Posted by Mark Brousseau
As the world closes in on the three-year mark of the beginning of the global financial crisis, one expert believes that it’s not enough to rely on new regulations to prevent future disasters — a fundamental change in mindset is required.
Rex Ghosh, a Harvard PhD economist who has worked in the financial markets for more than 20 years, currently with the International Monetary Fund, believes that the very culture of the financial sector needs to shift back to basics as the economy limps out of recession.
“The global financial crisis, marked by the bankruptcy of Lehman Brothers in September 2008, has taken an enormous economic, financial, and social toll,” said Ghosh. “Both in the United States and abroad, regulations, laws, and practices are being changed to help ensure that such crises do not recur. But these regulations — running to the thousands of pages — are enormously complex. It may be years before they are all adopted and absorbed into the daily lives of those in the financial sector. The real prevention rests in the notion that leaders need to work toward changing the very culture of the sector to rely on more fundamental and basic practices based in prudence and responsibility.”
Ghosh would like to see the financial sector learn the following lessons in 2011:
... For the Federal Reserve -- Central banks such as the Fed should not only look at goods price inflation, but also at important asset prices, such as the stock market and housing sectors. It also needs to be more mindful of lending and credit booms, especially in the face of weakening credit standards. That’s what paved the road to hell three years ago. We do not want to repeat that option again. Traditional monetary policy tools (like the Fed’s interest rate) may need to be bolstered by counter-cyclical capital requirements (requiring banks to hold more capital in “boom” times).
... For Banks -- Boring is good. Banks should get used to being a much smaller proportion of the economy, like it was before the 1990s. Bankers should also be aware of credit and counterparty risks. They need to know who they’re doing business with, know to whom they are lending and not rely solely on credit ratings.
... For Regulators – They need to watch the kids and the cookie jar. They should not count on banks to manage their risks prudently. They should think seriously about “tail risks” — just because something has not happened before, such as a nation-wide decline in house prices, doesn’t mean it cannot happen in the future.
“These are not incredibly difficult precepts,” Ghosh added. “The short answer is that the Fed needs to broaden its view of what constitutes inflation, banks need to look past the paperwork and avoid risk, and regulators need to realize their jobs don’t end with the passage of new rules. For every regulation created, there are 50 new ways created to get around it. We need to realize that the practices of the past won’t go away until we match the letter of the regulations with the culture of the financial sector.”
What do you think?
Showing posts with label retail banks. Show all posts
Showing posts with label retail banks. Show all posts
Thursday, February 17, 2011
Monday, June 2, 2008
Banks Frustrating Customers
Posted by Mark Brousseau
An interesting article from Reuters:
Customers grow dissatisfied with retail banks
Wed May 28, 2008 12:07pm EDT
NEW YORK (Reuters) - A rise in fees has led to growing dissatisfaction with retail banks, J.D. Power and Associates said in a study released on Wednesday, adding that banks may be sacrificing long term growth in favor of short-term gains.
Customer satisfaction with retail banks dropped 26 points on a 1,000-point scale to 737 from the year before, according to the survey of nearly 20,000 households, conducted by the consumer study arm of McGraw-Hill Cos Inc.
While the current financial crisis has bruised the image of retail banks, it is cost-cutting and increased fees that have largely contributed to falling consumer sentiment, the study found.
"Some of the key drivers of customer satisfaction, such as the percent of transaction problems, fees, and wait time for tellers and phone service are going the wrong direction," Rockwell Clancy, executive director of financial services at J.D. Power and Associates, said in an interview.
Faced with the collapse of home values and the credit crisis, banks have cut personnel and increased transaction charges to meet shareholder demands.
"Typically when financial institutions are under a crunch, with loan volumes going down and charge-offs going up, banks raise fees and reduce staff to make their numbers," Clancy said.
Among the highest rated retail bankers, Commerce Bank received the top spot in the Mid-Atlantic and Midwest regions, while BancorpSouth Inc was rated highest in the Southeast.
Wachovia Bank was ranked first in the Southwest, and Bank of the West led the Western region of the country.
Banks that resist the urge to cut costs and retain a high level of customer service could reap financial rewards in the future, J.D. Power said.
According to the study, a bank that increased the number of highly committed customers -- people with a strong emotional attachment to the brand -- by 5 percent saw overall deposits grow as much as 3 percent annually.
"The focus on customer satisfaction can sometimes be considered as a discretionary expense when in fact it's the real differentiator in financial performance," Clancy said.
(Reporting by Steven Bertoni, editing by Dave Zimmerman)
An interesting article from Reuters:
Customers grow dissatisfied with retail banks
Wed May 28, 2008 12:07pm EDT
NEW YORK (Reuters) - A rise in fees has led to growing dissatisfaction with retail banks, J.D. Power and Associates said in a study released on Wednesday, adding that banks may be sacrificing long term growth in favor of short-term gains.
Customer satisfaction with retail banks dropped 26 points on a 1,000-point scale to 737 from the year before, according to the survey of nearly 20,000 households, conducted by the consumer study arm of McGraw-Hill Cos Inc.
While the current financial crisis has bruised the image of retail banks, it is cost-cutting and increased fees that have largely contributed to falling consumer sentiment, the study found.
"Some of the key drivers of customer satisfaction, such as the percent of transaction problems, fees, and wait time for tellers and phone service are going the wrong direction," Rockwell Clancy, executive director of financial services at J.D. Power and Associates, said in an interview.
Faced with the collapse of home values and the credit crisis, banks have cut personnel and increased transaction charges to meet shareholder demands.
"Typically when financial institutions are under a crunch, with loan volumes going down and charge-offs going up, banks raise fees and reduce staff to make their numbers," Clancy said.
Among the highest rated retail bankers, Commerce Bank received the top spot in the Mid-Atlantic and Midwest regions, while BancorpSouth Inc was rated highest in the Southeast.
Wachovia Bank was ranked first in the Southwest, and Bank of the West led the Western region of the country.
Banks that resist the urge to cut costs and retain a high level of customer service could reap financial rewards in the future, J.D. Power said.
According to the study, a bank that increased the number of highly committed customers -- people with a strong emotional attachment to the brand -- by 5 percent saw overall deposits grow as much as 3 percent annually.
"The focus on customer satisfaction can sometimes be considered as a discretionary expense when in fact it's the real differentiator in financial performance," Clancy said.
(Reporting by Steven Bertoni, editing by Dave Zimmerman)
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