessmodelsin2024

(figure7).

Deposits,forexample,havebecomeaferociousbattle-

ground.Retailbanksarecompetingwithdigitalbanksofferinghigherdepositcosts.Andinthepaymentsarena,digitalwalletsandaccount-to-accountpaymentsarefast

becomingthedefactopaymentoptionsinmanycoun-

tries,whilebuynow,paylater(BNPL)ismorewidelyacceptedasamainstreamofferingandalternativetocreditcardfinancing.

Capitalmarketsandinvestmentbankingbusinessesarenotimmunetonewcompetitiveforces,either.Scalehashelpedbulge-bracketinvestmentbanksintheUnitedStatesgrowmarketshare;however,aresurgenceamongEuropeanbanksmightbeunderwayastheyfocusonspecializedservices,andboutiquefirmsincreasinglyparticipateinbiggerdeals.Meanwhile,privatecapitalcouldposeagreaterthreatforcreditprovisioningandtalent.Hedgefundsarealsoincreasinglypenetratingmoreofinvestmentbanks’valuechain.Inmarketinfra-structure,traditionalexchangesseeincreasingcompe-titionfromnicheexchangesandthegrowthoftradingvenuesinemergingmarkets.

Atthesametime,therelationshipsbetweenbanks,fintechs,andbigtechsareevolvingrapidly.Fintechsarelargelynolongerseenasadversaries;collaborationwithincumbentsisnowcommonplace.Withincreasingindus-tryconvergence,strategicpartnershipsofbankswithfranchisedbrandsintechnologyandothernonfinancialindustriesisbecomingthenormforcustomeracquisitionandretention.

Concurrently,customersarebecomingmorevocalabouttheirevolvingexpectations.Theywanttheirbankstobalancedigital-firstexperienceswithoutcompromisingthepersonaltouch.Informationisalsobecomingdemoc-ratized,withtechnologyandsocialmediaempoweringcustomersinwaysnotseenbefore.Banksshouldheedthesenewdemandsasretailcustomersarespoiledforchoiceandmanywillbewillingtoswitchaccountsanddiversifytheirrelationshipsacrossmultipleplatformswithatapontheirsmartphones.Youngerconsumers,inparticular,areclamoringforasuperiorexperiencethatsometechnologyfirmsandfintechplatformsoffer.Wealthmanagementclientsareincreasinglyvocalizingtheirdesireforomnichannelexperiencesatlowercosts.Andcorporateandinstitutionalcustomers,fortheirpart,seemmoreintentthanevertobroadenthenumberofbankingrelationshipstodiversifyrisk.

Ontheregulatoryfront,wecontinuetoobserveadiver-genceinlawsandpolicies,withsomejurisdictionstypi-callychartingamoreassertivepath,asintheEU’snewAIAct.26Asaresult,thereisstillalackofacoordinated,globalapproachtocrypto,digitalassets,dataprivacy,artificialintelligence,andevenclimaterisk.Butregula-toryscrutinyisontherise,withgovernmentsincreasinglyfocusingonconsumerprotection,industryresilience,andopencompetition.Moreregulatorsandpolicymakersaroundtheworldarenowprobingbanks’lendingprac-

ticesandcallingonthemtodomoretohelp

consumers.

12

2024bankingandcapitalmarketsoutlook

Inaddition,banks,particularlyintheUnitedStates,couldfacestrictercapitalrequirementsunderaproposedoverhaultocapitalrulesaspartofBaselIII“endgame”startingJuly2025.27Theserulescouldimpactbanks’abilitytosupportsomecapitalmarketsactivities,suchasproptrading.Theycouldalsoimpederetailbanks’abilitytolendintheresidentialmortgagespace.

Regulatorypressureswillbeparticularlyacuteforregionalandsmallbanks,especiallythosethatareconcentratedintheirinvestmentandlendingportfolioanddepositmix.Manybankswillspendthebulkof2024tryingtotightenlendingstandardsanddiversifytheirbalancesheetsawayfromriskyassetssuchasCREloansandevensafeassetssuchaslong-termtreasuries.

Meanwhile,openbankingregulationsintheUnitedKingdom,Europe,Australia,SaudiArabia,Brazil,andMexicoarereducingthebarriersfordatashar-ingandofferingcustomersmorechoiceforfinancialproductsandservices.TheUSConsumerFinancialProtectionBureau(CFPB)ismullingsimilarrules.28USconsumerwatchdogsarealsosoundingthealarmontheproliferationofartificialintelligence(AI)-drivenchatbotsinbanking.

Scale