Avoid popular alienation

It is easy for bankers, at times like these, when all the political and media talk, and even highbrow analysis, is focused on elements of domestic and international financial and economic issues, to concentrate exclusively on an operational approach and decisions that are targeted solely and precisely at solutions to only such issues. This is a view of finance as being only alta finanza (higher finance) and never a popular service to “the people”.

... there are vast swathes of people out there to whom the banks everywhere have not endeared themselves- John A. Consiglio

In my banking history books collection, one small book that I treasure is that of Anthony Faville Tuke’s (former chairman of Barclays Bank) annual bank addresses (1952-1962).

Famous words said by Tuke at one of those meetings were later used by the well-known charity Dr Barnardo’s Homes in an advertising campaign in the Financial Times in 1980: “... because at the end of the day banking is about people... perhaps much more than it is about their institutions and certainly much more than it is about money”.

When bank boards become conspicuous to the people (otherwise known under various descriptions, such as “the small saver”, “the small shareholder”, “the small depositor” or even “the middle to lower classes” etc) by some of their certain traits, they run a real risk of alienation, as dangerous as that which the political class is nowadays facing in many countries.

These traits include actions, or policies, such, as year-after-year, retaining unchanged on their boards certain high business personalities; holding a minimal number of board meetings because that happens to be the vision of good management of, possibly, the main shareholder; deciding abruptly on cutting down on certain services or the sources of their provision and, in the process, therefore, only their vision of how such services should be provided prevails or is imposed.

Far too often, the defence to such criticisms lies in statistics: “If the figures are right, then we must be doing it right”. And they will quote, for example, statistics regarding after-tax profits, annual rates of increases in deposits or lendings, net-interest margins and non-interest incomes, increased use of ATMs, reductions in staff numbers, and so on and so forth. That, of course, is tantamount to a vision of banking as being purely a profit-motivated business and not a money-related service being given to “humans”.

Is it the role of banks to act as social engineers? Why is it that they so often end up being hated by so many people whose perceptions of good service and treatment happen to be, for example, not necessarily entering into a brightly, recently refurbished branch, finding endless queues, only one or two cashiers at the most to serve the citizens and, generally, wasting hours of their precious time, and often being fobbed off by the brigade of “use-the-ATM-trained”, smartly dressed (and, it must be conceded, very sweet) receptionists?

Several institutions often try to defend themselves against such criticism by bragging about how, and what, they do on the front of corporate social responsibility. Much action on that front is often very easily seen for what it really (but only partially) is: a genuine wish by the institutions to do well to many seriously disadvantaged elements of a society, like the disabled, the environment, culture, etc.

Yes, that is a fact but there is also the undeniable fact that such praiseworthy activity also carries with it, for the benefit of the institutions themselves, substantial fiscal benefit. So, in truth, it is not only “being good” but also “it pays me to be good in this particular way”.

A general criticism which one comes across among operators in the business sector, especially SMEs, is that “We are today only an account, a number”. What is this to be attributed to? Is it possibly true that, even at a time when media projection seems very focused on presenting banks as “the friends of business”, the new structures set up – like centralising in elegant so-called “business centres”, removing most powers and downgrading the role of the former influential branch manager, pushing new services often full of new hidden costs, and other measures – have not helped in any way towards making for a closer and more popular bank/branch/businessman nexus?

Of course, running a bank today is anything but an easy job. Both the economic conjunctures of our times and the totally new regulatory environment demands have changed the former character of bank financial management.

Coupled with such grassroot changes, the social and political environment out there has evolved in a way that could not be expected not to also impact the banks. I well remember, for example, when the realities of the newly-created discipline of marketing hit the banks like a bolt. Thenceforth, the concept that took over in the banks everywhere became that of “marketing for profit” and no longer of banks as service providers.

That damned new word “products” – no longer “services” – came in and their competitive creation and selling took over. With the marketing profession, others – like the accounting and computing professions – teamed up to enforce much change in the banks.

But it was change which – now with the benefit of many years of hindsight – has had consequences. It has pushed banking “up” from and not “down to” the people at large. Recent studies in some US academic institutions have shown that, particularly after the way the banks there acted at the sub-prime lending and house foreclosure levels, many banks, even small local ones, became very unpopular and unloved.

And so there are vast swathes of people out there to whom the banks everywhere have not endeared themselves. These are working class citizens, pensioners, small shareholders, many hard-working families, what one might often describe as the middle to lower classes; what the Romans used to call the proletariat.

Of course, there have also been some banks that have been smart and did better than others in carrying out this type of social analysis. Several of them have smartly tailored their approaches and operating methodologies popularly downwards and not sophistacedly upwards (in areas of, for example, branch represen­tation and operating manners, interest rate policies, charging approaches, their own human resources practices, having more populistic board representation structures, et al). In the process, they are not doing at all badly.

One wonders whether this type of brave debate ever finds its place, or can find its place, in any society which currently seems much more concerned with whether the euro will survive, whether Greece will make it or whether the budget deficit is standing at 2.45 or 3.05 per cent of GDP. Should it be the case now that, besides the marketers, accountants, computer whizz kids and whatnot, now also the sociologists have become serious involved?

Dr Consiglio lectures in the Department of Banking and Finance of the University of Malta.