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Challenges of Modern Banking
- 1. Challenges of Modern Banking Presentedby- Pratidhee Palak Jha
- 2. Introduction Banking canbe defined as the business activity of accepting and safeguarding money owned by other individuals and entities, and then lending out this money in order to earn a profit.
- 3. Evolution of Bankingin India Presidency Banks: Bank of Bengal in 1809,Bank of Bombay in 1840 & Bank of Madras in 1843 Imperial Bank of India -1921 Reserve Bank of India-1935 State bank of India-1955 Nationalisation of 14 Banks-1969 Second Dose of Nationalisation –1980 Narasimham Committee Reforms-1990s ICICI Merger- 2003
- 4. Modern Banking TheModern banking system is two tiered. This means that at the bottom there are commercial banks i.e. the banks that we interact with on a day to day basis. They are then managed by a central bank which forms the next level in the hierarchy. The modern banking system provides central banks with considerably more rights and responsibilities.
- 5. Challenges of modernbanking Macroeconomic risk Macroeconomic risk was the top concern for all survey respondents despite the fact that many economies have now returned to positive growth. For bankers, uncertainties in the macroeconomic environment together with persistent and high levels of debt across sovereign, corporate, and consumer sectors lay the groundwork for asset bubbles to burst in the event of significant instability.
- 6. Regulation There isslightly less of a concern for risk managers and industry analysts, bankers cite tightening regulatory requirements as sometimes costly, excessive, and ineffective. While bankers recognize the need for tougher controls, concerns were raised about the volume and complexity of current regulation which were stated to eat into management time and overall industry margins.
- 7. Political interference Bankersexpressed concern that governments could intervene in banking operations for a multitude of reasons, including to raise revenues in a time of budget stress, increase investor protection, and rebuild the national tax base. Bankers also highlighted that the uncertainty in several political environments including in Europe and across the Middle East, as well as the impact of the upcoming U.S. elections, could result in greater interference over banking management, lending policies, and taxation.
- 8. Technology risk Theoutdated core IT systems were a significant concern for global bankers. Failure to invest appropriately in secure, agile systems that can enhance digital and mobile banking can result in significant loss while compounding the risk for cyber attacks . According to Alexander Campbell, editor of Operational Risk & Regulation Magazine, “the burden of multiple legacy systems at some banks (due to a history of mergers) is already causing real problems.”
- 9. Criminality Cyber attacksare increasingly seen as a top concern for bankers. Many respondents worried that banks are not currently equipped to prevent attacks from opportunistic hackers, organized criminals, or government-funded corporate (IP) espionage. The concern is further compounded by banks’ increased embrace of newer (and potentially high-risk) tech including distributed ledgers, crypto-currencies, and real-time payments. Banks with strengthened technology systems are only as strong as their weakest link, rendering them vulnerable to cyber attacks from a multitude of sources.
- 10. Other few Challenges Not making enough money. Consumer expectations. Increasing competition from financial technology companies. Regulatory pressure.