NOVEMBER 20248 BY REUBEN ATHAIDE, HEAD, CYBER SECURITY ADVISORY AND DEVSECOPS, STANDARD CHARTERED BANKTHE IMPACT OF DIGITIZATION AND EMERGING TECHNOLOGIES ON CAPITAL MARKETS AND BANKSThe Capital Markets unit of a bank executes various transactions in keeping with the responsibilities of banks. In particular the bank's cash management and the management of the bank's financial risks, which is similar to the treasury function in a non-bank entity. In addition to these standard treasury responsibilities, the capital markets unit is also tasked with sourcing funding, acting as a market maker for its clients, advising them on financial instrument transactions as well as in some instances supervising securities issues or in the case of investment banking supporting mergers and acquisitions.Over the last decade digitization has impacted the capital markets value chain across all products and functions especially sales and trading as digital channels have become the preferred route to access markets, execute transactions as well as access Bank personnel in advisory capacities and research. Hence, while workforces surged towards the end of the pandemic, the extra people that were employed were mainly developers to fast-track digital capability in order to cater to customer demand and evolving trends. Also, to streamline processes, drive efficiencies and increase the stickiness with clients.Since the last credit crisis, banks have faced challenges around increased regulatory reporting which do not look like abating anytime soon. There also continues to be significant pressure on returns for a sector that for the most part is undervalued with some FSIS trading at a discount to book value. Banks are also dealing with the costs of maintaining complex legacy platforms, which make it difficult to adapt to evolving client expectations and increasing competition for talent. The onset of digital technologies has also been a challenge to some extent as the electronification across the capital markets value chain has reduced margins overall.That said, emerging technologies and digital offerings are key enablers for banks to leverage to drive efficiencies, enhance reporting, transform legacy platforms, and cater to evolving client expectations as well as future proof for return on equity as well as attract talent. In the case of the latter new entrants to the IN MYV EW
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