There is almost universal agreement, given the recent financial crisis, that banking and indeed banking regulation needs to change. However, the other clear message from the financial crisis is that the role banks play is vital to our economic prospects and the need, to use a medical analogy, to keep the patient awake and working, even during surgery. Taking the medical theme further, it is not necessarily advisable to put the patient through every medical procedure at the same time. This concept, known as absorbability by change professionals, looks to assess and control the amount of change to be undertaken within an organisation so that “business as usual” can continue alongside the implementation of the change. So how is banking doing on this absorbability scale?
To assess this, I carried out the following exercise. By setting out the key regulations that will impact UK/European financial services organisations over the next few years, I was able to very quickly fill a page with the names and abbreviations of the major regulatory initiatives that we have mentioned in this bulletin over recent months (e.g. RDR, MiFID 2, Basel III) and also a few new ones (e.g. PRIPS, FATCA). Then I added organisational changes, such as the splitting of the UK regulator the FSA and the anticipated ICB/Vickers proposals, and then the various market, technology and economic challenges. Lastly, I drew out the connections between the items whether they represented new challenges, complexities or indeed solutions. It did not take long for a spider’s web of interrelationships to emerge. Not only did this reaffirm the MPI strategy of concentrating our efforts in these areas, but also that the banking sector must be very near, if not already over, the maximum amount of interlinked change that it can safely absorb.
Before I get accused of going soft on banks, it is worth remembering that having a healthy, self-supporting banking sector is not just an abstract concept, but is essential if the taxpayers who are currently propping up several major banks are to get our money back. So, the suggestion would be to limit additional change and, for example, allow more time for the implementation of new regulatory regimes – it is a time for prioritisation and judgement rather than retribution.
