current challenges and solutions in banking & capital …file/ey... · c urrent challenges and...

Current challenges and solutions in banking & capital markets

The financial services industry is in the midst of transformation toward a new reality.The whole picture must be understood, from every perspective.

Those who do not adapt will be left behind.

C on te n ts

I n tr od uc ti on 4

A n e w r e a l i ty 6

I m p a c t of V U C A on ba n k i n g & c a p i ta l m a r k e ts 10

1. Rethinking the strategy 12

2. Transforming business models 14

3 . Transforming control & support functions 16

4 . Adapting IT infrastructure & data management

taking into account information security 20

5. C hanging corporate conduct and culture 24

I m p l e m e n ti n g n e w r e g ul a tor y r e q ui r e m e n ts 26

Aud i ti n g i n th e n e w r e a l i ty — a s s ur a n c e , p r os p e c ts a n d a d d e d v a l ue 28

Your c on ta c ts 3 2

4 | C urrent challenges and solutions in banking & capital markets

Ei n l e i tun g


Ei n l e i tun g

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T h e r e i s n o q ue s ti on th a t th e S w i s s ba n k i n g i n d us tr y i s un d e r g oi n g s tr uc tur a l c h a n g e . T h e d r i v e r s of v a l ue c r e a ti on i n p a s t y e a r s h a v e l os t m om e n tum : i n a n e n v i r on m e n t of ul tr a - l ow i n te r e s t r a te s a n d v ol a ti l e f i n a n c i a l m a r k e ts , S w i s s i n s ti tute s a r e g r a p p l i n g w i th n e w r e g ul a tor y r e q ui r e m e n ts , e f f or ts to i n c r e a s e e f f i c i e n c y , m or e e x a c ti n g c us tom e r e x p e c ta ti on s , e s p e c i a l l y a s r e g a r d s e l e c tr on i c c h a n n e l s , a n d s c a n t g r ow th p r os p e c ts .

An d i t w oul d be un w i s e to i g n or e th a t. S i m i l a r to ba n k s , e n d c us tom e r s a l s o f a c e c h a l l e n g e s th a t h a v e l i k e w i s e c h a n g e d a n d i n te n s i f i e d . Ye t s tr uc tur a l c h a n g e a l s o

br i n g s w i th i t op p or tun i ti e s f or th os e w h o r e s p on d to th e n e w e n v i r on m e n t i n te l l i g e n tl y .

S uc c e s s f ul l y i m p l e m e n ti n g tr a n s f or m a ti on p r og r a m s i n r e s p on s e to s tr uc tur a l c h a n g e p os e s a toug h c h a l l e n g e to a l l i n s ti tute s , on e th a t w i l l p ut th e i r p e r f or m a n c e c a p a bi l i ti e s to th e te s t. O f p a r a m oun t i m p or ta n c e i s a n e y e f or th e c r i ti c a l f a c tor s , a n un d e r s ta n d i n g of th e i n te r r e l a ti on s a n d a g r a s p of th e s tr a te g i c i m p l i c a ti on s f or op e r a ti on s .

B a c k e d by our i n te g r a te d c om p e te n c e s , w e a t EY a r e p a s s i on a te a bout h e l p i n g our c l i e n ts s uc c e e d i n th e n e w r e a l i ty .

O l a f T oe p f e rPartnerH ead of B anking & C apital Markets S witzerland


A n e w r e a l i ty

T h e S w i s s ba n k i n g i n d us tr y i s un d e r g oi n g a f un d a m e n ta l tr a n s f or m a ti on p r oc e s s th a t w i l l c r e a te a n e w r e a l i ty . I n th e p a s t, th e f i n a n c i a l i n d us tr y w a s h e a v i l y d ol l a r - ba s e d a n d m a i n l y c on tr ol l e d by th e W e s te r n w or l d , w i th l ow l e v e l s of a utom a ti on a n d te c h n ol og y i n i ts bus i n e s s p r oc e s s e s . I n th e n e w r e a l i ty of th e f utur e , th e f i n a n c i a l i n d us tr y w i l l be ba s e d on m ul ti p l e c ur r e n c i e s , w i th a m ul ti p ol a r or i e n ta ti on a n d bus i n e s s p r oc e s s w h i c h a r e h i g h l y a utom a te d a n d d i g i ti z e d .

T h e d r i v e r s be h i n d th e c ur r e n t tr a n s f or m a ti on p r oc e s s a r e th e s h i f t i n th e g e op ol i ti c a l p ow e r s tr uc tur e ; d e m og r a p h i c c h a n g e ; c h a n g e s i n c us tom e r be h a v i or ; c h a n g i n g v a l ue s i n s oc i e ty ; te c h n ol og i c a l a d v a n c e s i n s oc i a l m e d i a a n d d a ta m a n a g e m e n t; a n d s h a r p i n c r e a s e i n r e g ul a ti on f ol l ow i n g th e f i n a n c i a l c r i s i s .

