The opinions expressed here are those of the authors. They do not necessarily reflect the views or positions of UK Finance or its members.

Margin compression, market volatility, rising regulatory demands, and growing competition from non-bank lenders are all testing banks’ ability to grow without compromising stability. 

To understand how institutions are navigating this complex landscape, we spoke with 32 senior professionals across lending, risk, and finance at leading global banks. These conversations revealed a clear shift: risk is no longer just about oversight – it's becoming a proactive, strategic partner to the business. We also uncovered key challenges and strategies shaping how banks manage risk while remaining agile, relevant, and profitable. 

Here are five out of the nine most pressing themes shaping banking strategy today:

1. Non-bank lenders are reshaping the competitive landscape

Banks are feeling the pressure from non-bank players, including private credit firms, fintechs, debt funds, and sector-specific lenders in areas like real estate and renewable energy. These challengers can often move faster and take on more risk thanks to lighter regulation. Now banks are rethinking their competitive edge – forming strategic partnerships, offering back-leverage or syndicated exposure, and reassessing their speed and service. As one EU portfolio risk director put it, “They can turn around a deal in 48 hours. We can’t compete on speed – but we can on depth and safety.”

2. Credit risk and borrower quality are under greater scrutiny 

Banks are tightening credit standards and focusing more on fundamentals such as counterparty strength, interest rate sensitivity, and resilience under stress. They're also reevaluating legacy exposures – especially in sectors once considered stable, like commercial real estate, healthcare, and education – due to rising volatility and regulatory shifts. Rather than chasing volume, institutions are concentrating on deeper, more strategic relationships with borrowers who demonstrate long-term strength. A Head of APAC Corporate Lending said, “We must ensure we're taking the right type of risk associated with doing this or that deal. So firstly, it's at a level that we can kind of quantify as best as we can, with the least amount of uncertainty. Secondly, that everyone is okay with that quantity of risk. Thirdly, that that quantity of risk kind of sits well in your gut.”

3. Balancing growth with prudence is a constant tension – but a necessary one 

Most banks agree that the push and pull between risk and lending isn’t a problem – it's a defining feature of sound banking. Risk teams safeguard against undue exposure, while lending teams bring vital customer insight and commercial nuance to the table. The most effective banks manage this dynamic with clear risk appetites, empowered portfolio and credit partners, and governance structures that encourage open discussion. Finance teams are increasingly stepping in as intermediaries, leveraging tools like customer tiering, capital efficiency scoring, and risk-adjusted return metrics to navigate the middle ground. As Originator in APAC noted, “If risk and business are always in agreement, something’s wrong.” It’s a productive tension – one that, when well-managed, leads to smarter growth and stronger discipline.

4. Diversification of lending portfolios is a both a risk response and a growth strategy

In the US especially, banks are shifting away from traditional concentrations in commercial real estate (CRE) and expanding into areas like corporate and industrial (C&I) lending, consumer and SME banking, and various forms of secured or asset-backed lending. While diversification offers benefits like capital relief and more stable deposit relationships, it also brings new risks. Banks are mindful not to replace concentration risk with capability risk, emphasising the need for sector expertise. A US Finance Director added, “If we’re going into C&I, we need people who understand C&I. It’s not just copy-paste.” Diversification, done well, can drive certainly growth – but only if backed by deep sector knowledge. 

5. Regulation is no longer an external force – it shapes internal strategy 

Regulation is no longer something that happens to banks – it's shaping how they operate from the inside. From Basel IV and stress testing to AML requirements, regulatory demands now influence how institutions structure systems, allocate capital, and design controls. In response, banks are formalising risk frameworks, enhancing early warning systems, and investing in model validation and audit infrastructure. In some cases, regulatory scrutiny has prompted capital raises, lending diversification, or strategic shifts in operating models. A Head of Wholesale Lending told us, “We don’t see regulation as a burden – it's part of doing business.” Increasingly, leading banks are moving from a compliance mindset to a proactive one – embedding regulatory thinking into everyday strategy to stay ahead, not just stay in line.