It is difficult to form a clear judgment at the moment about the state of economic performance and its impact on the financial services industry. Every month, statistics are scanned for signs of consistent trends; but the picture remains confused. Recovery in one place is offset by further gloom elsewhere – and is itself reversed a month later. Perhaps the "new normal" which everyone is seeking to define will simply be characterized by continuing uncertainty and unpredictability. Financial services firms therefore face a twin challenge. They need to develop new business models for the new, post-crisis environment; but it remains unclear exactly what this environment will look like. At the same time, though, they have to rebuild turnover and profitability, and deal with the increasingly demanding – and sometimes inconsistent – new regulatory measures being imposed on them. A focus on the short-to-medium term is understandable, but it is producing mixed results; efforts to reduce costs and improve capital efficiency are failing to feed through to higher profits because of low interest rates and higher regulatory demands.
The latest issue of Frontiers in Finance reflects a number of aspects of this search for growth in difficult times:
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