BlogsGet back to the business of banking
We’d all be better off if we jettisoned the misleading term 'relationship banking'
By Peter Williams | Published 13:19, 07 February 12
Angela Knight, the forceful chief executive of the British Bankers Association, wants constructive results to emerge from the national debate about the future of banking. She condemns the “personal pillorying and lobbying of catchy but insubstantial sound bites”.
CFOs agree with her, they want a properly functioning banking system that supports their businesses. Knight says that banks understand that they are essential to Britian’s economic recovery, jobs and prosperity. But they seem incapable of following up that understanding with constructive action.
Banks clearly still have much to do to put their own houses in orders - and are struggling with issues way outside their control such as the eurozone crisis - but even in the midst of these difficulties businesses deserve some honesty and clarity.
For a start let’s stop using the term ‘relationship banking’. In better times it was a neat shorthand for suggesting that both banker and CFO were in it for the long term. Such illusion died in the credit crisis and we’d all be better off if the phrase was permanently sidelined.
Instead the banks left standing should tell CFOs whether they want to do business with them, being clear about what services they can offer and at what price. CFOs have no way of working out the impact of regulation like Basel III and the Independent Commission on Banking (ICB) on their credit and liquidity plans, nor on their long-term interaction with those providers of finance.
But an impact is already being felt. The last few months have seen examples of banks dumping businesses when lines of credit and loans have come up for renewal. Ending a relationship is fine, as long as the bank gives plenty of warning and is honest about the reasons why: has the bank lost faith in the sector, or the business or does it think there is a better return elsewhere?
In turn finance chiefs need to be smarter about how they deal with their banking partners in particular how they find the necessary credit and allocate their spend on services such as payment services, trade finance solutions and hedging instruments.
And without raising the argument over pay: bankers like Knight can hardly expect CFOs to be happy that they are forking out over the odds for mediocre services which don’t work with the technology or geographical reach of their organisations.
Most of all finance chiefs need to see banking returning to something approaching business as normal. Businesses need suppliers and customers that are being well served by bankers.
Business and consumer confidence won’t increase until sensible levels of credit are flowing to every part of the system. With or without their precious knighthoods, CFOs need bankers to go back to the business of banking.
CFOs agree with her, they want a properly functioning banking system that supports their businesses. Knight says that banks understand that they are essential to Britian’s economic recovery, jobs and prosperity. But they seem incapable of following up that understanding with constructive action.
Banks clearly still have much to do to put their own houses in orders - and are struggling with issues way outside their control such as the eurozone crisis - but even in the midst of these difficulties businesses deserve some honesty and clarity.
For a start let’s stop using the term ‘relationship banking’. In better times it was a neat shorthand for suggesting that both banker and CFO were in it for the long term. Such illusion died in the credit crisis and we’d all be better off if the phrase was permanently sidelined.
Instead the banks left standing should tell CFOs whether they want to do business with them, being clear about what services they can offer and at what price. CFOs have no way of working out the impact of regulation like Basel III and the Independent Commission on Banking (ICB) on their credit and liquidity plans, nor on their long-term interaction with those providers of finance.
But an impact is already being felt. The last few months have seen examples of banks dumping businesses when lines of credit and loans have come up for renewal. Ending a relationship is fine, as long as the bank gives plenty of warning and is honest about the reasons why: has the bank lost faith in the sector, or the business or does it think there is a better return elsewhere?
In turn finance chiefs need to be smarter about how they deal with their banking partners in particular how they find the necessary credit and allocate their spend on services such as payment services, trade finance solutions and hedging instruments.
And without raising the argument over pay: bankers like Knight can hardly expect CFOs to be happy that they are forking out over the odds for mediocre services which don’t work with the technology or geographical reach of their organisations.
Most of all finance chiefs need to see banking returning to something approaching business as normal. Businesses need suppliers and customers that are being well served by bankers.
Business and consumer confidence won’t increase until sensible levels of credit are flowing to every part of the system. With or without their precious knighthoods, CFOs need bankers to go back to the business of banking.
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