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Project Blue
diciembre 2012
PLAN
ADAPT
Project Blue framework
Global instability
Regulatory enviorenment
Fiscal pressures
Political and social unrest
Rise and interconnectivity
of the emerging markets (SAAAME)
Economic strength
Trade
FDI
Capital balances
Resource allocation
Population
Demographic change
Population growth
discrepancies
Ageing populations
Changing family structures
Belief structures
Social and behavioral change
Urbanization
Global affluence
Talent
Changing customer
behaviors - Social media
Attitudes to FIs
Technological change
Disruptive technologies
impacting FS
Digital and mobile
Ecosystems
Climate change
and sustainability
War for natural resources
Oil, gas and fossil fuels
Food and water
Key commodities
Ecosystems
Climate change
and sustainability
Rise of state-directed capitalism
State intervention
Investment strategies
Country/city economic strategies SWFs/development banks
Project Blue
PwC
diciembre 2012
2
How different is banking from other sectors?
Pre-crisis banks were in line with other sectors in how they shared the pie,
allowing for capital intensity, but post the financial crisis
• To compare compensation across
industries, you need to look at
balance of capital versus labour
• Ratio of compensation to profit
pre compensation enables us to
do this
• Industries requiring more capital
have to pay a lower proportion of
profits in compensation costs
• This measure helps us assess
impact of rising capital
requirements in banking
Sources: Bank scope 2001 - 2007 (no adjustment made for FVOD by Bank scope)
Published annual reports for 2010 (for consistency with Bank scope, no adjustments made for FVOD)
Project Blue
PwC
diciembre 2012
3
The Project Blue framework – banking reward
Political and social unrest
Regulatory environment
•Bank pay as a populist issue (EU)
•Potential government intervention
•Political pressure on shareholders
• Remuneration regulations (G20)
• EU ‘leading’ in 3-speed world - focus
on pay structures
• Focus on risk-adjusted performance
Social & behavioral unrest
Rise of the emerging markets
• Expectations of employees
• Motivational effect of incentives
• A challenged reward model
• SAAAME leading in 3-speed world
• RoE pressures in developed markets
• Pressure on ‘one-bank’ pay model
Project Blue
PwC
diciembre 2012
4
The Project Blue framework – banking rewardRoE pressures
• Bonus pool reductions since the financial crisis - more to come, but limited scope
• Support function costs and erosion of the investment banking premium
• Investor looking for more structured funding guidance
RoE pressures
• Divergent economic and regulatory environment in Europe, US and SAAAME
• Emergence of regional pay practices
• Death of the ‘one bank’ pay model?
A new approach to rewarding talent needed
• A tainted sector
• Traditional pay models are no longer fit for purpose
• Requirement to rebuild a sense of purpose
Project Blue
PwC
diciembre 2012
5
Investors are increasingly vocal on the pay question returns being a key reason
Project Blue
PwC
diciembre 2012
6
Investors are increasingly thinking in terms of the
“share of the pie”
Investors have been increasingly vocal on bank pay policies this year
Project Blue
PwC
Tax
Employe
es
Retained
earnings
Dividend
s
diciembre 2012
7
PLAN
ADAPT
Project Blue framework
Global instability
Regulatory environment
Fiscal pressures
Political and social
unrest
Rise and interconnectivity
of the emerging markets (SAAAME)
Economic strength
Trade
FDI
Capital balances
Resource allocation
Population
Demographic change
Population growth
discrepancies
Ageing populations
Changing family structures
Belief structures
Social and behavioral change
Urbanization
Global affluence
Talent
Changing customer
behaviors - Social media
Attitudes to FIs
Technological change
Disruptive technologies
impacting FS
Digital and mobile
Ecosystems
Climate change
and sustainability
War for natural resources
Oil, gas and fossil fuels
Food and water
Key commodities
Ecosystems
Climate change
and sustainability
Rise of state-directed capitalism
State intervention
Investment strategies
Country/city economic strategies SWFs/development banks
Project Blue
PwC
diciembre 2012
8
Project Blue assesses the impact of these changes on all
aspects of the leadership agenda… (1 of 2)
Project Blue
PwC
diciembre 2012
9
…suggesting a hierarchy of core organizational impacts to
consider
...(2 of 2)
Project Blue drivers
The Project Blue hierarchy of core organizational impacts
Project Blue
PwC
1. The future of the industry
2. The company’s ambition and visión*
3. Growth
4. Risk
**
5. Technology
***
6. Organization
7. Stakeholder
management
****
diciembre 2012
10
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