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Top 10 challenges for investment banks in 2015: Forced compensation (Part 3)

Beat Monnerat, Accenture’s Senior Managing Director of Financial Services for Asia Pacific | Dec. 15, 2014
For the seventh consecutive year Accenture outlines ten of the key challenges facing investment banks in the coming year. This is day three of Accenture delineating a challenge a day.

If there is one common denominator across nearly all businesses, it is: how can we pay enough to attract and retain top talent?

Banks feel this pain acutely. Thanks to increased cost pressures, scrutiny regarding bankers’ wages from everybody — from the customer at the ATM to shareholders to regulators — and the emergence of competitors from new industries, banks have it particularly tough.

Staff costs continue to represent approximately 60% of operating expenditure across the investment banking industry, a figure broadly unchanged since the financial crisis, according to Accenture research. At the same time, investment banks are facing increasing competition, not only from other banks but also from the less-regulated industries and the budding technology, touted by many as the “go-to” industry for the best and brightest. This is particularly true for IT departments across the financial institution sector. Technology giants and start-ups are continuing to increase their graduate intake, as the “trendy” industry image, created by a perceived relaxed corporate culture, amplifies the appeal of technology as a career choice.

CIOs have a role to play in helping banks come up with innovative solutions for retaining the best and the brightest. Accenture has long argued that in order to reduce fixed operating costs in a sustainable way, banks must make bold decisions about their operating model and human capital programmes. For example, banks should look to outsource entrenched areas of operational cost in non-core areas, or in parts of the value chain where processes are commoditized and deliver no differentiating value to the business — for example in post-trade processing.

Reducing operating costs allows resources to be re-focused on areas that deliver the most value for the business.


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