The banking system is currently in need of urgent reforms after the crisis. The reforms in banking regulation are largely caused by the need for market discipline of banking organizations. It is necessary outline the main points that will change the banking system unprecedentedly.
One of the foremost changes is leveled up costs within the banking system in order to meet new regulations. Many banks will have no chance to cross subsidise operations and, so, they will hold up a firewall between investment and retail banking operations. This all will lead them to increase the costs. Furthermore, the increasing costs of the banking altering systems will have their impact on the 10% maintenance by banks as a profit reserve. The latter in its turn will influence the profitability. In case the banks decide to keep their margins, there have to be efficiency savings made.
The banks can actually make those saving work via forming mutually beneficial relationships with outsourcing companies. The reason for such strategic partnership is reducing the costs for customer service and processing of payments which outsourcing companies are able to do. It is estimated that the outsourcers can cut the costs down to 20 percent. The banks usually use the opportunity to outsource their business partially to save their savings at least somehow. The World Retail Banking Report states that about 77% of retail banks are up to such a way out within the existing post crisis banking reformation.
Needless to say the banking debate is uncovering fiercely as per the necessity to make banks more competitive. The banking system is altering its stable traditions that emerged hundred years ago and today the course is headed towards market-like entity. The new banks are encouraged to emerge in the chain of British banks in order to offer a customer a variety of choice. However, 5 year old banks failed to enter the system because of the huge dominance of the existing banks. Nevertheless, there are those customers who seek for new opportunities and are willing to turn in their investments to the new banks. Unfortunately, the attempts to change banks are limited to 3% of adults; the rest chose to stick to the old good decision and their family banks. This pushes the banking system to be regulated differently in order to create a diverse banking environment for the customers. Moreover, if the new regulations implement separation of investment and retail activities, the new banks and the ones launched five years ago will most likely survive.
It is important not to forget the actual mean of attracting the customers – the quality standards of service. Along with competitive market the quality services will give a new touch to the banking regulations and will free up the market. Just like the mobile companies launched MAC and PAC codes and created a competitive market, focusing on quality service, this will work for the banking industry, as well.
The superior quality service will drag much effort of the banks to reorganize their workforces and customer service. For example, the young people largely agree they would communicate with their bank through social networks. This and other regulations, like switching the accounts in seven days and not within unlimited time, will make the banks work on their internal staff reorganization to satisfy the diverse and modern demands of the customers.