Trust and the Banks - Defusing the Bomb
"Trust is like a piece of silk, once torn, you will always see the join" Anon
"Just as the revolution eats its children, unchecked market fundamentalism can devour the social capital essential for the long term dynamism of capitalism itself" Mark Carney, Governor, Bank of England
Whilst the latest banking scandal may not have surprised even the most optimistic of capitalists, for the most part it fills most of us, even ex-bankers like me, with an overriding sense of gloom.
How dare they? They have fixed the currency markets, fiddled the LIBOR rates, mis-sold PPI, endowments and other financial products. When push came to shove, they proved to be undercapitalised and now the economy is on the up, they are slow to lend. Even this week RBS has been fined millions for failing to invest in its IT systems - putting our money at risk.
Should we be surprised? Banks, remember, are relative newcomers to the world of unfettered capitalism and since the freeing up of regulations in the 1980s have been most anxious to please their demanding owners. Not us the customers, but the shareholders. In this context, all efforts have been made to maximise financial returns to ensure the share price and dividends were optimised. Strategies were set to maximise returns with "under-performing" businesses being sold off, being identified as "non-core", and new investments in riskier opportunities pursued. Staff were trained, incentivised and rewarded on the basis of achieving the overarching financial returns. New performance management approaches were introduced to encourage a single-minded drive to enhancing profits. At the same time, banking products became riskier and a rising market supported a frenzied dash to out do each other. A poisonous cocktail.
Chris Lorimer is an
experienced management consultant who has helped many owners, Directors and staff to achieve more.