No Bank is an Island- get global before globalisation get you

Today’s performance woes, combined with the quest for sustainable growth, are pushing
banks beyond geographic and product centric boundaries.

Globalization is the single greatest opportunity – and yet also the greatest threat – facing the industry today. Over 40 percent of 644 bankers around the world cite expansion to global markets as their single biggest growth opportunity. Shifts in customer trends and new collaboration strategies will spell new prospects, particularly for those with a clear strategy to act promptly and decisively. However, this path is not without its challenges. With global interdependencies on the rise, many banks are struggling to deal with a credit crisis gone global and with aggressive new competitors.

In the IBM survey (url attached), conducted in cooperation with Economist
Intelligence Unit, the effects of globalization on the retail banking industry is examined.

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The Ernst & Young Financial Services Index: 1st Quarter 2008

The Ernst & Young Financial Services Index (E&Y FSI) tumbled 14 index points – from 98 in the last quarter of 2007, to 84 in 08Q11,2. This is the first time in five years (since 03Q4) that the index is below its long term average of 88.

Since the previous survey, the following developments most likely contributed to reduced financial sector confidence:

• The prime overdraft rate was increased for an eighth time in December 2007. Retail banks now face a further rise in nonperforming

loans and declining demand for new loans from individuals (and some businesses).

• The implosion of the sub-prime mortgage market in the USA led to stress in financial markets, which in turn led to a major

decline in credit and withdrawal of some financial instruments. As a result, financial market uncertainty and volatility surged
world wide. These developments affected South African financial institutions adversely in several ways:
- Investment banking activity plummeted3.
- Investment managers saw a big drop in net inflows, probably as investors switched from equity investments to safer
havens, such as bank deposits and contractual investments4.
- Falling net inflows and fluctuations in the value of funds under management dampened income growth of investment
managers. This development hurt small managers disproportionately more than large managers.
- Life insurers experienced a big fall in investment income growth.

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