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Is Sustainable Global Banking Possible?

Since the financial crisis, banks have worked to restructure revenue strategie

The global financial crisis of 2008 changed the banking industry in many ways: not just how it was perceived by the public, but how it operated and generated revenues. It ushered in a new age of burdensome and expensive-to implement regulations that made many of the old profit models practically impossible to maintain.

According to McKinsey Quarterly, even though 2010 and 2011's first half have delivered higher profit performance for banks, they still do not cover "their cost of equity." This profit disparity will only intensify as the new rules take effect, so banks will need to move quickly to scale back operating costs while drawing new investments and contributing to the economic recovery, the source says.

One of the biggest challenges, McKinsey Quarterly reports, is that operational costs have increased drastically, due mainly to the rules that mandate banks "hold more capital and liquidity to ensure that the industry better withstands future shocks," as well as "scarcity of capital and liquidity, changing consumer behavior as a growing number of customers move to mobile and online channels, and diverging regional growth paths."

An example of a company that is pumping up its product lines and offerings is J.P. Morgan, which recently announced it would expand its sub-custody arm by increasing direct custody and clearing business in the Russian and Brazilian markets.  

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