T h e c ur r e n t c h a n g e p r oc e s s i s s h a p e d by f our f a c tor s : v ol a ti l i ty , un c e r ta i n ty , c om p l e x i ty a n d a m bi g ui ty ( V U C A) . T h e s e f or c e s a r e i m p a c ti n g a l l f i n a n c i a l i n s ti tuti on s .

B us i n e s s f un d a m e n ta l s a r e c h a n g i n g a n d v a l ue c h a i n s a r e un d e r g oi n g r e s tr uc tur i n g . T h i s i s n ot a n or d e r l y tr a n s i ti on ; on th e c on tr a r y , w h a t w e a r e s e e i n g i s a s e i s m i c s h i f t th a t i s g e n e r a ti n g i n s ta bi l i ty . T h i s p h a s e h a s a l r e a d y s ta r te d a n d i s s e t to c on ti n ue ov e r th e n e x t te n y e a r s .

C urrent challenges and solutions in banking & capital markets | 7C urrent challenges and solutions in banking & capital markets | 7

V ol a ti l i ty U n c e r ta i n tyT h e n e x t f e w y e a r s w i l l be m a r k e d by e r r a t i c c h a n g e s . T h e s p e e d a n d e x te n t of th e s h i f ts a r e i n c r e a s i n g a n d i t i s n ot p os s i bl e to p r e d i c t a tr e n d or r e c og n i z e a r e c ur r i n g p a tte r n . C h a l l e n g e s n ow a p p e a r s ud d e n l y , w i th out a d v a n c e w a r n i n g , a n d d e m a n d a n i m m e d i a te r e s p on s e . T h i s i n c r e a s e d v ol a ti l i ty i s a p p a r e n t i n th e p r i c e tr a j e c tor y of c om m od i ti e s a n d s e c ur i ti e s a n d th e e r r a t i c d e v e l op m e n t of th e g l oba l e c on om y .

I n c r e a s e d v ol a ti l i ty l e a d s to g r e a te r un c e r ta i n ty . T h e f utur e c a n n o l on g e r be d e r i v e d f r om th e p a s t. D ur i n g th i s p e r i od of tr a n s i ti on , f utur e c h a l l e n g e s c a n n o l on g e r be c l e a r l y d e f i n e d . C om p a n i e s m us t e x p e c t s ur p r i s e s . T h e y h a v e to l e a r n to a c t w i th out a n y c e r ta i n ty a bout f utur e d e v e l op m e n ts .


C om p l e x i ty Am bi g ui tyI n c r e a s e d c on n e c ti v i ty a n d e c on om i c g l oba l i z a ti on a r e tw o of s e v e r a l f a c tor s f ue l i n g c om p l e x i ty i n th e a l i g n m e n t a n d l e a d e r s h i p of c om p a n i e s . T h e w a v e of c on s ol i d a ti on th a t c a n be e x p e c te d w i th i n th e f i n a n c i a l i n d us tr y a n d th e r e s ul ti n g l a r g e r or g a n i z a ti on a l un i ts w i l l a l s o a d d to th e c om p l e x i ty .

T h e s e c h a n g e s — i n c r e a s e d v ol a ti l i ty , un c e r ta i n ty a n d c om p l e x i ty — ul ti m a te l y e n g e n d e r a m bi g ui ty . T h e n e w r e a l i ty a l l ow s m a n y i n te r p r e ta ti on s . T h e s i g n i f i c a n c e of i n d i v i d ua l e v e n ts i s n o l on g e r c l e a r l y i d e n ti f i a bl e a n d i t i s be c om i n g i n c r e a s i n g l y d i f f i c ul t to d i s ti n g ui s h be tw e e n c a us e a n d e f f e c t. T h e s e d e v e l op m e n ts h e i g h te n th e r i s k of e r r on e ous c on c l us i on s a n d m i s i n te r p r e ta ti on .

C urrent challenges and solutions in banking & capital markets | 9

1 0 | C urrent challenges and solutions in banking & capital markets

I m p a c t of V U C A i n ba n k i n g & c a p i ta l m a r k e ts

T o s ur v i v e i n th e r a p i d l y a p p r oa c h i n g n e w r e a l i ty , i n s ti tuti on s h a v e to ta k e a n i n te r d i s c i p l i n a r y a p p r oa c h .

New regulatory requirements must also be implemented and audits must increasingly provide foresighted assurance and generate added value.

