• Regulation continues to increase in both complexity and stringency across the globe: new rules for capital, liquidity, and funding; surcharges for financial institutions deemed systemically important; and a raft of consumer-protection initiatives.
• Collectively, the new regulation could have dramatic consequences, including a significant negative impact on ROE.
• Technological advances are empowering both nonbank attackers, which have gained share in traditional banking domains by offering viable alternatives, and consumers, who have never found it easier to switch banks.
• Macroeconomic volatility continues to create uncertainty in the business. Particularly in developed economies, the pace of deleveraging seems to be up, slowing demand for loans.

Cyclical change could, of course, eventually weaken—or reverse—today’s macroeconomic headwinds, but banks can’t afford to wait. Senior banking executives should focus on the operational and business-culture forces they can change directly, by throwing their weight behind the following goals:

• Accelerate the economic transformation of the business by improving capital efficiency, finding new pockets of growth, and embracing industrial-style efficiency to cut costs sustainably.
• Reinvent the business model to deal with new realities in customer behavior, innovative attackers, and changing global growth patterns.
• Embrace cultural change and enhance value creation. Rightly or wrongly, the industry’s reputation has suffered in the last several years. To reinforce new approaches to the creation of value, banks must examine their organizational culture across four dimensions: balancing the interests of shareholders and the broader society, creating value for customers, ensuring that internal processes are sound, and influencing employee mind-sets.