Research & Markets: trend analyses and market developments
One of our main sections, where we regularly inform you about current economic developments, dynamics, opportunities and potential in the banking business and present our latest studies, is our “Research & Markets” section.
You were particularly interested in our observations and analyses regarding the Supply Chain Due Diligence Act (Lieferkettensorgfaltspflichtengesetz) (LkSG). With the threshold dropping from 3,000 to 1,000 employees in 2024, more companies began focusing on the Supply Chain Due Diligence Act at the start of the year. This Act, effective in Germany since 2023, aims to mitigate risks within the supply chain. The Federal Office of Economics and Export Control (BAFA) is responsible for checking compliance, which presents new challenges for regional banks with many local supplier relationships. Find out more here.
There was also great interest in the conundrum of increased interest income described in the guest article by Dr. Andreas Ita, Managing Partner of Orbit36 Risk Finance Solutions AG. In the spring, he explained the apparent discrepancy between banks’ negative IRRBB exposures and the observed increase in net interest income. You can delve deeper into the topic here.
Is the private client business well positioned for the coming years? In June, our authors analyzed European retail banking revenues and believe that they are likely to settle at a new and higher level. The forecast average revenue pool for the period 2024–2026 is EUR 250 billion, which is slightly lower than in the outlier year 2023. Read more here.
Regulatory and political initiatives, as well as customers and investors, have been placing higher ESG demands on banks for some years now. Against this background, our authors provided answers to the following questions: What is the maturity level of banks when it comes to sustainability transformation? What challenges are banks facing? And how do these topics relate to the different areas of a bank? You can find out more about ESG transformation in the banking industry in chapter 3 of the July issue of zeb.market.flash #49, Q2 2024.
How much do European banks need to do in terms of ESG? Download our ESG Implementation Study!
ESG Implementation Study 2024
Europe’s banks under the microscope: between ecological ambition and economic realityOur ESG Implementation Study 2024 reveals that there is a clear need for Europe’s banks to take action on ESG. The majority of the 36 large, national and domestically focused banks surveyed are still at the beginning of their transformation to sustainability. The responses from the surveyed institutions resulted in an average “ESG maturity level” of around 34%. Institutions have recognized that the consideration of environmental, social and governance factors is crucial for them. However, there is obviously still a long way to go. In our article on the study, which has met with great interest, we provide background information on the study and explain selected key areas for action for banks! You can find the study results here.
You were also very interested in our article on the zeb.European Asset Management Study 2024, in which we examined the turnaround in the European asset management industry. Global AUM growth regained momentum and the market grew by around 9%. However, this market growth is no reason to sound the all-clear! Low returns, cost pressures, technological disruptions, and escalating geopolitical tensions pose enormous challenges to asset managers. One of the main aims of this year’s asset management study is to appropriately address these issues and identify unused efficiency levers. Learn more about the current developments in our article.
Banking: challenges and innovations
As in previous years, our “Banking” section was very popular with you. Our articles in this section were always among the most read. We would like to highlight the following topics.
In 2024, there were several changes in the area of credit inspections. BaFin outsourced a large number of special inspections to external audit firms, which means that the Bundesbank will no longer carry out the majority of the inspections. It is likely that the additional auditors and their different levels of experience will no longer be able to fully ensure consistency in the assessment and weighting of audit findings. This could make the inspections even less predictable and preparation much more difficult. Find out more here.
Our thematic discussion of the reasons for the growing appeal of using internal models (IRBA) for regional banks and savings banks also attracted a great deal of attention. After all, regional banks face the challenge of continuously adapting their internal models to new regulatory requirements. Our article sheds light on the specific measures required. Further information can be found here.
As a result of the sharp rise in interest rates, the net interest spread on the liabilities side is once again a significant source of income for regional banks. Meanwhile, direct banks and captives in particular are stepping up the competition for deposits. The challenges in deposit management can only be overcome by taking holistically evaluated measures from a sales and management perspective. In the first part of our series of articles this year, our authors looked at sales approaches in interdisciplinary deposit management and in the second part at the management and treasury perspective.
As previously discussed in the Research & Markets section, the Supply Chain Due Diligence Act was also addressed in the Banking section. Although the law has been in force in Germany since 2023, it only started to apply to companies with more than 1,000 employees at the beginning of 2024. To date, however, there has been a lack of comparable regulation at the EU level. The Corporate Sustainability Due Diligence Directive (CSDDD) aims to prevent human rights violations and environmental harm during product and service manufacturing within the EU. What will change with the CSDDD? When and how will the CSDDD be transposed into national legislation? This and other exciting background information as well as implications of the CSDDD for banks, can be found in our July article.
The risk materiality limit allows banking processes to be optimized without neglecting regulatory requirements! The clear separation between risk-relevant and non-risk-relevant loans means that resources can be deployed in a targeted manner and employee workloads can be reduced. This will result in greater efficiency, improved risk management and a sharper focus on key business areas. In September, our experts examined, among other things, the activities depending on risk relevance, the audit-proof derivation of the threshold as well as process simplifications in the credit processes and the use of de minimis rules. Learn more about the risk relevance threshold here.
