What can banks now bank on to survive?
IT WASN'T just Deutsche Bank that was grappling with big questions about the future at the International Monetary Fund (IMF) meetings in Washington last week.
The German bank is scrambling to overhaul its operations as it faces a multi-billion-dollar fine for selling toxic mortgage-backed securities in the United States.
But many others in the banking industry are also still figuring out what they should be doing, nearly a decade after the financial crisis, as they grapple with anaemic economic growth, wafer-thin returns on lending and the possibility that regulators will further hike their cost of doing business.
"This new world of low interest rates and even negative interest rates is something that is very difficult," said Frederic Oudea, chief executive of French bank Societe Generale.
"It is a game changer, not just for banks but for the whole financial industry," he told an audience from the Institute of International Finance (IIF), a trade group for big banks that holds its annual meeting alongside the IMF.
Deutsche Bank's immediate obstacle is the US Department of Justice's demand for a massive fine over the sale of bad mortgage bonds that could far exceed the 5.5 billion euros (S$8.5 billion) in provisions that the bank has set aside.
But Deutsche Bank's fundamental problem is that its large investment banking business doesn't fit the post-crisis era.
Chief executive John Cryan is in the middle of an overhaul, cutting jobs and selling assets.
Since the crisis of 2008, banks on both sides of the Atlantic have shored up their defences against future losses, adding hundreds of billions of dollars in equity capital and shedding loss-making assets.
Sergio Ermotti, chief executive of Swiss bank UBS, said those defences had proved their worth in recent weeks when other European banks were largely insulated from the lurch in Deutsche Bank shares.
But with rates expected to stay lower for longer, more banks will be under pressure to change with the IMF warning last week that lenders in Germany, Italy and Portugal needed to take urgent action to address old, non-performing loans and bloated, inefficient business models.
US bankers attending the IIF meeting were far more upbeat than their European counterparts.
JPMorgan Chase CEO Jamie Dimon, Morgan Stanley head James Gorman and Citigroup boss Michael Corbat took to the stage together to talk up the strength of the US consumer and their own roles in the global economy.
Like their European rivals, many US banks are struggling to get shareholder returns above their cost of capital, but are making more progress because they wrote off larger portions of their bad loans earlier and most of their crisis-era litigation costs are behind them.
The US economy is also improving at a faster clip than Europe's.
Britain's vote to exit the European Union is another headwind, with the British financial industry risking a loss of up to £38 billion (S$64.7 billion) in revenue if the country has only limited access to the European Union's single market, according to one study.
The competition from technology firms in banks' traditional markets, such as lending and payments, has also ramped up the pressure to change.
In pre-crisis days, banks would have merged to cut costs. But regulators are now much less in favour of allowing the creation of big, cross-border lenders which could disrupt markets if they got into trouble.
Instead, banks are left to swing the axe where they can and ideally build big market positions in areas that are not penalised by big capital charges, such as consumer lending and asset management.