T r a n s f or m i n g c on tr ol& s up p or t f un c ti on s

Pictograms for Strategic Solutions

Customer Protection

Capital Markets Reform

Tax transparency

Prudential Basel III

Recovery & ResolutionPlanning

Culture change

Business Optimization

Technology Enabled Transformation

Customer Agenda, Digitalization & Revenue

Strategic Change

Tax transformation

Enterprise Intelligence & Data Management

Finance Change

Risk & Actuarial Transformation

TAX

TAX

R e th i n k i n g th e s tr a te g y

T r a n s f or m i n g bus i n e s s m od e l s


Customer Protection


Tax transparency



Culture change




Strategic Change

Tax transformation


Finance Change


TAX

TAX

Ad a p ti n g I T i n f r a s tr uc tur e & d a ta m a n a g e m e n t


Customer Protection


Tax transparency



Culture change




Strategic Change

Tax transformation


Finance Change


TAX

TAX

C h a n g i n g c or p or a te c on d uc t a n d c ul tur e

C urrent challenges and solutions in banking & capital markets | 1 1

O ne thing is clear in the current environment: those who do not adapt will be left behind. C ompanies must take measures in order to master their entry into the digital world. The corporate strategy must be reconsidered and the business model optimized. C hanges in customer behavior, pressure on margins and stricter regu lations are forcing banks to reorient their value chains. B anks will need new ideas and concepts in the new reality. And we are not talking about gradual adj ustments. Rather, the sector is essentially facing a paradigm shift. IT is a key strategic element as a means of guaranteeing an organization’ s growth, scalability and efficiency in the context of V UC A.


O l a f T oe p f e r Partner

N i c k B l a y d e s Executive Director

P e p p i S c h n i e p e r Partner


“ The key strategic question is: H ow will institutions adapt to the new environment? ” O l a f T oe p f e r , P a r tn e r


In past decades, corporate strategies were based upon a fundamental understanding of value creation, the validity of which has eroded over time. Financial institutions must rigorously adapt their strategy to a new reality. H owever, many aspects of the future playing field are not yet foreseeable. And companies must be agile enough to respond more quickly. S pecific aspects of the strategy have to be reviewed more than once a year. In addition, companies have to cope with an unprecedented array of parallel strategic priorities: implications of regulatory changes, sustainable enhancement of efficiency, profitable earnings growth and a reorientation of the business model to a new reality.

These developments put a company’ s performance capability to the test. A strategic interpretation is key to converting risks into opportunities, driving ahead market consolidation,

transforming business models and optimizing the value chain. Restructuring operations and acquisitions will be core elements of many corporate strategies in the coming years. In the new reality, the message is clearer than ever before: Get big, get niche or get out.

An i s ol a te d p e r s p e c ti v e d oe s n ot h e l p our c us tom e r s a c h i e v e th e i r obj e c ti v e s . T h i s i s w h y our s tr a te g y a d v i s or s a r e f ul l y i n te g r a te d m e m be r s of a te a m , c on tr i buti n g th e p r ov e n e x p e r i e n c e th a t i s c r i ti c a l l y i m p or ta n t f or y ou on s ubj e c ts r a n g i n g f r om r e g ul a tor y a s p e c ts or op e r a ti on s a n d I T to f i n a n c e , ta x a n d l e g a l .

W e a l s o s ta n d out f r om our c om p e ti tor s be c a us e of our p r a g m a ti c , r e s ul ts -or i e n te d a p p r oa c h , of f e r i n g th e be n e f i ts of our te c h n i c a l a d v i s or y k n ow - h ow c om bi n e d w i th tr a n s a c ti on s up p or t s k i l l s .

EY’ s s tr a te g y te a m c a n w or k w i t h y ou to h e l p y ou a d a p t s uc c e s s f ul l y to th e n e w r e a l i ty .


Customer Protection


Tax transparency



Culture change




Strategic Change

Tax transformation


Finance Change


TAX

TAX




Ac h i m B a ue rPartner

J ö r g T h e w sPartner

A c on s e q ue n c e of a n y s tr a te g i c r e a l i g n m e n t i s th a t bus i n e s s m od e l s n e e d to be r e c on s i d e r e d a n d a d j us te d . B us i n e s s m od e l s th a t p r ov e d s uc c e s s f ul i n th e p a s t m a y n ot n e c e s s a r i l y r e m a i n v i a bl e i n th e n e w e n v i r on m e n t.

G i v e n th a t n ot a l l f i n a n c i a l i n s ti tuti on s h a v e th e s a m e bus i n e s s m od e l s i n p l a c e , i t f ol l ow s th a t n ot a l l of th e m f a c e th e s a m e c h a l l e n g e s . Ye t th e y a l l h a v e s om e th i n g i n c om m on : r e q ui r e m e n ts r e g a r d i n g c os t a n d c us tom e r s a r e i n te n s i f y i n g . C om p a n i e s h a v e to f i n d w a y s of w or k i n g tow a r d s e e m i n g l y c on f l i c ti n g g oa l s i n p a r a l l e l . I n e f f e c t, th i s m e a n s e i th e r i n c r e a s i n g e f f i c i e n c y w h i l e p ur s ui n g g r ow th or r e d uc i n g c os t w h i l e i n v e s ti n g i n I T s y s te m s — w i th out l os i n g s i g h t of c h a n g i n g c us tom e r be h a v i or .

