Dubai: In the wake of market volatility and tightening global liquidity, banks will need to reevaluate the way they approach changes and challenges in their customer and business strategies and focus on digital and talent strategies in 2016 to stay ahead in the long run — according to KPMG’s UAE Banking Perspectives report.
The banking sector — both globally and in the UAE — is currently facing a number of strong headwinds. Globally, institutions are focusing on enhancing regulatory capital. Digital and broader technology advances are challenging the customary ways of doing business. New market participants -non-bank financial institutions — are encroaching on traditional hunting grounds.
In addition to the challenges faced by their global counterparts, the UAE’s banking sector is facing region specific challenges such as tightening liquidity, margin compression and potential rise in loan impairments.
“2015 was a challenging year for the banking sector in the UAE with a prolonged period of low oil prices and economic volatility. But we are confident that the impact of greater scrutiny and regulatory reform will pave the way for a more stable banking and financial services sector in the future. This will be driven by other factors like improved efficiency, a more enhanced customer journey, digitisation and tougher cyber security processes,” Vikas Papriwal, Head of Markets, KPMG Lower Gulf.
Prolonged low oil prices have resulted in governments and government related entities (GREs), a key source of liquidity for banks are now using excess liquidity to balance their own books. The UAE’s banking sector is likely to feel squeezed as drawdowns continue while weaker oil prices filter through into the non-oil economy.
The KPMG report, based on an examination of 10 leading listed local banks highlights that banks need to identify critical functions and roles where investment is required to find and retain the right people. To capture the right talent, talent risk has to be incorporated into wider risk management governance and reporting frameworks.
“KPMG’s UAE Banking Perspectives 2016 underlines that, “While the focus must remain on operational transformation and cost optimisation, banks should look at the rapidly changing landscape as an opportunity to drive improvement, rather than just complying with what is required. The banks that do so will be the ones that have a competitive edge in the long run,” said Luke Ellyard, Financial Services partner, KPMG.
