Strategic developments – corporate and commercial banking industry

Globally banks have faced a range of challenges in weathering the pandemic storm and have come out of it identifying pain points and gaps in product and service delivery. To understand the impact of the pandemic, current challenges and new priorities for the industry, Acuity Knowledge Partners conducted a survey of senior decision makers at global and regional corporate and commercial banks and this report summarises the key findings.

Key Takeaways

1. 55% of the respondents believe withdrawal of fiscal stimulus will increase the probability of default (PD) of leveraged companies, while 38% believe loan-loss provisions would help reverse the deteriorating credit quality of loan portfolios.
2. Monitoring credit quality of existing clients emerged as the #1 challenge, with increasing new business and digitalisation at a close second.
3. Unsurprisingly, managing credit risk efficiently is priority, with over 90% of the respondents classifying this as a top three priority. Complying with regulatory requirements and the need to improve internal digital infrastructure remain highly relevant.
4. 96% of the respondents consider fragmented systems to be the main hurdle on the path to automation. 82% of them agree the lack of data standardisation is also a major challenge.
5. The decision makers agree on the importance of reinventing the lending landscape with intelligent automation, and a significant 43% of them are actively looking for new opportunities to digitalise. Coming a close second are banks that have lending platforms but work mostly in silos and have significant scope to improve efficiencies.
6. 71% of the decision makers are focused on automating the monitoring function first. The second priority is automating loan origination and servicing. Automating credit underwriting, given the criticality and complex nature of analysis, is generally not the starting point in digitalisation and is more often undertaken once systems have been connected, data is standardised and application of AI/ML tools is more feasible.
7. As far as digitalisation strategies are concerned, a majority of respondents agree in building a complete digital platform with a long-term view either by themselves or by bringing in a partner. As digitalisation is now at the heart of business transformation strategy for most banks, a large number of them are open to strategic partnerships.

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