2022-02-09-奥纬咨询-Thriving_In_The_Land_Of_Opportunity_24页_2mb

Analysis and Summary of "Thriving in the Land of Opportunity"

Context

Foreign Banking Organizations (FBOs) are a diverse group of banks operating in the U.S., holding approximately 20% of total U.S. banking assets. They play a critical role in connecting global markets, facilitating monetary policy, and driving capital inflows but face below-hurdle returns, regulatory fines, and structural disadvantages due to limited scale and high compliance costs. Despite these challenges, the U.S. market remains attractive. Oliver Wyman's report outlines four key priorities for FBO executives for 2022 to maximize returns while adapting to a changing regulatory environment.

Four Priorities for FBO Executives

1. Reaffirm Deliberate Post-COVID-19 Participation Choices

FBOs must re-evaluate their U.S. involvement to align with strategic objectives. Activities should be categorized as Non-negotiable (essential for Group strategy), Group synergistic (beneficial for broader franchise), or Market-specific (standalone opportunities). Post-COVID, shifts like digital acceleration and geopolitical tensions necessitate slimming down operations, as seen in recent exits and footprint reductions by firms like BBVA and Credit Suisse. Executives should assess whether current activities justify investment given evolving market conditions.

2. Fully Align Performance Incentives with FBO Objectives

Current performance metrics often rely on Group-wide measures like booked revenue, which may not capture local value or constraints. To improve accuracy, FBOs should revise incentives using methodologies such as Halo RoE, Franchise Sales Credits, or adjusted transfer pricing, reflecting franchise-specific earnings and local binding constraints like regulatory capital buffers. This can enhance accountability and better align local actions with Group priorities, especially as U.S. operations become more integral to global banking franchises.

3. Reduce Drag from Structural Financial and Operational Inefficiencies

FBOs need to address systemic inefficiencies in structure, funding, and operations. Key areas include optimizing entity structures (e.g., Insured Depository Institutions) to avoid trapped capital, refining funding models to minimize costs, and updating operating models for efficiency gains through digitization and talent export. This involves deconstructing financial planning to incorporate local considerations, such as stress testing under regulatory frameworks, to ensure viable participation strategies and avoid suboptimal balance sheet management.

4. Adjust to and Prepare for Shifting US Regulatory Winds

FBOs face heightened supervisory scrutiny due to ongoing regulatory activities, including potential reforms in liquidity requirements, climate-related risks, anti-financial crime enforcement, and data management. Executives should proactively engage with emerging areas like governance arrangements, booking models, and AFC compliance to demonstrate preparedness. They can also leverage U.S. expertise in resolution planning and scenario testing for global benefit, exporting lessons learned to enhance the Group's overall risk management and operational resilience.

Conclusion

Oliver Wyman emphasizes that 2022 is a pivotal year for FBOs, with evolving market dynamics, regulatory pressures, and strategic shifts demanding urgent attention to these priorities. Executives must navigate these challenges to achieve sustainable returns and thrive in the competitive U.S. banking landscape.