RISK
– despite feeling vulnerable to global banking shocks. The report
does, however, show some rising concern about the prospects for
China as its economy slows and its banks face growing pressures.
‘South Africa’s banking sector has held up well in the face of
the global financial crisis of 2008,’ says Tom Winterboer, Financial
Services Leader, PwC Southern Africa and Africa. ‘This is largely due
to tight regulation, good governance and being well-capitalised.’
Johannes Grosskopf, Banking and Capital Markets Leader, PwC
Southern Africa, maintains that while banks in the rest of the
world cite the shortage of liquidity and the availability of capital
as their prime concerns, South Africa’s banking industry faces
different concerns.
The survey reveals that one of the top concerns facing South
Africa’s banking industry is the sector’s growing dependence on
technology (ranked at number three). This is not surprising, given
the rise of electronic and online banking channels, coupled with
banks replacing legacy systems. The industry is trying to use
technology to become more efficient, but this has to be balanced
against their concerns about fraud and the huge costs involved in
fighting this crime, says Grosskopf. ‘Dependence on technology in
the banking industry is huge, with banks having to invest significant amounts in implementing new systems to defend themselves
against fraudulent activity. There has also been a sharp increase in
awareness around the potential dangers of cyber crime and hacking,
and the huge financial and reputational damage such economic
crime can cause,’ he says.
The risks of fraud and criminality are positioned in the fourth
and fifth place respectively in South Africa, compared to 27th
and 24th globally. ‘A difficult economic climate usually leads to
higher incidents of fraud. Criminals are becoming increasingly
sophisticated, particularly in the electronic world at a time when
more financial business is going digital,’ says Grosskopf. PwC’s
Forensic Service Practice carried out research in December last
year which shows that a significant percentage of companies
(60%) were victims of one or more instances of fraud in the last 12
months. The financial services sector is particularly vulnerable to
economic crime, says Grosskopf.
The South African response to liquidity risk is significantly
more positive than the survey’s global average, perhaps indicating
the sector’s relative distance from the Eurozone debt crisis, says
Grosskopf. It is of much less concern here, placed at number 17 on
the index, compared to being one of the top concerns ranked by
respondents overseas.
Worldwide, regulatory oversight continues to be one of the
top concerns facing the sector. The risks include higher costs,
management distraction, constraints on profitability and the capacity to lend. Grosskopf says that the most significant change to take
place in the South African banking industry will be the introduction
of Basel III, which is expected to have an effect on the trading book
and funding models of banks. In addition to Basel III, banks will
have to come to terms with the provisions of the new Companies
Act, compliance with International Financial Reporting Standards,
and the proposed Protection of Personal Information Bill. ‘In
response, we can expect to see a significant increase in resources,
Banking executives
in emerging markets
have a more positive
outlook on the
financial services
sector than those
in industrialised
countries.
BANKING BANANA SKINS 2012
SOUTH AFRICAN PERSPECTIVE
1 Macro-economic risk (1)
2 Credit risk (2)
3 High dependence on technology (18)
4 Criminality (24)
5 Fraud (27)
6 Business continuation (12)
7 Pricing of risk (11)
8 Regulation (6)
9 Human Resources (28)
10 Political interference (5)
(Global ranking in brackets)
GLOBAL PERSPECTIVE
1 Macro-economic risk (4)
2 Credit risk (2)
3 Liquidity (5)
4 Capital availability (6)
5 Political interference (1)
6 Regulation (3)
7 Profitability (-)
8 Derivatives (7)
9 Corporate governance (12)
10 Quality of risk management (8)
(Previous ranking in brackets)
Continued »
Edition 1
SA BANKER
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