The advent of new generation banks changed the entire concept of banking. The new banks went out to the clients’ offices to offer them not only deposit products but also to give loans. Banks’ top management was focussed on the bottom line, thereby pressurising bankers. This was done to keep the stock price high!
Bankers started to live quarter to quarter. The burdened poor banker then resorted to ‘innovation’ to sell new products such as mutual funds, insurance, and credit cards. In this process, he mis-sold products which were of no use to the customers just to attain his targets. What followed was a rat race, the performers survived while the non-performers got sacked, transferred or left for greener pastures with the competition (or from the frying pan into fire).
After that, banks did not want to go to customers and vice-versa, so they created internet banking and mobile banking. Risk management models were tweaked. In this process banks missed the “willingness to pay” index score and hence we saw many defaults on credit cards, mortgages, corporate & personal loans.
Life has come full circle for the MBA banker who became a sophisticated sales guy. The more you sell, the higher your bonus or the faster your promotions. But in this process, bankers lost the important ethical lessons of trust, empathy, and balanced risk taking.
We bankers are created to develop trust and confidence so that others can give their hard earned money to us for safe keeping. But the very trust is broken and many banks have gone bust globally.
Banking is a service to mankind but well respected bankers lost their credibility by selling products such as complex derivatives or collateralised debt obligations which were neither understood by them nor their customers (which included financial institutions). We have seen in the past five years how many global iconic brands and institutions have collapsed like a pack of cards. The North Atlantic banking crisis has turned into a global economic crisis. Banks and sovereigns are fighting hard to find ways to survive this crisis caused by reckless banking.
Most bankers’ lives are monotonous and they have stopped thinking and learning. They get up early, travel to work in the morning, go home tired and return to the same routine the next day. Bankers should start their day with a positive attitude saying “How can I be a better banker”. This will change the dull faces of boring bankers and they will start trying to do their jobs better.
This economic crisis needs to be solved by creating trust, confidence, and morality in the banking sector. Bankers never learn from their mistakes and keep on repeating it by creating one crisis to another.
Now, bankers need not think out of the box but “be inside the box” and rectify the errors of the past by putting in secure and stable systems and procedures. The regulator need not over regulate the sector otherwise the business of banking will become unviable and the nature of risk taking will be lost.
Banks need to focus on their clients and employees to generate additional revenues. “The happier the employee is, the more productive he will be.”
Empathy is another important aspect little practised by bankers. They turn into fair weather friends and remove the umbrella when it rains on the clients. We need bankers who can understand customers beyond the numbers or the financials of their companies. They need to be sensitive to the character of the borrower and find out whether the company is ethical and giving us the real picture or misinforming us to take advantage of schemes such as corporate Debt restructuring and one time settlements.
In cases where there is a genuine business model and opportunity for companies to bounce back and repay, then they do deserve to be extended a longer rope.
If we create positive and contributing bankers then we will regain our respect and reputation in this world. Positive bankers will easily be able to unlock the next decade successfully.
( The author is Executive Director and Chief Representative – India of BBVA. The views are personal).