KPMG: Finance shake-up could mean end of universal banking

 
Tim Wallace
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THE ENTIRE concept of universal banking could be thrown out as a result of public pressure for transparency and clarity in the sector, KPMG warns today.

Investors must also learn to cope with the new environment, the auditor said in a report. It argued banks are unlikely to regain the level of profits seen before the crisis – in part due to regulatory pressures piling costs on the sector.

The only way to restore public trust in banking is to improve transparency, said KPMG’s Bill Michael.

“The information provided on remuneration is opaque and inconsistent, making it almost impossible to determine complete remuneration packages,” he said. “Banks must encourage greater transparency in accounting and reporting practices to help restore public and investor confidence.”

But he warned that “big global banks are incredibly complex and opaque – the need and demand for greater transparency will intensify pressure on the sustainability of the universal banking model”.

The report also focused on the intense pressure on Eurozone banks, predicting increased regulatory involvement as impairments could increase in the poor economic climate.

Tougher capital requirements also mean KPMG does not expect a recovery in dividends in the foreseeable future, meaning investors may have to lower their expectations permanently.