Cost Efficiency Survey 2012: Financial industry on the brink of radical restructuring
Zürich (ots)
Banks and insurance companies are taking drastic measures to improve cost efficiency. According to the Cost Efficiency Survey carried out by the professional services firm Ernst & Young, financial institutions in Switzerland intend to cut costs considerably, with distribution channels also affected. Private banks are particularly hard hit by the upheaval.
ZURICH, 31 MAY 2012 - Cost efficiency is a growing concern for companies operating in the financial sector in light of the ongoing tough market environment. 90 per cent of banks and 75 per cent of insurance companies have taken cost-cutting measures within the last two years. The survey, which was carried out among Switzerland's leading financial institutions for the first time, reveals that the restructuring process in the financial sector continues. Half of companies want to reduce costs by 5 per cent to 10 per cent, while 40 per cent are aiming for a reduction of between 10 per cent and 20 per cent. 4 per cent of those polled are hoping to cut their costs by more than 20 per cent. "These figures are a clear signal that we are on the brink of further transformation in the financial sector. A temporary economic recovery would not be enough to stop this process. The industry is undergoing radical change," says Bernhard Böttinger, Performance Improvement Leader at Ernst & Young.
The insurance companies surveyed cited fiercer competition for new customers and growing pressure on prices as the key challenges, both of which are partly attributable to the fact that consumers are able to compare providers more easily. Banks pinpointed the enormous cost of implementing new regulatory requirements, more rapid client turnover and the challenge of offering customers attractive products and services. The private bank business model faces particularly intense pressure. "Revenue is falling because clients are withdrawing their assets or turning to products with lower returns. At the same time, new regulations require significant investment," says Bernhard Böttinger.
Paving the way for future growth Banks and insurance companies agree that short-term, gradual savings measures are not sufficient to secure sustainable improvements. "If they take that path, companies risk unsettling their employees, neglecting their customers and damaging the quality of their services. To avoid these negative effects, they need to redirect savings into investment in new products, services and markets," says Marcel Stalder, Advisory Financial Services Leader Switzerland. "By achieving cost efficiency, companies can lay the foundations for future growth and secure their market differentiation."
New business models needed To get their cost base down even further, the financial institutions questioned stated that fundamental changes needed to be made to business models and organizational structures. Examples of potential cost-cutting approaches include efforts to optimize processes and streamline the IT infrastructure. Banks highlighted service offerings, the sales organization and personnel expenses as further areas for possible savings. Insurance companies were also keen to eliminate redundant organizational overlap and outsourcing. According to companies, the support of top management, clear targets and a thorough understanding of the industry are key factors to ensure the success of these saving objectives.
About the study The Cost Efficiency Survey is based on a representative survey carried out by Ernst & Young in February 2012. Decision-makers at 23 large banks and 10 insurance companies in Switzerland were polled in an online questionnaire - the first time the study has been carried out in this form. The survey can be downloaded from our website www.ey.com/ch.
Contact:
Simone Isermann
Ernst & Young
Media Relations
Phone: +41 (0) 58 286 35 97
simone.isermann@ch.ey.com