“ T h e c om p l e x i ty of th e e n ti r e v a l ue c h a i n h a s to be tr i m m e d . ” Ac h i m B a ue r , P a r tn e r


C os t Pressure on margins is increasing. C ompanies have to produce more cost- effectively as revenue streams dry up in traditional fields of business. The future points toward more automation, industrialization and standardization in the core business. C ompanies are breaking up value chains; increasing the level of standardization and automation of processes; relying more on centralization; scrutinizing distribution channels; driving forward outsourcing of certain functions; and shifting other functions from front to back office.

C us tom e r s More is needed to respond to changing customer behavior. An ever- increasing variety of customer structures are emerging. Galvanized by readily available and transparent information, consumer behavior is fundamentally changing. C onsequently, customer touchpoints have to be adj usted, and relationships between customers and providers need to be reshaped.

D i g i ti z a ti on C ompanies that develop and implement an integrated IT strategy will capture competitive advantages by strengthening customer relationships and the customer experience and by increasing operating efficiency while lowering service cost. Technology is a critical competitive advantage in this context.

T h e k e y p r e r e q ui s i te s f or f utur e s uc c e s s i n c l ud e a s h a r p e r c us tom e r f oc us ; th e c r e a ti on of n e w p r i c i n g a n d s e r v i c eof f e r i n g s ; a r e v i e w of th e e x i s ti n gp or tf ol i o; a n d th e s i m p l i f i c a ti on ofc om p l e x p r oc e s s e s . T h e k e y to s uc c e s s i s to s tr i k e th e be s t p os s i bl e ba l a n c e be tw e e n c us tom e r s , c os ts a n d d i g i ti z a ti on — w i th f e w e r , but be tte r r e s our c e s a n d p r oc e s s e s .

EY’ s k n ow l e d g e of th e e n ti r e p e e r g r oup a n d th e be n c h m a r k s a t a l l s ta g e s of th e v a l ue c h a i n c a n g i v e y ou a c om p e ti ti v e e d g e ba s e d on w i d e - r a n g i n g i n d us tr y m od e l s , ba c k e d by our m a n y y e a r s of e x p e r i e n c e .

O ur i n te g r a te d a p p r oa c h to bus i n e s s op ti m i z a ti on i s ba s e d up on th e un d e r l y i n g f a c tor s of ti m e , c os ts a n d q ua l i ty w i th i n y our or g a n i z a ti on , w i th th e a i m of i d e n ti f y i n g a r e a s w h e r e s us ta i n a bl e op ti m i z a ti on i s p os s i bl e .


M a r c o Am a toPartner

M a r c R y s e rPartner

R ol f G e i e rPartner

T r a n s f or m i n g c on tr ol & s up p or t f un c ti on s

T h e c on tr ol f un c ti on s , f i n a n c e , c om p l i a n c e a n d r i s k m a n a g e m e n t h a v e a l r e a d y s e e n d r a m a ti c c h a n g e s i n r e q ui r e m e n ts s i n c e th e s ta r t of th e f i n a n c i a l a n d e c on om i c c r i s i s , c oup l e d w i th i n c r e a s e d e x p e c ta ti on s r e g a r d i n g c os t e f f i c i e n c y .

N ow , th e n e w r e a l i ty c a l l s f or a s tr a te g i c r e a l i g n m e n t of th e c on tr ol a n d s up p or t f un c ti on s . W h a t i s i m p or ta n t i s th a t th i s w i l l e n ta i l a s us ta i n a bl e i m p r ov e m e n t i n e f f i c i e n c y by i n d us tr i a l i z i n g a d m i n i s tr a ti v e a n d tr a n s a c ti on - ba s e d w or k f l ow s , ba s e d up on a n a p p r oa c h to s ta n d a r d i z a ti on , a utom a ti on a n d outs our c i n g . Ev e n m or e i m p or ta n t, h ow e v e r , a r e th e r e q ui r e m e n ts f or a c h a n g e i n th e c on tr i buti on th a t th e s e f un c ti on s m a k e to v a l ue c r e a ti on , a n d a n e n ti r e l y n e w ty p e of c oop e r a ti on be tw e e n th e f un c ti on s . I n th e n e w r e a l i ty , s tr a te g i c p l a n n i n g , f i n a n c i a l p l a n n i n g , c a p i ta l a l l oc a ti on , c om p l i a n c e , r i s k a n d l i q ui d i ty m a n a g e m e n t m us t a l l be c l os e l y c oor d i n a te d w i th r e s p e c t to c r i ti c a l a s p e c ts .

The new environment also requires companies to make significant adj ustments to central support functions, especially in the management of finance, risk and tax. These three areas should not be considered in isolation. Rather, they need to be integrated into a consistent system, enabling the functions to provide organizations with relevant information during this period of uncertainty.

F i n a n c e Today’ s advanced technologies enable integrated and timely financial reporting. As evidenced by the volatility of markets, there are no safe havens left today, be it in currencies, commodities or elsewhere. Financial institutions must understand these influences and factor in their consequences in order to keep pace with a rapidly changing market and anticipate the corres pon ding ramifications. Transparency of current indicators is merely a starting point —


leading players are already able to forecast and plan in real time using integrated programs. The new paradigm in financial control is a “ no surprises” culture.

