BankingHub: a look back at the banking industry’s year 2022

Year nine of the BankingHub is rapidly drawing to a close. 2022 has definitely been neither an easy nor a quiet year, that’s for sure! Due to huge and dynamic economic developments, we have addressed, among other things, the impact of the climate and energy crises and geopolitical conflicts on the banking business as well as the opportunities that arise.

However, before following the tradition to go into more detail in our Christmas article, we would first like to extend our heartfelt thanks to you, our loyal readers, and to our authors who are so adept at writing. We would like to thank you for writing, sharing and commenting our articles and for the positive feedback we have received on our redesign.

BankingHub topics in the course of 2022

The banking industry’s year 2022 has kept our authors pretty busy. They were on the look-out for new banking topics and continuously reported on changing requirements, challenges and opportunities in the financial market. We have picked out some of the key topics published on the BankingHub over the course of the year here for you as a review.

ESG (Environmental, Social, Governance)

ESG or sustainability was definitely a topic that kept our industry and us busy throughout 2022. When trying to achieve the goals set out in the Paris Agreement, one thing is certain: massive investments are required in all kinds of business areas. The banking sector is seen as an essential part of this green transformation – but do banks even have enough capital to fulfill this important task? Our experts’ assessments of this development can be found in the 39th edition of our zeb.market.flash. Our look at trends in internal and external ESG reporting as well as approaches for practical implementation in banking operations are available here.

When evaluating the extent to which the economic activities financed by a financial institution are detrimental to the climate, it is also important to know whether the impact of these activities can be measured. In the “Carbon accounting: managing financed GHG emissions” article, our experts analyze the process of carbon accounting for recording and quantifying financed GHG emissions. This has a crucial strategic importance for planning a GHG target path towards “net zero” and is the starting point for operationalizing a reduction path for an institution’s respective sub-portfolios.

The topic of (gender) diversity in German banks is a matter of personal importance to us. The interrelation between an increasing proportion of women in top management positions and the resulting growth in business success has been scientifically proven. Diverse teams are more creative, more productive and more successful! So, what can banks do to end the perpetual “Thomas cycle”? And how can managers be made aware of the problem? Answers to this can be found in our article ”Diversity in German banks: shocking figures for gender diversity on the management boards”.

Innovation & Digital

Digital assets were a special focus topic in our range of articles. They have been present on the market for about ten years now, are available in a wide variety of formats (cryptocurrencies, security tokens, NFTs, etc.) and are increasingly establishing themselves as a relevant asset class. Especially cryptocurrencies (payment and utility tokens) are experiencing high demand to date. The use of digital assets to build new customer services promises great potential for suitably positioned financial institutions. The first savings banks and cooperative banks are positioning themselves with their own offerings, which shows that the need for action has already been recognized. At the 11th get-together for banks and fintech companies (article only available in German), we had a lively discussion on this topic with Marion Spielmann (COO Banking Business Units, PO Digital Assets, DekaBank), Markus Fehn (Managing Director, Chartered Investment Germany) and Matthias Kröner (fintech entrepreneur, CFO and founder, Tradelite Solutions). Opportunities for Swiss institutions to position themselves on the market can be found in our article “Digital assets – Launch of services in Swiss financial institutions”.

Currently, there are two factors driving digital currencies forward. Firstly, there are efforts to develop private-sector solutions using so-called stablecoins. Secondly, the ECB is pressing ahead with its plans to develop a Central Bank Digital Currency (CBDC) to complement the euro in its current form. In our article “What is the German banking industry committee’s position on the digital euro?”, we shed light on the motivation behind the latter. Jens Holeczek, representing the Volksbanken and Raiffeisenbanken, gave us answers to our most burning questions about the digital euro.

A milestone in European financial market regulation was set by Regulation (EU) 2022/858 based on the distributed ledger technology (DLT pilot regime). It was published on June 2, 2022, by the EU Parliament and Council to establish a pilot regime for market infrastructures and will enter into force across Europe on March 23, 2023. The goal of the DLT pilot regime is to create a new and innovation-friendly regulation that provides market participants with justified exemptions from existing regulations to encourage the use of DLT on the financial market. It is part of the EU’s digital finance strategy, which has been pursued since 2020 and also includes the Markets in Crypto Assets Regulation (MiCAR) and the Digital Operational Resilience Act (DORA).

Currently, DLT-based platforms are an option that could become mainstream in the future with regard to virtual ecosystems. With this in mind, we occasionally took a look at metaverse platforms based on DLT. They are continuously gaining popularity and changing the way we interact, which also affects banks and their customers. It is important to quickly take the first steps in the metaverse in order to stay on the ball and approach the customers of tomorrow where they are – even if many factors that ensure smooth functioning of metaverse platforms are still being developed. Whether DLT will really catch on in the context of metaverse platforms remains to be seen. Although we see their potential benefits in connection with virtual ecosystems, for example, we need to keep in mind that DLT-based platforms are still at a very early stage of development.

With the publication of a paper on the principles for using algorithms in decision-making processes, the German Federal Financial Supervisory Authority (BaFin) provides financial institutions insights into preliminary considerations on possible minimum requirements for the use of artificial intelligence (AI). The principles are intended to provide guidance to banks without limiting their technological neutrality. We took a close look at BaFin’s regulatory requirements for the controlled use of Big Data and AI. You can also check out the results of our study on the use of artificial intelligence.

