1、Hong Kong Banking Outlook 2020 Contents Overview: Change is the only constant in 2020 Virtual banks: Competition heats up for customers and deposits Cost and operational efficiency: Invest more to save more in 2020 Suptech: Regulators to leverage suptech in 2020 to gain more granular and real-time i
2、nsights into banks business Greater Bay Area: Cross-boundary wealth management and mortgage lending the next steps in GBA development for banks Wealth management: Wealth in 2020: Digital, China, Family Offices Mainland Chinese banks in Hong Kong: Beefing up digital capabilities and attracting mainla
3、nd Chinese corporates to Hong Kong the keys to success Risk and regulation: Three emerging risk issues for banks in Hong Kong Cybersecurity: As banking and technology converge, bolstering cyber resilience is the key to success 5 6 7 8 9 10 11 12 13 2019 KPMG, a Hong Kong partnership and a member fir
4、m of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Conduct and Culture: More misconduct enforcement cases on the horizon, with culture a major contributor Credit risk: New credit risk models se
5、t to emerge amid uncertain macroeconomic environment Sustainability: Time for a step change: regulators and industry to increase their focus on sustainable banking Customer intimacy: Those that can leverage data to drive personalised outcomes will earn the right to survive Financial crime compliance
6、: 2020 will see new technology-driven, intelligence-led approaches to combat financial crime LIBOR: Greater risks and costs for banks that do not have a LIBOR transition programme Bancassurance: Stronger digital partnerships between banks and insurers will create win-win scenarios for all, including
7、 customers About KPMG Contact us 14 15 16 17 18 19 20 21 22 2019 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 2019 KPMG, a Hong Kong partners
8、hip and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Change is the only constant in 2020 Welcome to our outlook for 2020, where we forecast the key developments and trends tha
9、t will impact and shape Hong Kongs banking industry. Reflecting first on 2019, we expect to see muted financial results across Hong Kongs banking industry this year, with ongoing market uncertainty around the US-China trade tensions and the low interest rate environment being the key drivers. The re
10、cent events and business disruption in Hong Kong has also impacted retail investor confidence. In our annual Hong Kong Banking Report1 launched in June this year which summarised the 2018 financial performance of Hong Kongs banks we correctly predicted that we would see interest rate cuts in the sec
11、ond half of 2019. Coupled with muted loan growth in the first half of the year, this pressure on margins will mean revenue growth will continue to be a challenge for banks in 2020. Despite a challenging year, we continue to see opportunities for investment and growth for banks in 2020. For example,
12、mainland China continues to open up its financial services sector to foreign investment, and a number of international banks in Hong Kong are looking to capitalise on this opportunity to take a majority or wholly-owned stake in their mainland Chinese securities and asset management businesses. The C
13、entral Governments recent announcement to explore the establishment of a cross-boundary wealth management scheme in the Greater Bay Area is another development that has great potential for banks in Hong Kong. With 2020 around the corner, our focus is on what the future of banking looks like. One thi
14、ng is certain: rapid change will be the new constant. In this report, KPMG subject matter experts offer a number of predictions for the industry which also shed light on three broader trends. First, risks continue to change, and so does the nature of those risks. In particular, we are seeing a great
15、er focus on non-financial risks, ranging from cyber and climate-related risks to conduct and culture. Second, we continue to see a fast evolving and increasingly competitive landscape in Hong Kong. The launch of the citys first virtual banks in the coming months will certainly add new players into t
16、he mix, but it also forms part of a broader trend where the lines are blurring between sectors. Many technology and telecom companies are seeking to expand into financial services in order to build and strengthen customer relationships across all areas of their daily lives. At the same time, the way
17、 in which people use financial services is changing, and so too are banks operating models. Lastly, we expect digital transformation to become an increasingly important business imperative to enable banks to improve cost and operational efficiency, capitalise on new opportunities and win new custome
18、rs. Data underpins each of these key trends, and will be a crucial area of differentiation among banks in 2020. We believe the banks that will be successful in the long run will be the ones that have a comprehensive data strategy and that can leverage their data to increase revenue, and enhance regu
19、latory compliance and operational efficiency. Overview Paul McSheaffrey Partner, Head of Banking the twin will be unhindered by the legacy processes that might otherwise delay/strangle the customer intimacy programme. This is an area where the virtual banks that are launching in Hong Kong have an ed
20、ge over their traditional banking peers. What the virtual banks dont have, however, is the treasure trove of historic data locked up in banks current systems. A digital twin backed by a major bank is a distinct possibility in 2020. 2020 may also see an increased focus on customer intimacy in the cor
21、porate market. There are undoubted opportunities for banks to use data to serve their corporate customers better. For example, leading banks could use their knowledge of one corporate customer and link them with another, harnessing the information they have on the expressed preferences of both to dr
22、ive a friction-free transaction. In an age where loyalty to financial services providers is declining if indeed it ever existed beyond the gravitational pull of inertia banks that are able to leverage the data they are sitting on to predict behaviour and create personalised experiences for their cus
23、tomers personal and corporate will give themselves a chance of long-term survival. Getting serious about achieving that in 2020 should be on the agenda of every bank that wants to still be in business in 2030. Neil Macdonald Head of Wealth & Asset Management Centre of Excellence KPMG China By bringi
24、ng past and present together, leveraging data analytics at scale, leading banks can predict the products and services customers will benefit most from. Banks can then encourage customers, using the skills of behavioural economists, to take a financial decision in a fiscally responsible way. 2019 KPM
25、G, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 17Hong Kong Banking Outlook 2020 Financial crime compliance 2020 will see new technology-driven, in
26、telligence-led approaches to combat financial crime Hong Kongs regulators and financial services industry will be pleased with the Financial Action Task Forces (FATF) recently issued Mutual Evaluation, which notes that the city has made great strides in maintaining a strong legal and institutional f