R i s k tr a n s f or m a ti on Today’ s unprecedented pressure from regulators ( including the delimitation of capital, liquidity and management responsibility) is colliding with eroding margins, efforts to improve performance and cost cutting in the core and non- core businesses. This is forcing financial services providers to redesign their risk functions ( mandate, organization, guidelines, methodology, process and control functions, data and culture) in order to fulfill the requirements in this rapidly changing environment.

T a x Demands on tax functions have increased tremendously over recent years. Globalization, rapid and

wide- reaching changes in the legal framework conditions, greater transparen-cy and shorter financial close cycles are j ust some of the challenges that tax managers face. The financial and reputation risks are increasing accordingly. In order to survive this situation with scarce resources, efficient and stable processes are required along with tax-specific applications. These applications relieve tax managers from routine tasks and enable them to concentrate on value- adding activities.

W i th our c om p r e h e n s i v e a p p r oa c h , w e c a n s up p or t y our tr a n s f or m a ti on p r og r a m —f r om th e bus i n e s s c a s e th r oug h to i m p l e m e n ta ti on .

W h e th e r y ou a r e l a un c h i n g a r e or i e n ta ti on or h a r m on i z i n g y our v a r i ous s up p or t f un c ti on s , EY i s y our p a r tn e r of c h oi c e .

As on e of y our k e y s tr a te g i c s p on s or s , w e w i l l w or k to h e l p e n s ur e th a t y ou be n e f i t f r om th e “ n o s ur p r i s e s ” a p p r oa c h .

W i th our c om p r e h e n s i v e a p p r oa c h , w e c a n s up p or t y our tr a n s f or m a ti on p r og r a m —f r om th e bus i n e s s c a s e th r oug h to i m p l e m e n ta ti on .

W h e th e r y ou a r e l a un c h i n g a r e or i e n ta ti on or h a r m on i z i n g y our v a r i ous s up p or t f un c ti on s , EY i s y our p a r tn e r of c h oi c e .

As on e of y our k e y s tr a te g i c s p on s or s , w e w i l l w or k to h e l p e n s ur e th a t y ou be n e f i t f r om th e “ n o s ur p r i s e s ” a p p r oa c h .


“ Requirements for control and support functions will change fundamentally in the new reality.” M a r c o Am a to, P a r tn e r


Ad a p ti n g I T i n f r a s tr uc tur e & d a ta m a n a g e m e n t ta k i n g i n to a c c oun t i n f or m a ti on s e c ur i ty

An d r e a s T og g w y l e rPartner

T om S c h m i d tPartner

D a v i d e G obboExecutive Director

T h e s tr a te g i c i m p or ta n c e of I T a n d th e v a l ue of d a ta m us t be r e c og n i z e d a s a k e y p r od uc ti on f a c tor . T h e r e m us t be a c l e a r l y d e f i n e d te c h n ol og y s tr a te g y a t th e h e a r t of e v e r y f i n a n c i a l s e r v i c e s c om p a n y . I T s y s te m s a n d h a r m on i z e d d a ta m a n a g e m e n t m a k e i t p os s i bl e to i m p l e m e n t th e n e c e s s a r y c h a n g e s to bus i n e s s m od e l s a n d p r oc e s s e s w i th a g i l i ty a n d c os t e f f i c i e n c y . I n a d d i ti on , th e a p p r op r i a te p r ote c ti on of d a ta i s k e y .

B y i n te g r a ti n g I T a r c h i te c tur e a n d i m p l e m e n ti n g e f f i c i e n t d a ta m a n a g e m e n t, f i n a n c i a l s e r v i c e s p r ov i d e r s c a n i m p r ov e th e i r a g i l i ty a n d e q ui p th e m s e l v e s to r e a c t to c h a n g e s m or e q ui c k l y a n d a d e q ua te l y . T h e i n te g r a ti on of d a ta a n d a p p l i c a t i on a r c h i te c tur e s r e m e d i e s s om e of th e l e g a c y c om p l e x i ty th a t h a s d e v e l op e d ov e r ti m e . T h i s a p p r oa c h w i l ls i m ul ta n e ous l y un l oc k op p or tun i ti e s to ta p i n to n e w bus i n e s s a r e a s a n d i m p r ov e r i s k m i ti g a ti on w i th th e h e l p of d a ta

