Future of finance

E&Y report on the reaction of financial services companies to the downturn.

The unpredictable and uncertain market conditions have led to a dramatic increase in spending on controlling and reducing risk: 80 per cent of the banks surveyed had increased their investment in this area over the past six months, the report says.

Financial services companies are also bolstering their legal, audit and regulatory functions even as they make swingeing cuts in departments such as information technology and supply chain management.

“The end of the recession and a return to profitability is a tough one for any industry to call,” said Tom McGrath, managing partner of Ernst & Young’s Europe, Middle East, India and Africa financial services business.

“But financial services are naturally more cautious – and possibly more realistic – about when the return to profitability might happen.”

According to E&Y’s research, the financial services industry was taken aback by the ferocity and depth of the economic downturn, with 72 per cent of respondents saying they were surprised at the severity and another 70 per cent surprised by the speed of the crisis.