The COVID-19 pandemic has accelerated the journey of investment banks’ technology transformation, but both consistent regulation and further investment are needed to ensure banks in Europe can deploy competitive technology, according to a report published today (16th November) by the Association for Financial Markets in Europe (AFME) and PwC.
The Technology and Innovation in Europe’s Capital Markets report surveyed the largest investment banks in Europe to assess their technological progress over the past two years. Findings reveal that banks have accelerated adoption of emerging technologies and new ways of working. However, insufficient IT investment, complex legacy systems and increasing regulatory requirements, remain some of the key barriers for further progress.
Among the key findings from the report:
James Kemp, AFME’s Managing Director, said:
“Capital markets demonstrated significant resilience through the COVID-19 pandemic, adjusting to extensive remote working and high market volatility without major disruption. Innovation is crucial for banks to continue serving their clients, though it’s clear that the emerging regulatory framework also needs to adapt to support, not limit, innovation at this critical period of change.
“New regulatory initiatives need to remain technology-agnostic, risk and principles based, globally consistent, and follow the principle of ‘same activity, same risk, same regulation’. This will allow the industry to continue harnessing the benefits of new technologies whilst minimising risks.”
Mark Leaver, Partner at PwC, said:
“The capital markets industry in the UK and Europe is at a critical juncture with continued pressure on revenues and costs, and the opportunity that technology provides. Since our initial report was published in 2018, progress has been made in areas such as cloud computing, and the response to the pandemic has demonstrated the resilience of operations and systems. However, it is clear that much work remains.
“The industry needs to step up its commitment to automation, technology simplification and leveraging the opportunities of new technology. Culture change, collaboration and building new ecosystems will be critical to meet the pace of adoption required. Regulators will play a part here as a new framework emerges that will help shape the industry over the coming years.”
The report predicts a shift to a longer-term transformation strategy across the investment banking industry. AFME and PwC have identified five calls to action which the industry should adopt in the next two-three years. These are:
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