Wholesale and Investment Banking: State of the Nation

As we look towards 2010, we note it has been a remarkable two years for the Wholesale and Investment Banking Industry. Four quarters of severe write-downs, followed by two quarters of significant failures, then by two quarters of strong results have naturally left many firms with difficult decisions on restructuring and strategy, with much more limited visibility on future context than usual.  

Many believe that the industry is far from out of the woods. The trading conditions that have supported capital regeneration are weakening, margin re-pricing is reverting and there is massive reliance on public liquidity. Most regulatory change is still to come with a very high degree of uncertainty around outcome. Challenging times lie ahead.  

Oliver Wyman's three-part series on this sector, which has been combined into a full-length report, explores our view of current and future industry paradigms and solutions to key strategic, operational, and resource management challenges facing boards and management teams.  The contents of our report are described below:

Part 1: Industry context
An overview of current industry context,  public policy and regulatory dynamics, and changes in market positioning of various types of participants.

Part 2: Strategy and transmission
A discussion of how to achieve 'effective transmission' of shareholder interests and Board objectives into a firm’s strategy setting and operations - including roles,  governance, risk appetite setting, metrics, and compensation.  Additionally, a view of how management teams can assess strategic options in a time of significant uncertainty.

Part 3: Financial resources and infrastructure
An assessment of how capital and balance sheet management need to change in a greatly resource-constrained environment. Additionally, a description of some of the universal infrastructure challenges facing firms in the sector post-crisis, and an outline of what we see as best practices in terms of investment prioritization, governance and service delivery.