The future of the banking industry remains uncertain, but there are a number of long-term catalysts such as the expected demographic shift and the rise of state-directed capitalism that will further shape the global financial sector.

That is the conclusion of research by financial advisory firm PricewaterhouseCoopers (PwC).

The research shows that there are several forces at work - the weak economic environment, regulatory reform and fiscal pressure - that are shaping tomorrow's banking world.

This transformation coincides and will be accelerated by the increasing importance of emerging market banks and the rise of the South America, Africa, Asia and Middle East.

'Western banks will have to abandon the universal banking model, which also had its part in creating a debt-fuelled economic expansion that paved the way for the global financial crisis,' said PwC Middle East deputy chairman and head of assurance Ron McMillan.

'The new world order of banking will be further moulded by a demographic trend, whereby ageing or even declining populations in many key Western countries mean that these markets will offer low or no growth.

'Younger generations, for example, will interact in a different way - note the rise of social media - and will likely demand a new and distinct offering from their bank.'

'Another long-term driver is the rise of state-directed capitalism,' said PwC Middle East region financial services leader Graham Hayward.

'Governments may continue to believe in capitalism as a strong financial system, but at the same time they exert increasing control over both banks and the real economy.

'In developed markets, the crisis necessitated a rapid increase in state intervention and, in many people's eyes, has legitimised intervention. Governments have exerted significant control for many years and this is likely to persist,' he said.

'Only those financial services companies preparing and understanding the long-term underlying trends will be able to play a role of significance in the new world order of banking,' he added.-TradeArabia News Service