Banking Banana Skins 2021
- Matthew Ball
This week saw the latest release of the CSFI’s annual survey, Banking Banana Skins 2021, looking at banking risk. The Institute sponsored the report, and it comes at a timely moment for the UK banking sector, as it seeks to emerge from the worst public health crisis for over one hundred years, and the worst economic recession since modern records began in 1948. We as an Institute have sought to play our part by supporting our members to navigate these choppy waters and ensuring that qualified banking professionals are rising to all the challenges.
According to the CSFI’s latest survey, the greatest risks to banks from the Covid-19 pandemic come from crime and disruption. Cyber criminals are taking advantage of the operational changes that have been forced on the banks - such as remote working - to infiltrate bank systems, commit theft and harm payments networks.
The pandemic is also accelerating technological change in the banking sector, which could lead to re-structuring and the appearance of new business models.
All this is perhaps not that surprising in what has been such a tumultuous year but what strikes me is that “Brexit”, which comes under “International Trade” in the Index, only lies at 14th place (unchanged from last year). So why does it lie so low? Is it because senior bankers, like the UK population - as we are led to believe, by most of the UK media, largely consider it to have been done?
When it comes to financial services, I think it is fair to say that is far from done, since the sector, which represents around 7% of the UK economy and more than 10% to the UK Exchequer in terms of tax receipts, was scarcely mentioned in the Brexit Deal. And those provisions that do exist in the Deal for financial services, are at best, very limited. There is clearly still a lot to be negotiated before we can say that banking and financial services has it’s “Brexit Deal.” But perhaps many in banking do not see it as a risk anymore, or maybe they just do not like to mention it so publicly anymore, if they do?
When it comes to Brexit, the survey states that “Some thought that the UK “underestimated” the risk and was insufficiently prepared for its impact. A respondent from a banking professional body said that “a lack of access to the EU market could be more damaging to banks than the effects of the pandemic. London could lose its place as a global centre of financial services.”
“Other Brexit-related concerns included the possibility of a downgrade in the UK’s credit rating, greater volatility in sterling, and a requirement for costly investment in post-EU infrastructure.”
That said, “Some respondents welcomed the escape from “politically driven” rule-making and expected to see “more proportionate regulation”, so I’ll guess we’ll have to wait to see how that one plays out. But since 40% of the UK’s financial sector trade relies on the EU at present, then a “going concern” should, at the very least, be applied to Brexit.
I’ll leave the final word to our Chair, Bill McCall, as I think it underlines why being a member of the Chartered Banker Institute is something to be proud of during these uncertain and somewhat “risky” times.
‘This issue of the BBS (Banking Banana Skins Report) makes us think. The world we are moving into will be one in which all professionally qualified bankers will have to be even more cognizant of their responsibilities. There will be no room for short-term banking.”
Matthew Ball, Head of Public Affairs, Policy & Communications