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Regulation, political interference top risks for global banking sector

Regulation and political interference are seen as top risks for the global banking sector, according to the latest Banking Banana Skins survey released on Tuesday.

SINGAPORE: Regulation and political interference are seen as top risks for the global banking sector, according to the latest Banking Banana Skins survey released on Tuesday.

The study is conducted biennially by the Centre for the Study of Financial Innovation, in association with consulting firm PwC.

It showed that banks operating in Europe and America, in particular, are concerned that the recent wave of regulations following the global financial crisis is excessive and could dampen economic recovery.

Other concerns included the macroeconomic environment and technology risks.

More than 650 bankers, regulators and observers across 59 countries -- including Singapore -- were surveyed.

The study also showed that top risks reflected in previous surveys about capital availability, liquidity and credit risk in the banking system have begun to ease.

Banks in Singapore also voiced concerns over the volume of new regulations and restructuring, and said they expect to go through a challenging period of structural change.

Karen Loon, PwC’s Singapore banking leader, said: “The banks are concerned with having to look at some of these rules, and also get their business models and organisations ready to deal with growth.

"Banks still continue to want to grow and grow their businesses, they also need to manage cost bases and they're looking at that.

“But clearly, the regulations do come with some cost, and they're looking at how they can best position themselves -- whether it's for acquisitions, restructuring, divestments -- to allow them to continue to grow and generate the right benefits for all their stakeholders."

The three local banks are scheduled to report first quarter 2014 earnings on Wednesday.

OCBC and United Overseas Bank are expected to show single-digit year-on-year growth, while DBS' core earnings are expected to weaken slightly.

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