In the new paradigm of lower revenues, increased costs and a heavy regulatory burden, banks would be well advised to seek out more opportunities for collaboration, rather than competition, to gain efficiencies.
Carney noted that since the financial crisis, bank revenue is downward, or flat at best, and "there's no relief on expense side, with increased costs to meet increased regulatory requirements."
"Banks are living in world where asset balances have been reduced, plus there's a credit risk appetite that’s not fully recovered from the shock [of the crisis]," he added.
Carney said one solution for banks to thrive in these times is to explore cooperative solutions between institutions, even though it may be a foreign idea in the industry.
"The flood waters have started to recede post crisis, and how changed is the landscape?" he asked. "Should we go back to beating the lights out of each other as we used to? Or should we change our behavior and the way we think about things to survive and thrive in the new reality?"
Both Carney and O'Connor said the latter is the preferable way forward. While cooperation between competitors isn't always appropriate, it is something banks should be more open to exploring, both argued. In fact, Citi and State Street did just that.
A few years ago, State Street was on the market for a new strategic partner for online banking and select service delivery functions, O'Connor noted. The bank was looking to replace it's old system to reduce expenses, replace outdated platforms and "satisfy pent up customer demand" for new online banking capabilities. The bank was also looking to streamline and standardize business processes, she said.
Bryan Yurcan is associate editor for Bank Systems and Technology. He has worked in various editorial capacities for newspapers and magazines for the past 8 years. After beginning his career as a municipal and courts reporter for daily newspapers in upstate New York, Bryan has ... View Full Bio