Thursday, June 09, 2011

The Global Banking Gap

Annika Falkengren, the president of SEB — at over 150 years, the oldest privately held bank in Sweden — spoke recently at a Swedish American Chamber of Commerce luncheon, on the new financial landscape for banking in a globalized world.

What struck me about this talk, in comparison to others I have heard, is Falkengren’s emphasis on the customer. Describing SEB as “the relationship bank of the Nordics,” she noted: “To me a successful bank in the new financial landscape stays close to the customer, listens, adjusts to customer needs and continues to build long-term relationships. It is about being there for customers in good times and bad; that is what a trusted partner does." That is public relations wisdom, if I ever heard it.

She noted that there were two sides to running a trustworthy bank: 1) the "hard factors," including strong corporate governance, accurate risk management and transparency in everything from customer information to how we operate our business and 2) the “soft factors” which are more important than ever: a long-term view in everything we do -- that can last over business cycles — a holistic perspective on relationships and customer needs and a commitment to provide the right competence and mindset to deliver the very best service experience.

She cites the new landscape as post-subprime and post-Lehman and sees three characteristics in this emerging period: 1) the "the never again mantra" which creates a commitment from the world's leaders "to create a reregulation of the markets“ to avoid another financial crisis; 2) to make this happen, the cost of doing business will increase to expand compliance, risk control and the auditing functions; and 3) markets will continue to globalize, making a level playing field for banks and financial institutions more critical.

SEB, admittedly, is well-capitalized and a stable bank -- and a vigorous supporter and investor in the three characteristics noted above. And there are others with fine records, too.

But overall, I wonder if global banking regulation will ever materialize? The global regulatory framework, Basel III, is at work -- but is it a work in progress? Capital and liquidity ratios must grow. Further, who will be responsible for the worldwide monitoring of banks' investment in compliance, risk management and auditing?

"To achieve and support stable and effective globalization, there must be a level playing field," the SEB president said. "Sometimes the wish for a level playing field seems like the quest for the Holy Grail," she concedes.

But trustworthy relationships are all about opportunity, safety and "leveling." It is hard to have all of them without a globally managed, systemic, integrated approach -- as we are global whether we like it or not. And the longer we delay in adopting the rules required for banking globalization, the greater the risk we have of puncturing the trusting relationship with the customer.

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