27、ramework for combating money laundering and terrorist financing. However, with a recent United Nations estimate indicating that less than 1 percent of global illicit financial flows are currently seized and frozen, it is clear that underlying problems with combating financial crime remain. We believ
28、e the issue lies in the fact that many banks tend to focus more on technical compliance to avoid failures rather than on directly combating financial crime. In 2020, we therefore expect to see continued debate around the effectiveness of the current approach to financial crime compliance. The Hong K
29、ong Monetary Authority (HKMA) recognises this, and in 2020 will seek to adopt approaches that were not part of the Mutual Evaluation assessment to improve financial crime compliance. This starts with looking at financial crime holistically, through a lens that covers not just money laundering, but a
30、lso fraud, bribery and corruption, and conduct. The HKMA will also increase its focus on technology in the year ahead, particularly on regtech for the banking industry, and on supervisory technology or suptech to facilitate their supervision through a more data-driven, predictive model. The regulato
31、r has also signalled its intent to hold a series of AML/CFT RegTech Forums to encourage dialogue and collaboration between the banking industry and technology companies to address opportunities and challenges that regtech can bring to anti-money laundering and counter-financing of terrorism work. Fr
32、om an industry perspective, leading banks will adopt new and innovative cost- effective ways to enhance financial crime compliance in 2020. These approaches could include the integration of financial crime risk into compliance functions, leveraging technology and data analytics solutions, and greate
33、r industry-wide information and intelligence sharing. As both the industry and regulators continue to embrace technology in the year ahead, we expect to see reduced compliance costs, increased effectiveness of regulatory supervision and enhanced financial crime compliance. We could also see leading
34、banks explore the use of managed services to streamline and improve the cost-effectiveness of their financial crime compliance programmes. Rani Kamaruddin Partner, Head of AML & Sanctions, Hong Kong KPMG China Kyran McCarthy Partner, Asia-Pacific Head of AML & Sanctions Services KPMG China It is cle
35、ar that underlying problems with combating financial crime remain. We believe the issue lies in the fact that many banks tend to focus more on technical compliance to avoid failures rather than on directly combating financial crime. 2019 KPMG, a Hong Kong partnership and a member firm of the KPMG ne
36、twork of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 18Hong Kong Banking Outlook 2020 LIBOR Greater risks and costs for banks that do not have a LIBOR transition programme With LIBOR set to be phased out by the
37、end of 2021, many banks in Hong Kong are still not yet prepared. Banks are not currently addressing LIBOR transition in a meaningful way and will therefore need to roll out an accelerated programme early in 2020 or run the risk of not being ready. Banks that do not use the year ahead to develop a co
38、mprehensive transition strategy to identify and remediate their LIBOR-linked contracts, models, systems and processes, will face higher costs, and will be exposed to greater operational and reputational risk. Programmes will need to include all relevant stakeholders within the bank, both horizontall
39、y and vertically, as well as an appointed programme leader to drive and monitor the transition effort. Programmes should also be contemplated to incorporate ongoing iterations of market and regulatory developments over several years, as opposed to short-term reactivity which can lead to costly worka
40、rounds and negative value transfer for clients. Given the sheer volume of work and the fast-compressing timeline, many banks will seek to leverage technology and artificial intelligence-enabled solutions as part of their transition programme. The year ahead will feel hard and expensive for banks as
41、they start to uncover LIBOR buried in many of their products and processes. We therefore believe that proceeding with the transition without the aid of technology is not an option anymore. Some banks will remember the size and scale of MiFID II that proved challenging to implement the LIBOR transiti
42、on undoubtedly exceeds that exercise. Banks that are proactive and innovative will start offering more risk-free rate-based products to clients and issuing contracts that do not reference LIBOR. There will be a competitive advantage for banks that make the first move to create new product structures
43、 that can enable them to generate revenue using the new alternative reference rates. Conduct risk will also be a key consideration for banks as they look to develop these new products. In the year ahead, we will also see a momentum shift on the part of those the banks are servicing. As the industry
44、and clients get themselves up to speed on the risks related to the LIBOR transition, they are likely to start demanding answers and forcing renegotiated terms with their banks. We could therefore see the opening up of litigation risk for banks in 2020. Banks will therefore want to be ahead of the cu
45、rve when it comes to client outreach. The market leaders will be the ones that are more advanced in their transition programme, and that implement an effective communication plan that facilitates the identification, development and execution of key communication and training activities in each of th
46、e main stakeholder groups. This will mobilise the organisation and minimise the impact on customers, along with operational, reputational and conduct risks. Marie Gervacio Partner, Financial Risk Management KPMG China Banks that do not use the year ahead to develop a comprehensive transition strateg
47、y to identify and remediate their LIBOR-linked contracts, models, systems and processes, will face higher costs, and will be exposed to greater operational and reputational risk. 2019 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG
48、 International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 19Hong Kong Banking Outlook 2020 Bancassurance Stronger digital partnerships between banks and insurers will create win-win scenarios for all, including customers With customers increasingly favouring digital cha
49、nnels for managing their financial affairs, and banks reducing the number of their physical branches to manage costs, insurers in Hong Kong are starting to rethink how they generate optimal value from their bancassurance deals. Similarly, many banks are increasingly considering how to maximise the value of their bancassurance relationships as a result of decreasing customer footfall to physical branches leading to fewer opportunities for bank relationship managers to promote and sell insurance products. Banks undoubt
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