Samantha Regan discuss ‘Structural Reform for Improved Financial Performance and Innovation’ at GARP 2015.

1. Structural Reform
for Improved Financial
Performance and Innovation
February 2015

2. Overview
GSR is re-writing the financial services landscape, enacting lessons learned from
the crisis and creating strategic implications for financial institutions
Demonstrating value to key stakeholders
GSR is re-writing the
financial services landscape
• Re-shaping institutions
to be more resilient
• Implications for
geographies, products
and client mix
• Need for investment
and hiring
Organizing a
longer term response
• Success through
proactively organizing
the response
• Major themes of GSR can
provide a framework for
the response
Unlocking potential
in a new ecosystem
• Local not global
• Market-driven
specialization
• Start with compliance
and efficiency
• Innovation mindset
Solving the
strategic conundrum
• Macroeconomic
disruptions and unique
industry challenges
• Institutions needing
to remain focused on three
key imperatives within the
new ecosystem
Copyright © 2015 Accenture All rights reserved. 2

3. GSR is re-writing the financial services landscape
Rule making has been prolific as regulators have sought to add greater
resilience, leaving institutions faced with making hard choices about their post-
crisis business model
Key GSR regulations Early trends in responses
• Basel III
• Enhanced Prudential Standards
• Volcker Rule
• Title I Resolution Plans
• OCC Heightened Expectations
• Swaps Push-Out Rule
• Total Loss Absorbing Capacity
• GSIB Capital Surcharge Proposal
• CCAR and Stress Testing
Standards
• Ring Fencing
• Banking Reform Act 2009
• Bank Recovery and Resolution
• Structural Reform
• MiFiD II
BIS
US
UK
EU
Geography: Developing tailored
propositions by market whilst seeking
to ring-fence more operational
activities for efficiency
Products: Developing offerings that
enable more efficient use of capital or
better align to core competency
Client mix: Targeting clients based in more
profitable jurisdictions and/or who demand
more profitable offerings
Copyright © 2015 Accenture All rights reserved. 3

4. Institutions are securing significant sums of investment…
The stakes are high for senior management to make the right choices given the
significant investment being made in their post-crisis institutions as a result
of GSR
4%
10%
23% 16%
17% 18%
20%
27%
20%
16%
16% 13%
Technology Spend Non-Technology Spend
>$500M
$250M - $500M
$100M - $250M
$10M - $100M
$1M – $10M
$0 – $1M
Forecasted spending related to GSR Commentary
• Over half of survey respondents are
spending $100M+ in both technology
and non-technology efforts
• Insurance institutions are generally
spending the greatest amounts, with
Capital Markets firms spending the least
Copyright © 2015 Accenture All rights reserved. 4

5. …and hiring the required talent
In addition, a substantial effort is underway to hire and maintain the skills and
workforce required to manage the changes demanded by GSR
4% 3%
25%
5%
10%
22%
18%
11%
8%
16%
15%
17%
20%
25%
Technology FTEs Non-Technology FTEs
>300
250-300
150-250
100-150
50-100
25-50
1-5
Commentary
• Over 40% of survey respondents in
North America indicate they are ramping
up over 300 FTEs in the next year
• The largest numbers of FTE hires will
be concentrated in the non-technology
groups of Capital Markets firms
Forecasted additional FTEs to address GSR
Copyright © 2015 Accenture All rights reserved. 5

6. Solving the strategic conundrum
Publication of GSR regulations is adding further disruption to the financial
services industry. Financial institutions must remain focused on three key
imperatives to navigate the challenges ahead
Industry Dynamics
Declining margins
Disintermediation of customer relationships
Macroeconomic disruptions
Changing customer expectations
Technology innovation
Ongoing publication of GSR regulations
across each jurisdiction
Solving the strategic conundrum
Organize a long term response
around major themes
Continue to demonstrate
valuable return on investment to
all stakeholders
Unlock potential through
innovation and focus in
client offerings
Copyright © 2015 Accenture All rights reserved. 6

7. Organizing a longer term response
Successful institutions will proactively organize their response to the new
financial services ecosystem. Accenture sees seven major themes of GSR that
can provide a framework for developing a longer term response
Home/host
regulatory
frameworks
Governance of
legal entities
Enhanced risk
governance
Capital & liquidity
adequacy
Recovery &
resolution
planning
Separation of
cessation of
activities
Geography
focused finance
Copyright © 2015 Accenture All rights reserved. 7

8. Unlocking potential in a new ecosystem
GSR drives a need for compliance, though within the new ecosystem there is
also a clear opportunity for innovation and improved financial performance
Survey respondentsOpportunities
Local, not global
Market-specific
specialization
Focus on
compliance &
efficiency
Innovation
mindset
Developing operating models that
have the agility to run locally relevant
businesses in each jurisdiction
Maintaining relevance through
specializing in certain customer,
product, or geographic
market segments
Treating reputational risk management
as a competitive advantage, making
trust your currency
Driving innovation in product offerings,
and in establishing leaner ways
of working
57% will tailor their
geographic footprint
48% plan to focus
on core competencies
95% feel equipped
to comply with GSR
requirements
62% plan to launch new
products or services
57%
48%
95%
62%
Copyright © 2015 Accenture All rights reserved. 8

9. Continuing to demonstrate value to key stakeholders
Demonstrating value in the near term will require focus on regulatory compliance,
whilst laying the foundations for the changes required to achieve the longer term
operating model
Initial Compliance New Operating Model
Establish compliance
and communicate future
strategy and operating model
Develop foundational enhancements
to address new structural reforms
Deliver ongoing
enhancements
Design and early Implementation Embedding and Tuning
Establish revised steady state governance,
processes, technology, and talent management
Copyright © 2015 Accenture All rights reserved. 9

10. Continuing the discussion
Accenture will soon publish “Unlocking the Potential of Global Structural Reform”
– a point of view regarding the industry response to structural reform
A global quantitative online survey which
explores Global Structural Reform at
financial institutions across North America,
Latin America, Europe, and Asia-Pacific
The survey was conducted in late 2014,
and issued to 131 Chief Risk Officers,
Director / SVP / VP Leads of Regulatory
Structural Reform Programs, Heads of
Regulatory Structural Reform / Capital
or Prudential Programs
Copyright © 2015 Accenture All rights reserved. 10