Capital Markets Corporate

May 6, 2015

Banks: actions speak louder than words


By Ross Gillam, Consultant

Since the 2007/8 crash banks have been pilloried by just about everyone possible. From politicians to regulators, to the media and the public at large, banks and bankers have been public enemy number one. No doubt there have been a plethora of reasons for this, some arguably more legitimate than others, with banks often the default and easy option to blame when things go wrong.

One of the major reasons for the entrenched negative perceptions that banks find themselves up against is due to the continual series of scandals and regulatory breaches, as most emphatically embodied by the systemic PPI mis-selling and the resulting peak of £7.8bn of collective fines in 2012. After PPI we’ve seen a string of other headline-grabbing scandals and regulator outcries from Libor rigging to FX market manipulation, to tax evasion and the near collapse of the once much heralded ethical poster child, the Co-op.

Without clear water between one scandal and the next – and despite much balance sheet rejigging, improved capital ratios and the closing of numerous proprietary trading arms – banks have found it nigh impossible to move the conversation on and to repair their reputations. (It must be said that there have been some valiant efforts, with my personal favourite being Barclays’ Digital Eagles initiative, as it’s a great example of actions speaking louder than words).

With this context in mind, last week’s report by Standard & Poor’s about conduct and litigation charges in relation to the UK’s big four banks is worth noting. The report stated that ‘conduct and litigation charges are now “a way of life” for the U.K. banking industry, and that some form of charge seems probable every year for the larger banks and every other year for the smaller institutions. This reflects the intrusive nature of regulation to the benefit of customers rather than the banks, strong media attention, and the proactive role of claims management companies.’

If banks are to continue being penalised and publically lambasted, then how are they to begin repairing the industry’s shattered reputation?

In my mind, and this is not unique to banks, the principle of actions speaks louder than words is a solid foundation – as highlighted with Barclays’ Digital Eagles initiative above, for example. Too often the gap between what banks say and what they actually do means they are open to claims of hypocrisy. If this disparity continues for long enough, no-one will believe you when you say you’re going to change.

Furthermore, banks, and this isn’t just the high street banks with retail customer operations, need to demonstrate their value and purpose, and to explain what it is they do in jargon free language. Amongst the general public there remains too much mystery about banks and what it is they do – and more importantly, what their value to society at large is. Acting upon this would help break the ‘us’ and ‘them’ mentality that people still feel towards the financial industry. This is not just a communications strategy, but involves clearly proving demonstrable value through real actions and engagement.

It must be said that it shouldn’t be a one way street. Too often banks are all tarred with the same brush with those offering a different proposition and approach, such as the challenger banks, also being prone to catch-all criticism by the media. No-one or no organisation should be above scrutiny, but those that are trying to make positive progress, particularly without legacy issues, should be met part of the way across the road and given time to explain their value. Continually berating banks collectively and focusing exclusively on the negatives does little to help anyone – certainly, the public don’t understand banks and what they do any further and mistrust remains as entrenched at ever.

Clearly, communications are only one part of the jigsaw for banks looking to repair theirs and the industry’s reputation. As I say, actions speak louder than words, but for those trying to cut through the cacophony of ingrained scepticism, communicating effectively is a powerful and necessary tool to have in their armoury.