ING DIRECT’s executive director for distribution, Lisa Claes, said the upshot of the Basel III reforms is likely to be that banks will have to increasingly match their assets with their liabilities, like for like.
“The days of borrowing short and lending long are numbered,” Ms Claes said. “This means banks will be required to hold more capital for the same level of banking business than they have in the past.”
With a larger amount of liquid assets on their balance sheets, banks will value ‘sticky’ customers more because they will provide a higher ‘liquidity benefit’, according to Ms Claes.
“Put simply, an unbreakable term deposit will receive a higher liquidity benefit than ‘at call’ savings,” she said.
So what are the practical consequences for intermediaries like financial planners and brokers?
Banks will price longer dated savings (such as unbreakable term deposits) more favourably than ‘at call’ savings, Ms Claes said.
“Banks will [also] bundle products or offer discounts for additional products which will lead to improvements in the onboarding processes, and the universal application form may proliferate,” she said.
Intermediaries are also likely to be in competition with each other to broaden financial solutions to customers.
“Banks, in an effort to attract distributors competent in this regard, will undoubtedly offer unique rewards for those with proven ability to attract the one customer for many products,” she said.
Finally, ‘consumer propensity models’, which predict at what stage of a customer’s lifecycle – or relationship with an institution – they are most likely to buy products will become “even more critical”, Ms Claes said.