Finance and Risk Forum

November 2012

Plenary Session

• Where do Finance & Risk professionals currently add value to the business, and

• how might this change in the future?

• The impact of structural change on

banking model

Plenary Session

• Reflection on the conference

• Key challenges going forward

• Your role in these challenges

• Sharing Ideas – how to deal with these challenges

Reflection on Forum

• John Peters – stable / good outlook – China key driver – structural change (industries – regions) – savings culture

• Steven Glenfield – growth logic – point of difference – clear path - risk appetite – technology adoption – Basel III – Tier 1 options

• Peter Russel - Reduced NIM-NII, less in top 15 – Falling ROA (long term)

• Darren Ball - IR – Game Changer – Management – Business Plan

• Geoff Yui - GST anomalies, Monthly payments, surplus focus

• Mark Degotardi - 48% > $4bn, ROA .56% from .70%, NIM 3% fall 10 yrs cost to income 27 > 90% - technology challenge, Risk v Reward -

stand out from crowd – inward focus

Reflection on Forum

• Paul Williams – Treasury – risk appetite, manage liquidity – Financial Risk – Capital – Debt Issuance, profit centre, securitise

• Mark Workman - setting-up treasury, skills – structure – strategy – systems, working with brokers, complex products – FRNs - CDOs

• Sam Garland: Risk: 3 lines of defence (Executive – Risk Function – Internal Audit), Risk-Return Thinking, Understand Risk Appetite, Confident Decision Making

• Rob Kella: Risk Framework – Resilience Framework, change structure – raise risk function / strategy (belief, skills, culture), $ impact

on risk model

• David Tattam: VAR, Quality Quantity Consistency – Capital & Liquidity, leverage-maturity mismatch, capital buffer, Capital Strength – Liquidity Strength, options – CCDS, others?

• Structural change in bank model:

• Savings (Mint.com, Smarty Pig)

• Insurance (Real etc)

• Mortgage Lending (iSelect, Ubank, BBVA)

• Channel – no one dominates – ‘Omni Channel’

• Customer Engagement (PFG, Smart Phones) – Paradox

• Margin Pressure:

• Banks vying for deposits 55% funding mix (more TDs)

• Rate competition – discounting, third party channels, disruptive models

• Lower volumes – more competitors

Key Challenges Going Forward

• Convergence:

• Banks changing branch to store (change in transaction banking),

• Life Cycle and Life Stage Focus

• New stores – ‘Apple style’

• Wealth – Risk – Retirement – Home Purchase (problem: training/compliance)

• Governance:

• Boards still not engaged in strategic thinking

• Over focus on operational – audit issues

• Skills mix often skewed

• Risk appetite – conservative – easily scared by APRA etc

Key Challenges Going Forward

• Basel III:

• More pressure on profits to build capital

• Counter Cycle buffers, working with new Tier I

• Technology Investment:

• Apps, smart phone banking, core banking, payments switch

• Shorter life cycle – higher amortisation

• Productivity:

• Falling volumes – explains most of scale problem

• Tendency to avoid targets – cross sell culture

Key Challenges Going Forward

Back to the Question

• Where do Finance & Risk professionals currently add value to the business, and

• how might this change in the future?

• The impact of structural change on

banking model

Your Role

• What do you think are the three top challenges you face in your role?

Your Role

• How do you contribute to dealing with these now?

Your Role

• What new value can you add to deal with these more innovatively?

Metaphor Thinking Activity

• What motor vehicle describes your business best?

Metaphor Thinking Activity

• What type of restaurant – café describes your business best?

Metaphor Thinking Activity

• What type of airline describes your business best?

Back to the Question

• Where do Finance & Risk professionals currently add value to the business, and

• how might this change in the future?

• Warm thanks to all Delegates!