Banks Need To Change...
“Banker bashing” has become a national sport in certain countries, taking over from estate agents, journalists and politicians. Some of it (as always) is “scapegoating”, but a lot of the ire seems justified, given what we are seeing.
As a former banker myself, I
feel both ashamed and annoyed at the antics we see. When I joined the UK banking industry over 25 years ago, it was a respected (if not that lucrative)
profession. There were standards
of conduct, and the “bonus culture” had not yet arrived. If you were lucky, you received an extra
month’s salary near Christmas – a most welcome relief, but nothing like the
“telephone number” bonuses paid out these days.
You were taught that you had an ethical
as well as a professional duty.
Since then, much has
happened. The UK deregulated its
financial services markets in 1986 (“Big Bang”) and cross-fertilisation and
mergers became the order of the day. You
either survived by merging or acquiring and some players completely disappeared
from the market. As time went on and
transparency increased, performance and financial strength information were
scrutinised more carefully, and banks slowly turned into what some might now
call “businesses” dependent on the goodwill of markets and analysts.
The Bank of England (BoE) had
been in charge of supervision in the UK, but as markets became more
complicated, people began to think that it was no longer up to the task,
especially as it was seen to be “conflicted” in regulating its own. To end this, the UK Financial Services
Authority (UKFSA) was created as an independent regulator with four statutory objectives
against which one might be justified in saying that it has failed to
deliver. It is now to be re-absorbed
into the BoE as Britain’s politicians re-arrange the proverbial deckchairs on
the Titanic in an effort to be “seen to be doing something”.
Finally, 2007 saw the start of
the global banking crisis that has affected every corner of the globe. Where are we now?
·
The global financial services industry is more
complicated thanks to technological and financial innovation. We now have products that we couldn’t have
dreamt about 20 years ago - and delivered at a lower price.
·
The global financial services industry is
“global” – with banks in one country connected to others as the current
financial crisis shows.
·
The sort of person working there now is a far
cry from the “old fashioned” branch manager who knew all his customers intimately and could make lending decisions without referring to a central credit risk unit. Make no mistake, an infusion of new blood was
needed as the UK financial services market seemed at times to be in serious
danger of going the way of the dodo due to chronic “inbreeding”. Equally, as foreign institutions took over
British ones, the character of “The City” inevitably had to change. Staff now have more training and have to
prove that they are competent to deal in products.
·
One of the things that banks have never got
right is their PR – their customers can be just as (if not more) sophisticated
and yet continually see the so-called “Masters of the Universe” ignore
them. This is now starting to bite
back.
·
Banks now have to submit to sterner oversight
and to increased capital requirements to ensure that taxpayers don’t have to
bail them out to save bond and shareholders, as well as to prevent a systemic
loss of confidence. We are belatedly
beginning to realise that we don’t
have all the answers to risk management – whatever the business school
graduates (and I have worked with a number of them) may tell us.
It’s not only banks, but
governments, businesses and individual consumers who have learnt the hard way
that the global financial services industry is in serious need of repair. What’s missing is a global solution as
nations take their own, sometimes contradictory, action. Very few focus on the fiduciary element mentioned earlier in this article.
Banks occupy a “grey area”
between businesses and public sector companies.
They are essential to an economy’s health and confidence; one might
describe them as “strategically important assets”. Treat them as any other business, and they will behave accordingly, with the risks that go with this.
Banks need to go “back to basics”
and re-establish trust with governments, regulators, investors, the media and
their customers. The era of being able
to say “We know better” is over, and the sooner that everyone realises this,
the better. It may mean that banks
become more “boring” and that everyone will have to lower expectations in all
areas but trust and stability, but it’s worth it.
I have spent more than half my life working in different world markets from the most developed to “emerging” economies. With more than 20 years in the world financial services industry running different service, operations and lending businesses, I started my own Performance Management Consultancy and work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email . My website provides a full picture of my portfolio of services.
Labels: Career, Regulation, Social, Strategy
posted by William Martin @ 15:36
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