Like all private companies, banks can only survive in a stable fashion over time if they are profitable. And, set against the current transformation of the banking industry, ensuring profitability over time calls for a comprehensive, strategic and individualised reflection on the business model.
Margarita Delgado develops this idea of “comprehensive, strategic and individualised”. She perforces refer to some of the findings included by the Single Supervisory Mechanism (SSM) in its recently published thematic review of the determinants of profitability and business models.
Her address focuses on the importance of reflecting on the banking business model as a cornerstone for being able to achieve a sustainable level of profitability over time.
She stresses certain elements central to this reflection, such as detailed knowledge of the reality of the business, a price-setting policy that reflects the risk and cost of each product, a strategy geared to strengthening capital and reducing non-productive assets, sound governance and an individualised and tailor-made strategic approach.
Banks are preparing for the future and the new times ahead, although nobody knows for sure what this will be like. What is clear is that only banks that are proactive and better prepared from the strategic standpoint will be capable of exerting influence over their profitability and sustainability over time.
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© BIS - Bank for International Settlements
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