INTRODUCTION Contributed by: Johannes de Jong, Osborne Clarke N.V.
Global Considerations and Geopolitical Tensions The ongoing geopolitical tensions, resulting from ongoing conflicts in Eastern Europe, the Middle East and trade disputes between major economies, have created a complex and uncer - tain environment for the banking industry. These conflicts have led to increased economic uncer - tainty, disrupted supply chains, and heightened geopolitical risks. Banks operating in or with exposure to these regions have faced signifi - cant challenges, including increased credit risk, operational disruptions, and reputational dam - age. Moreover, the broader geopolitical instabil - ity has contributed to market volatility, impacting investor sentiment and the overall health of the global financial system. Looking ahead to 2025, banks should anticipate that these geopolitical tensions may persist or even escalate. To navi - gate this uncertain environment, banks need to be proactively addressing these challenges to improve their resilience and position themselves in an increasingly uncertain geopolitical environ - ment. Technological Advancements and Changing Customer Expectations The rapid pace of technological advancements continues to transform the banking industry. Artificial intelligence (AI), machine learning, and big data analytics are being used to improve customer experiences, enhance risk manage - ment, and optimise operations. Banks that can effectively leverage these technologies will have a competitive advantage. In the UK and the EU, competition within the banking sector is also intensifying. The rise of fintech firms and the increasing popularity of digital banking ser - vices are challenging traditional banking models. Some banks might double down on existing cli - ent relationship models, while others must adapt to this changing competitive landscape by offer -
ing innovative products and services, improving customer experience, and leveraging technol - ogy to their advantage. Customer expectations are evolving rapidly, driven by digitalisation and increased competition from non-traditional financial services providers. Consultancy firms around the globe report extensively about what banks must do to address these challenges, but no hard and fast rule seems to apply for all banks next year. Conclusion In 2025, the global banking industry will face many challenges and opportunities. The full implementation of Basel III standards will require banks to carefully manage their capital and liquidity to meet new regulatory requirements. Changes in leverage ratio requirements will also necessitate strategic adjustments to maintain financial stability, particularly as some regions tighten these standards while others offer relief. Technological advancements like AI, blockchain, and open banking will push banks to innovate and improve their services, creating a dynamic and competitive environment. The rise of sta - blecoins, bolstered by new EU regulations, will further disrupt traditional payment methods, compelling banks to adapt or risk falling behind. With 83.5 billion USDT stablecoins in circulation in 2024, this trend is expected to grow, offering new opportunities for fintechs and posing chal - lenges for traditional banks. The growing importance of ESG factors will encourage banks to integrate sustainability into their operations, enhancing their reputation and attracting investors. Regulatory pressures, investor demands, and societal expectations will drive this integration, particularly in the EU with the introduction of CRR3 and CRD6. However, a lack of consensus on ESG measures remains globally, with emerging markets and regions like
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