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The 10 global bank risks that could create the next GFC

(Source: Getty)

The world’s financial system depends on the global banks – so when they go down, we’re all in trouble.

That’s why it’s important for global banks to manage financial risks, according to a joint report by EY and the Institute of International Finance (IIF).

In hindsight, it’s easy to point to all the factors that culminated in the global financial crisis and say we should’ve seen them from a mile away – but the fact is that the issues were neither hidden nor out of sight.

“The risks were not unknown, they were simply not understood or addressed,” the report said.

But more than 10 years on from the GFC, the world is looking different. In an effort to capture the evolving challenges, EY and IIF’s 10th annual global bank risk management survey report names the top risks to global banks over the coming decade:

  1. Weathering the likely financial downturn

  2. Operating in an ever-expanding ecosystem

  3. Protecting privacy to maintain trust

  4. Fighting a cyber war in banks and across the system

  5. Navigating the inevitable industry transition to cloud

  6. Industrialising data analytics across the business in a controlled manner

  7. Delivering services to customers, clients and markets without disruption

  8. Adapting to the effects of fast-shifting geopolitics on banks and their customers

  9. Addressing the impact of climate change on banks and society

  10. Meeting emerging customer demands for customised, aggregated lifetime offerings

“These issues are akin to those that many, both inside and outside the industry, missed or understated prior to the last financial crisis,” the report said.

“They are known, crucial issues that banks will need to manage as well as they do now for capital and liquidity. These are not unknown-unknowns.”

Australian businesses need to prepare for things to go south

The risk of a financial downturn would be a “real stress test” for Asia-Pacific financial institutions – and US-China trade disputes would make things worse, said EY Asia-Pacific’s Eugene Goyne.

Financial institutions will also have to manage risks such as company culture, cyber security, and data privacy.

“There continues to be a sharpened focus on managing conduct risk and developing new approaches to influence culture and behaviours,” said EY Oceania’s Doug Nixon.

“In the Australian context, many institutions are undertaking significant changes to the management of non-financial risk, all while the external environment continues to evolve at a very rapid pace.”

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