Regulatory forces continue to shape

Regulatory forces continue to shape the competitive
dynamics of the industry. Compliance and capital pressures
are pushing large banks to rethink the businesses they want
to be in and the customers they serve.6
Jay Langan, partner,
Deloitte & Touche LLP, puts it this way: “Large banks are
specializing in their core competencies and geographies
where they believe the return on capital is justified.”
Additionally, regulatory pressure is trickling down to
smaller banks. High compliance and governance costs are
consuming a sizable share of their resources, hurting their
competitive position.7
On the international stage, banks are re-examining their
business profile against Basel III capital requirements and
other strategic priorities. European banks are shoring up their
capital levels amid prospects of stricter regulatory oversight.
Consequently, many banks – especially the large universal
ones – are trimming domestic and international assets that
are riskier, noncore, or yielding low returns on capital.
Amidst this regulatory overhaul, many nonbanks are taking
advantage of limited regulatory oversight and banks’ capital
pressures. They are increasingly expanding beyond the realms
of technology and infrastructure-centric payment platforms
to traditional banking products, such as business lending.8
These pressures in commercial lending, combined with low
loan demand, are leading some banks to ease underwriting
standards and loan covenants to remain competitive.9