As of 2024, banks are required to make their contribution to climate neutrality. Paris climate targets, EU climate targets, German climate targets – what were the differences again? In December 2015, the Paris Climate Agreement was adopted at the international climate conference, marking a groundbreaking measure to combat climate change. While the agreement provides an international framework for climate protection, both the EU and Germany have adopted dedicated laws and initiatives to achieve their own climate targets. Although all initiatives pursue the same overarching goal – to achieve net zero – they differ in their (interim) targets and planned measures for GHG reduction. Financial institutions should discuss which specific ambitions they are pursuing and what laws and regulations they need to comply with. We explain the details in our October article.
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Digital transformation, trends and challenges in HR management
The transformation of the banking landscape continued unabated in 2024. Against the backdrop of skills shortages, the need for targeted HR management as a change manager and enabler is greater than ever. In addition, agility, innovative business models, key technologies such as AI and automated systems, and the ability to continuously change are critical survival factors for organizations in the financial industry. Many of you enjoyed reading the following articles from our HR and Innovation & Digital sections.
Change on the outside always requires change on the inside of organizations and the people who work in them. The key lever for a successful and future-oriented alignment of modern organizations is leadership. But what are the main challenges and what is their impact on leadership? In May, our authors examined when agile leadership makes sense and how it can be successfully implemented in organizations. Learn all about agile leadership here.
How financially literate is Gen Z? What similarities and differences are there between Generation Z and other generations in their handling of, attitude towards and knowledge of their own finances? You followed with great interest our discussion with Maria Mondry, Head of Banking at Tomorrow, the sustainable banking provider from Hamburg, about the financial literacy of Generation Z. It sheds light on Gen Z’s expectations of employers and how banks can respond to them. Click here to read our interview with Tomorrow.
By 2030, banks and insurance companies will lose an average of 30% of their current workforce due to demographics and attrition. New HR strategies are urgently required. When it comes to recruiting, developing and retaining employees, our authors believe that institutions focus too much on quantitative headcount and not enough on the qualitative aspects of staffing. Click here to find out why our authors are of this opinion.
The world of digital assets has become even more relevant this year. From our Innovation section, we would particularly like to recommend our topic glossary “A brief guide to digital asset services”. In this glossary for the digital asset world, we have published numerous articles dealing with the latest technologies, market developments and regulatory frameworks surrounding the Markets in Crypto Assets Regulation (MiCAR). MiCAR represents a significant step forward in the regulation of the European crypto market, establishing for the first time clear and consistent rules for dealing with crypto assets and related services. To help you understand this complexity, our glossary series provides you with a detailed overview of the key terms and services that the regulation focuses on. Go to digital asset glossary.
Top articles of the year 2024
To conclude our look back on the year, we would like to draw your attention to the top three most-read articles.
I) The 8th MaRisk amendment is imminent – a seamless transition (available in German only)
When an article is about the Minimum Requirements for Risk Management (MaRisk), we always know that it will be of great interest to you. We were therefore not surprised to find that our article (available in German only) on the draft of the 8th MaRisk amendment, which has been officially available for consultation since February 15, 2024, has been clicked on the most.
The background: At the end of January, the “Interest rate risk in the banking book” expert committee of the German banking supervisory authority discussed the draft of the 8th MaRisk amendment for the first time. The Minimum Requirements for Risk Management (MaRisk) are the main set of rules for qualitative banking supervision. Based on section 25a of the German Banking Act (KWG), they provide a flexible and practical framework for the organization of risk management in banks. Find out more here (available in German only).
II) What Generation Z professionals really expect from their employer!
How can companies ensure that they remain attractive to young talent as the world of work evolves? Roughly seven million – that is the number of workers that the German labor market will be short of by 2035 according to current forecasts.
Due to the increasing shortage of skilled workers and the resulting increased competitive pressure in the war for talent, companies have to put a much stronger focus on their own employer brand and the needs of their (future) employees. The attractiveness of employers is consistently put to the test. In this article, our authors discuss how the new generation should be contextualized and whether its demands really differ that much from those of previous generations.
III) Current challenges and strategies in dealing with non-performing loans (available in German only)
Just recently, in November, our third-placed article was published (available in German only), focusing on the challenges and strategies for dealing with non-performing loans. This is an important topic, as problem loan management is increasingly becoming one of the top priorities for many institutions. High NPL banks in particular are currently under supervisory scrutiny and face significant challenges due to specific regulatory requirements. Another major issue is the general shortage of skilled staff and the potential lack of specialized knowledge when it comes to dealing with problem loans.
Click here (available in German only) to learn more about these issues, the regulatory requirements of MaRisk, the importance of the NPL ratio, and the relevance of early risk identification and support for intensive and problem loan management.
Outlook for 2025
As you can see, the banking year 2024 once again offered a wide variety of topics, and in this article, we can only touch on the most-read articles to give you a quick overview. We hope that we have nevertheless been able to provide you with an informative look back. Now, we are taking a break from editorial work until mid-January.
We wish you a wonderful Christmas with your loved ones and look forward to inspiring you again in the coming year with captivating articles and interviews. Until then, we wish you happy holidays and the best of health in the coming year!
