Since the global financial collapse in 2008 the reputation of banks worldwide has been heavily damaged. With continued high unemployment, prolonged recessions and global economy recovery still in flux, many would argue in the last six years little has been done to repair the tarnished image of banks. Reported bad behaviour (like the recent Libor scandal) from global banking institutions has also left Canadians a bit weary – despite our own financial system adhering to the highest standards of integrity. It’s a point of contention touched on by Bank of Canada Governor Mark Carney, who urged banks to renew their focus on customer trust as a measure to revive the world’s economy.
Can Banks Rebuild The Trust?
Regular consumers in Canada and worldwide have stood by and watched as banks in the U.S were handed billions of dollars to avoid bankruptcy while many individuals lost their jobs and defaulted on their mortgages. In a bid to keep the economy moving, central banks have been printing money, but at the expense of currencies around the world being devalued, which has contributed to the eroding wealth of individuals. All of this happens as banks continue to report millions in profits each quarter. After all, what is now referred to as the financial crisis was caused by work of greedy bankers who made bets with money that did not belong to them and who reaped the rewards by collecting large pay checks.
Carney Says Banks Should Reconnect With Core Values
This was the subject of discussion in a recently speech made by Carney to a group of business students at Western University. He remarked, “It has been said that, ‘trust arrives on foot, but leaves in a Ferrari’. After the Ferrari screeched out of the parking lot in 2008, what steps have been taken to rebuild trust”?
His suggestion is that banks look to their morals, noting the “behavior during the crisis demonstrated that many were not being guided by sound core values.” He points out that rewards given to bankers for short-term returns created a situation where the present was overvalued and the future was undervalued. He added work done at banks was driven more by how individuals wound be compensated rather than how it would help the overall bank and its clients. The core values of a bank should always first benefit their clients.
Putting The Customer First
Banks need to reconnect with what they were really meant to do. Carney remarked in his speech that lenders no longer have a “direct view of the impact of their work.” With the onslaught of credit default swaps and other complicated financial instruments banks have become disconnected from their real clients. Banks are more concerned with making money and working with other banks then serving the needs of their own customers. He also spoke about clarity and the need for more transparency at the banks in order to build the public trust.
Regaining Canadian Trust
Canada’s banking system has been upheld as the model of what a sound financial system should look like. But despite this, recent studies have shown that only 56 per cent of Canadians think banks always do what’s right. That means close to half of Canadians are still weary about how much to trust the banks. Part of that might be a spill over of what’s happening in global finance but constant news of ballooning bank profits can’t help either. Just this week BMO announced a profit of $1 billion in the last quarter. That would make anyone paying fees wonder.
A New Generation of Trust
Carney concluded his speech by reminding students in attendance that the ultimate responsibility in banking lies in their hands. For those entering the banking industry, he urged them to uphold the traditional values of banking in order to regain the trust of the public. This all sounds idealistic and great at a lecture to students, but in the real world where profits are put before people many find it hard to work for others when the reward of working for yourself is so lucrative. The real issue remains the bloated salaries that so many on Bay and Wall Street continue to enjoy. That’s what gets in the way. Once those are removed the trust that customers once had for banks could start to be restored.