Will 2017 See The “ Great Adjustment ”?

After entering a bleak forest of slow growth and restructuring in 2016, investment banks can look forward to a relatively brighter 2017 amidst a fintech-influenced, compliance-heavy environment.

If investment banks in Singapore had a hard time coping with the flurry of challenges and changes in 2016, then 2017 will provide a much-needed breather, especially for banks that have started shaping up their operations. Analysts forecast a thrilling year ahead marked by an improving outlook as well as opportunities to collaborate with financial technology firms. Consolidation, innovation, and compliance will be the key themes in the coming months – and banks that fail to keep up will remain lost in the woods.

“The winners in this environment will be investment banks that restructure successfully and develop a sharp focus on the things they do best and embrace innovation,” says Liew Nam Soon, ASEAN managing partner, financial services at Ernst & Young Solutions LLP. Liew reckons that investment banks in Singapore face a slew of hurdles that are driving down return on equity (ROE). Not only is economic growth slowing, but revenue for fixed income, commodities, and currencies is on the decline. Banks must also contend with new tax and compliance regulations that impose tougher penalties.

As a result, ROE amongst investment banks has declined in the past years, forcing some to restructure their businesses. Liew says EY has been working with investment banks to restructure operations and implement new models to optimise business, taking into consideration legal entity structures and transfer pricing.