New York-based risk advisory firm ICS Risk Advisors announced its 2012 predictions for the financial services industry today, and its conclusion is probably what many people in the industry have suspected: Another difficult year is ahead for banks. Researchers at the company assert that U.S. financial institutions should plan on increased regulations in 2012 and more of what they faced in 2011, such as asset quality issues, competition for good loans and more stringent underwriting standards.
ICS Risk Advisors says that two issues will affect economic progress the most in 2012. The first factor is the unpredictability of the mortgage industry and the residential real estate market, which the company says has the potential to derail positive economic growth if unemployment and foreclosures increase. The second issue is the upcoming presidential election, which the company suspects will intensify the debate surrounding regulation and increase public concern around reform.
ICS Risk Advisors also points out that bank reform has been slow to take affect despite regulations efforts such as the Dodd-Frank Act and the formation of the Consumer Financial Protection Bureau. The company believes that in order to speed up this reform, banks must start their own internal reform and risk management programs.
"Banks need to get back to the basics," said John White, CEO of ICS Risk Advisors, in a statement released with the predictions. "In a market flooded with new regulations each month, banks need to try harder than ever to remain compliant and substitute strong returns in place of potential windfalls."