Smaller banks may survive best

With the increase in regulations and pressures on global banks it may be smaller banks that will survive by being "more focused and systemically connected."

ANZ's global head of IIB portfolio management, Sally Reid, writing for the bank's Blue Notes portal, said the global banking sector was facing "unprecedented, inexorable pressure on margins" as a result of regulatory and competitive pressures.

Reid said banks faced cyclical lows in asset spreads, pressure on the cost of funding, increased regulatory costs, increasing competition, an increased cost of technology and competition to recruit from a global talent pool.

Major banks needed to reposition themselves, she wrote, so they could survive the challenges being pushed their way. She said those banks prepared to radically reshape would be the long-term winners.

Reid said banks that adopted a learner model would find themselves more fleet-footed and capable of taking advantage of suitable opportunities when they arose.

"Banks need to communicate to their shareholders who in turn need to accept that there are some short term costs to building a long term sustainable sector."

If the major banks decide to "wait it out", Reid said, "they are likely to be confronted by more nimble competitors who more promptly repositioned themselves to adjust to the changing industry dynamics."