Tremendous changes are being witnessed in the scenario of banking risks due to disturbances in the global financial market, says a study from CSFI and PricewaterhouseCoopers.

According to “Banking Banana Skins”, a joint study by CSFI (Centre for the Study of Financial Innovation) and research firm PricewaterhouseCoopers, the scenario of banking risks is changing due to disturbances in the financial market worldwide, as reported by Gaapweb.

The study incorporates the views of about 300 senior financial experts from 38 countries on nearly 30 banking risks. Although some bankers believe that people over-reacted to the issue but majority of bankers feel hopeless about it. According to bankers, banking risk is a biggest threat to financial market, whereas non-bankers consider liberal bonus system and poor risk management of banks as major causes of the crisis.

The associated credit crunch and collapse in subprime are the main factors for decline in banking industry worldwide. Also, poor quality of bank risk management, which increases the fear of mischievous traders and fraud, is responsible for decline in consumer confidence on bankers and due to this, decline is witnessed in revenues of banks in global banking industry, say industry experts.

Moreover, the rules and regulations like monopoly of banks, which means bank can operate only in the native country, imposed by the governments of several countries are binding the banking industry. Also, the banks need to pay some amount of money to central banks of the mother country and this result in sluggish profits for the bankers and confine their growth.

Moreover, the study identifies slowdown in the US stock market and the US credit crisis as significant reasons behind the decline in the banking industry across the world. Also, shortage of liquidity in banking sector, fear of global economic recession in future and poor conditions of market are severely affecting the global banking industry.

A Senior Research Analyst at RNCOS says, “There are many drawbacks in the global banking sector, which are not only affecting its revenue growth but also the worldwide economic conditions. Moreover, the crisis exposes the failure of bank management, which depends upon various factors, such as no serious concern towards risk management, distorted incentive frameworks and increasing finance complexity.”

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