Cantillon: Plenty to worry bankers but not profit

Banking Banana Skins 2015 report finds state of economy biggest concern for bankers

The state of the economy is the biggest worry for bankers worldwide, according to a study that was published on Wednesday.

Banking Banana Skins 2015 is a report compiled on the back of responses from 672 people across 52 countries, who are either bankers, banking regulators or people who are close observers of the sector. It includes input from two individuals in the Irish banking sector.

The threat posed to economic recovery and growth by the "huge and in many cases rising" weight of debt across sovereigns, corporates and the consumer is cited as the major risk facing the sector.

Although the banking sector, and economies generally, are “in the advanced stages of recovery from the financial crisis”, concerns are growing about the strength of that recovery, according to the annual survey compiled by PricewaterhouseCoopers and the Centre for the Study of Financial Innovation.

With debt levels still stubbornly high, concern about the quality of risk management has jumped from 11th place in last year’s survey to sixth this time around.

Even more dramatic is the growing awareness of the risk of the impact of crime on banks worldwide. Just two years ago, criminality ranked 24th in the list of threats to the sector. But concern at the “alarming spread of cyber-crime in an increasingly borderless market, particularly data theft” has seen this jump to ninth last year and in today’s list it is now the second highest concern for the sector.

Reputation is a concern that failed to make the list in 2014 but now ranks 12th among the risk factors.

The dominant concerns last year – the impact of current and planned regulation and the threat of political interference – have receded in the minds of bankers, ranking just third and fifth this year.

Falling even faster on the agenda is the thorny issue of corporate governance. In 2014 this was the eighth most pressing issue for bankers responding to the survey; now it raises barely a murmur, coming in at 19th, well below social media and just above the always relevant matter of management incentives.

But even more telling is an issue that was the fifth most pressing concern for the industry just last year but fails to make the list of the top 24 risk factors at all this year – profitability. Presumably, for all their worries, bankers are comfortable that a stuttering economic recovery and the burden of residual debt won’t limit their potential for making money this year.