a n d i n te l l i g e n t a n a l y s e s . D y n a m i c d a ta th a t c a n be c ol l e c te d a n d e v a l ua te d ov e r ti m e i s g r a d ua l l y be c om i n g m or e i m p or ta n t th a n s ta ti c d a ta . D y n a m i c d a ta m a k e s i t p os s i bl e to m e a s ur e c us tom e r be h a v i or a n d to i m p l e m e n t n e w ty p e s of s e g m e n ta ti on — of f e r i n g s i g n i f i c a n t a d v a n ta g e s f or m a r k e ti n g , s a l e s a n d d i g i ti z a ti on e s p e c i a l l y . M e th od s of th i s s or t h a v e a l r e a d y be c om e e s ta bl i s h e d i n r e ta i l ba n k i n g a n d a r e a l s o e m e r g i n g a s a c r i ti c a l s uc c e s s f a c tor i n th e a s s e t m a n a g e m e n t bus i n e s s . T h e s e n e w a p p r oa c h e s a l s o op e n up th e w a y to e f f i c i e n tl y s up p l y i n g m a n a g e m e n t a n d s up e r v i s or y a uth or i ti e s w i th th e i n f or m a ti on th e y r e q ui r e . T h e v a l ue of d a ta i s th e r e f or e s i g n i f i c a n tl y i n c r e a s i n g f or ba n k s , a s w e l l a s th e n e e d to p r ote c t th i s d a ta f r om n e w c y be r r i s k s .


I T s y s te m s C urrent IT systems, often legacy systems that have developed over time, are in need of a thorough overhaul. The growing mass of information and the constant increase in cost pressure are forcing institutions to examine possibilities for stepping up the j oint use of key resources. This calls for IT architecture that allows standardization and industrialization of business processes. End- to- end integration at application level is the basis for a faster and more efficient response to regulatory requirements.

D a ta m a n a g e m e n t Data has a particularly significant role in the new reality. The prerequisite for functional data management is an integrated data architecture that enables efficient business- wide generation of standardized analyses and reports from a variety of perspectives. A comprehensive data management concept is essential

in order to respond efficiently to regulators‘ increased requirements. This is why the growing complexity of data management calls for an expansion of data governance, in order to ensure the integrity and quality of data throughout the enterprise.

D i g i ta l i z a t i on a n d s e c ur i ty C hanges in customer behavior in a changing market — due to digitization in particular — are significantly increasing demands on companies‘ analytical capabilities. Processes and technologies are needed that enable forecasting of likely customer behavior and the development of a customized offering. The most common applications include client segmentation, strengthening customer loyalty, increasing turnover and profitability, and credit scoring. Digitalization and the introduction of new distribution channels are also leading to new challenges with regard to

data security. C yber risks and threats will continue to increase and banks will have to make sure that their cyber security measures are aligned to the fast and significantly changing environment they are operating in.

EY of f e r s y ou a w i d e r a n g e of c r os s -f un c ti on a l a d v i s or y s e r v i c e s i n th e f i e l d of d i g i ti z a ti on — f r om s tr a te g y to i m p l e m e n ta ti on .

W i th our c om p r e h e n s i v e a p p r oa c h , w e s up p or t f i n a n c i a l i n s ti tuti on s w i th th e tr a n s f or m a ti on of th e i r I T i n f r a s tr uc tur e a n d w i th c us tom e r - c e n t r i c d a ta m a n a g e m e n t ta k i n g i n to a c c oun t th e i n c r e a s e d d a ta s e c ur i ty r e q ui r e m e n ts .

W h e th e r y ou a r e l a un c h i n g a r e or i e n ta ti on or h a r m on i z i n g y our e x i s ti n g s ol uti on s , EY i s y our p a r tn e r of c h oi c e .


Customer Protection


Tax transparency



Culture change




Strategic Change

Tax transformation


Finance Change


TAX

TAX

EY of f e r s y ou a w i d e r a n g e of c r os s -f un c ti on a l a d v i s or y s e r v i c e s i n th e f i e l d of d i g i ti z a ti on — f r om s tr a te g y to i m p l e m e n ta ti on .

W i th our c om p r e h e n s i v e a p p r oa c h , w e s up p or t f i n a n c i a l i n s ti tuti on s w i th th e tr a n s f or m a ti on of th e i r I T i n f r a s tr uc tur e a n d w i th c us tom e r - c e n t r i c d a ta m a n a g e m e n t ta k i n g i n to a c c oun t th e i n c r e a s e d d a ta s e c ur i ty r e q ui r e m e n ts .

W h e th e r y ou a r e l a un c h i n g a r e or i e n ta ti on or h a r m on i z i n g y our e x i s ti n g s ol uti on s , EY i s y our p a r tn e r of c h oi c e .


“ Data and analytics play a decisive part in coping with the implications of V UC A.”D a v i d e G obbo, Ex e c uti v e D i r e c tor

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2 4 | C urrent challenges and solutions in banking & capital markets2 4 | C urrent challenges and solutions in banking & capital markets

“ A performance- oriented culture is not the result of corporate success — it is the decisive factor in that success.” J ö r g T h e w s , P a r tn e r

J ö r g T h e w sPartner

Er i c L e f e bv r eExecutive Director



C or p or a te c ul tur e m us t be d e v e l op e d a n d i n f l ue n c e d ov e r th e l on g te r m i n or d e r to a tta i n e f f e c ti v e i m p l e m e n ta ti on of or g a n i z a ti on a l obj e c ti v e s a n d to m a k e bus i n e s s e s m or e d y n a m i c a n d a d a p ta bl e . I n th i s s e n s e , c ul tur e i s e v e n m or e i m p or ta n t th a n s tr uc tur e a s a c om p e ti ti v e f a c tor .