Banking regulation

BaFin published the next, now 7th MaRisk amendment to the minimum requirements for risk management (MaRisk) for consultation from the end of September until October 28, 2022, and has thus striven for the next development stage of the risk management requirements just about one year after the entry into force of the 6th MaRisk amendment (article only available in German). Our regulatory experts provide you with insights into the draft 7th MaRisk amendment (article only available in German), also in view of the new ESG requirements with regard to lending. Up to now, the date on which the 7th MaRisk amendment will be taking effect has not yet been published. Owing to European provisions, the amendment is assumed to enter into force soon without long implementation periods, except for the ESG requirements, which are probably going to require extensive technical and procedural adjustments.

In terms of regulation, this year we also took a deep dive into RWA management at regional banks and illustrated the immense pressure (article only available in German) regional banks have been facing due to the persistently challenging economic and regulatory environment. We also concentrated on the control levers of RWA optimization (article only available in German), the mandatory tasks of RWA management. RWA management (article only available in German), which is the subject of the most recently published article in our RWA series, aims to increase the income generated from RWAs and hence strengthens the capability for profit retention in order to accumulate capital.

Impact of inflation and rise in interest rates

2022 was characterized by high inflation and rising interest rate levels. With the end of the zero-interest rate regime, banks are now operating in a new and challenging environment – one of the positive effects from the banks’ perspective is the return of deposit products as a revitalized revenue stream. How did the deposit business fare in the past, how will it develop and what is the current playing field across Europe? Is a “battle for deposits” looming? In this year’s last zeb.market.flash, we got to the bottom of these questions in the special topic “Rebirth of the deposit business” (part 3, “Rebirth of the deposit business”).

High inflation and rising interest rate levels also have various effects on pricing issues and the construction business. Holistic pricing programs will become much more important in the future. Especially in these times of high inflation, it is important to avoid margin erosion and for financial services providers to be well positioned in all pricing dimensions (pricing strategy, price calculation, enforcement and controlling). More details of selected aspects can be found in the six articles of our BankingHub Pricing series (article only available in German).

The massive rise in interest rates provided a boost to the construction business in 2022, and the building societies look back on an eventful year. A perfect occasion for us to end our summary by recommending our 2022 annual review of the building society sector. Over the course of the year, our colleagues collected the information and news from the building society sector (article only available in German) for you and presented the highlights in separate bundles: legislation & regulation, sustainability, cooperation & mergers, platforms, innovation, personnel & anniversaries. This annual review is definitely worth a look!

Our top articles in 2022

Before taking our winter break, we would like to complement the above annual highlights presented by our editorial team with some more recommended reading for the holidays: an overview of our three most-read newsletter articles.

Indisputably, our reports on EU taxonomy are ranked as your number one and two articles. The taxonomy is the linchpin of the European Union’s Sustainable Finance Regulation and thus a crucial basis for assessing the sustainability of business activities. The criteria for the sustainability assessment of economic activities aim at measuring investments by their degree of environmental sustainability. The framework is designed to direct private and institutional capital flows into sustainable, green investments and achieve specific environmental goals in line with the European Green Deal. Our analysis of the use and processing of customer data with the help of artificial intelligence in the context of current account projects also aroused widespread interest.

  1. In the first-ranked article “EU taxonomy: special challenges for automotive banks”, Andrey Gaspirovich, Dr. Matthias Petras, Niklas Grawe and Geronimo Duckert take a look at the EU taxonomy with regard to the automotive banks’ business.
    EU taxonomy: special challenges for automotive banks
    EU taxonomy: special challenges for automotive banks
    When is an investment classified as taxonomy-aligned? The business of automotive banks against the background of the EU taxonomy.
    Read more »
  2. One thing is for sure: the sooner institutions thoroughly deal with the challenges of the taxonomy, the more likely they are to succeed in holistically integrating the topic of sustainability into their processes. The article “The EU taxonomy: sustainable or not? That’s the question” by Andrey Gaspirovich, Jakob Koch, Dr. Jan Müller-Dethard and Dr. Matthias Petras takes a closer look at the assessment scheme for sustainable investments and the EU taxonomy’s impact on institutions.
    EU taxonomy: sustainable or not?
    The EU taxonomy: sustainable or not? That’s the question
    The EU taxonomy for sustainable investments is the key basis for assessing the sustainability of economic activities and is relevant for several other EU regulations.
    Read more »
  3. Thanks to digitalized banking processes and the increasing use of online and mobile banking, there is no shortage of customer data. But how can customer data points be harnessed for banks and applied to current accounts for product and price optimization? Julian Zikmund and Christine Utendorf show you how modern database management can help banks optimize current account models (article only available in German) in a targeted manner and create a starting point for future use cases in data analytics as well as artificial intelligence. The use of AI to further professionalize the customer approach and at the same time identify customers at risk of churn will play a key role in stabilizing and expanding the market shares of individual institutions in the future.

We would like to take this opportunity to once again extend our thanks to you, our loyal readers. We wish you a wonderful Christmas with your loved ones and look forward to providing you again with inspiring as well as exciting articles and interviews next year. Until then: happy holidays and take care!

Feel free to contact us!

Julia Schraut / author BankingHub

Julia Schraut

Expert Office Berlin
Author Madita Pesch / BankingHub

Dr. Madita Amelie Pesch

Senior Consultant Office Münster

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