T o a c h i e v e th i s , c or p or a te g oa l s , v a l ue s a n d d e s i r e d be h a v i or p a tte r n s m us t be r e v i e w e d a n d tr a n s f or m e d i n to a c tua l w or k p r a c ti c e s a n d d e c i s i on - m a k i n g p r i n c i p l e s i n d a y - to- d a y w or k i n g l i f e .

A c or p or a te c ul tur e th a t i s s uc c e s s f ul l y g e a r e d to th e g oa l s c a l l s f or e f f e c ti v e a n d e f f i c i e n t i m p l e m e n ta ti on of th e s tr a te g y a n d or g a n i z a ti on a l r e q ui r e m e n ts a s th e outc om e of th e a c ti v i ti e s a n d d e c i s i on s of a l l e m p l oy e e s .

Ultimately, the necessary, desired culture is not recorded on paper — it is evident in everyday working life and in day- to- day dealings with clients. Any deviations must be specifically addressed and corrected using the various mechanisms that are available.

This creates trust, which is of paramount importance in the banking industry. The conduct of client advisors, for example, in their regular interaction with custom-ers is a particularly critical factor here. The desired behavior should not be controlled primarily by checks and the threat of sanctions, but by an under-standing of obj ectives and values, and by gearing all the elements of the organiza-tion toward supporting the implementa-tion of that behavior. To ensure a lasting transfor mation, operational change must go hand in hand with cultural change. Key target groups must be defined for an adaptation of the culture, and they must

be involved in determining the vision, the obj ectives and the behavior patterns. If all the main players and decision- makers are involved in initiatives to deal with specific issues, cultural change will happen naturally. A performance- oriented culture is not the result of corporate success — it is the decisive factor in that success.

L e t’ s j oi n f or c e s to tr a n s f or m y our c or p or a te c ul tur e i n to a c om p e ti ti v e a d v a n ta g e . B e n e f i t f r om EY’ s i n te r n a ti on a l c om p e te n c e c e n te r s i n S w i tz e r l a n d a n d our w i d e - r e a c h i n g e x p e r i e n c e w i th p e e r g r oup c om p a n i e s .

O ur a p p r oa c h i s d e s i g n e d to d e l i v e r c h a n g e s i n c or p or a te c ul tur e w i th d i r e c t, m e a s ur a bl e a n d l a s ti n g i m p a c t.


Customer Protection


Tax transparency



Culture change




Strategic Change

Tax transformation


Finance Change


TAX

TAX


I m p l e m e n ti n g n e w r e g ul a tor y r e q ui r e m e n ts

P h i l i p p e Z i m m e r m a n nPartner

C h r i s t i a n R ö t h l i nPartner

I M D I I ; M i F I D I I ; M i F I R ; F I D L EG ; EM I R ; P R I I P s ; C R D I V ; C R R ; AI F M D ; U C I T S V + V I ; EL T I F ; EuV EC A; M AD I I ; R D R ; F AT C A; a n d D od d - F r a n k Ac t — th e s e a r e j us t a f e w e x a m p l e s of th e m a s s e s of a bbr e v i a ti on s a n d a c r on y m s th a t f i n a n c i a l i n s ti tute s a r oun d th e w or l d h a v e to g r a p p l e w i th . R e g a r d l e s s of th e i r s i z e a n d d i v e r s i f i c a ti on , a l l bus i n e s s e s h a v e to n e g oti a te th e i r w a y th r oug h th i s l a by r i n th of r e g ul a tor y c h a n g e s . F a i l ur e to c om p l y m e a n s r i s k i n g s a n c ti on s a n d f i n e s .

C us tom e r p r ote c ti on Financial services providers must adapt to the new reality. This also includes complying with the tighter customer protection regulations ( e.g., FIDLEG, FINIG and FinfraG) . In the banking industry, the focus is on the appropriateness and suitability test. Regulatory reforms in the area of inducements and retrocessions also require a fundamental review of the entire

“ I n th e ta x w or l d , F AT C A i s n o d oubt th e c a ta l y s t f or a m a s s i v e i n c r e a s e i n tr a n s p a r e n c y — but i t i s on e ti l e i n th e ov e r a l l m os a i c . I t i s i n c r e a s i n g l y e v i d e n t th a t w e a r e g oi n g to s e e a r i s i n g ti d e of r e g ul a tor y a n d ta x i n i ti a ti v e s i n th e c om i n g y e a r s . ”

P h i l i p p e Z i m m e r m a n n , P a r tn e r


value chain from the perspective of product development and sales.

Tax transparency Financial institutions

have recognized and accepted that there

is no way to bypass total tax transparency.

The implementation of different initiatives

to improve tax transparency is, however,

complex, not to mention time and

cost-intensive: taxable funds are mobile

and honest tax payers make for more

demanding customers. In the future,

banks in the offshore business will be in

direct competition with other banks in

the customer’s home country.

Financial institutions must proactively tackle the issue of tax transparency. The key factors at the customer level are the Foreign Account Tax C ompliance Act ( FAC TA) on the one hand, and Automatic Exchange of Information ( AEI) on the other hand. At company level, the O rganisation for Economic C o- operation

and Development ( O EC D) has initiated the B ase Erosion and Profit S hifting ( B EPS ) ; thus the trend toward total tax transparency does not stop at companies.

R e g a r d l e s s of w h e th e r n a ti on a l or i n te r n a ti on a l r e g ul a ti on s a r e i n v ol v e d , w e be l i e v e th a t a n i n te g r a te d a p p r oa c h to p r e s e n t a n d f utur e r e g ul a tor y c h a n g e s w i l l p r ov e be n e f i c i a l i n th e l on g te r m .

T h r oug h our g l oba l l y c on n e c te d te a m s w i th l oc a l r oots , EY m a i n ta i n s c on ti n uous d i a l og w i th n a ti on a l a n d i n te r n a t i on a l a uth or i ti e s a n d r e g ul a tor s .

W e c a n d e p l oy our w e a l th of e x p e r i e n c e to h e l p y ou e x p l oi t s y n e r g i e s . T h a t i s w h a t m a k e s us a s tr a te g i c a l l y i m p or ta n t s p on s or of c h oi c e i n p r e p a r i n g a n d i m p l e m e n ti n g th e s e r e g ul a tor y r e g i m e s . I n te r d i s c i p l i n a r y te a m s w i th e x te n s i v e e x p e r i e n c e i n th e ba n k i n g a n d c a p i ta l m a r k e ts bus i n e s s a r e on h a n d to of f e r y ou s up p or t.


Aud i ti n g i n th e n e w r e a l i ty — a s s ur a n c e , p r os p e c ts a n d a d d e d v a l ue

P a t r i c k S c h w a l l e rPartner

S té p h a n e M ul l e rPartner

C l a r i ty , s i m p l i c i ty a n d c e r ta i n ty h a v e e n or m ous v a l ue i n th e n e w r e a l i ty of i n c r e a s i n g v ol a ti l i ty , un c e r ta i n ty , c om p l e x i ty a n d a m bi g ui ty . T h e s e a r e th e v e r y f a c tor s th a t m a k e a s s ur a n c e a n d tr us t p os s i bl e . U l ti m a te l y , th e y a r e th e e s s e n ti a l p r e r e q ui s i te s f or s oun d l y ba s e d a n a l y s e s a n d s us ta i n a bl e d e c i s i on s .

A comprehensive audit offers far more than a mere confirmation of compliance with legislation, regulations or relevant standards. It helps companies to understand the various financial reporting documents, such as financial statements, risk and controlling reports or performance reports, and to set them in the relevant context. It provides transparency and clarity with regard to the essential business processes and the quality of the control functions.

A comprehensive audit is future- oriented; it provides impetus and benchmark comparisons, and singles out relevant opportunities and risks. In these ways, we create added value for companies’ stakeholders and investors. We focus our organization consistently on the financial industry, and we occupy a leading position in the audit sector. O ur approach makes us a reliable and trustworthy service provider as we tackle the challenges and future opportunities for banks, insurers and fund companies, day after day and around the globe.

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T h e EY s e r v i c e s p e c tr um e s s e n ti a l l y s p a n s :

Financial Audit Regulatory Audit C ompliance Audit IT S ecurity Audit S ustainability Audit Risk Assurance S ervices Investment Performance S ervices Financial Accounting Advisory S ervices Internal Audit

W e a r e h e r e to h e l p y ou. T a l k to us .

“ C omprehensive audits reduce uncertainties and increase confidence — key requirements for good decisions.”

P a t r i c k S c h w a l l e r , P a r t n e r


“ C hange equals opportunities. For you. For us.”

O l a f T oe p f e r , P a r tn e r


M a r c e l S ta l d e rPartner Leader Financial S ervices S witzerland + 4 1 58 28 6 3 1 11 marcel.stalder@ ch.ey.com

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From all perspectives — understand the whole picture.

w w w . e y . c om / c h / p e r s p e c ti v e s

EY | Assurance | Tax | Transactions | Advisory

About EY

This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice.Please refer to your advisors for specific advice.

EY is a global leader in assurance, tax, transaction andadvisory services. The insights and quality services wedeliver help build trust and confidence in the capitalmarkets and in economies the world over.We develop outstanding leaders who team to deliveron our promises to all of our stakeholders. In so doing,we play a critical role in building a better working worldfor our people, for our clients and for our communities.

EY refers to the global organization, and may refer toone or more, of the member firms of Ernst & YoungGlobal Limited, each of which is a separate legal entity.Ernst & Young Global Limited, a UK company limitedby guarantee, does not provide services to clients.For more information about our organization, pleasevisit ey.com.

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