Background

There is no doubt that 2012 was a difficult year for financial institutions and banks. Again financial institutions and banks found themselves too often in the news for the wrong reasons. This damaged trust in banks, which was already at low ebb.

The behaviours which made those headlines in 2012 underlined how banking as a whole had lost its way, and had lost touch with the values on which banking reputation and trust were built.

Over a period of almost 20 years, banking has become too aggressive, too focused on the short-term, too disconnected from the needs of their customers and clients, and wider society.

There was a tendency to pursue short-term profits at the expense of the values and reputation of the organisation; a tendency to choose profit over values-driven business.  In doing so banks damaged their ability to make long-term sustainable returns.

Values-driven business

But banking will only be valuable business if it is values-driven business; banking will be valuable business if banks operate to the highest standards of behaviour with integrity.

There is no choice between profits and values-driven business in banking business and to place them as opposites fundamentally misunderstands the problems facing the banking sector.

Banking business is built on having a firm commitment to strong values. This is not something banks should do for public relations or political benefit. It should not be a window dressing gimmick. It should be how banks should be run to become valuable and sustainable institutions.

Banking Reforms

The time for reform is now. Banks should reform and the reform should be values-based reform. Banks should look afresh at what they want to achieve and how they want to do it. Banks should reflect on their history which shows how banks and what banks can achieve when grounded in strong values.  And by remaining grounded and committed in strong values, then banks can be institutions that does the right thing for colleagues, customers and clients, and indeed all of their stakeholders.

Agreeing and having a strong commitment to strong values is one part of the equation, the easy part of any banking reform. The difficult challenge is to ensuring everyone in the organisation live by them all of the time.

Aside making sure every staff is aware of the values, banks should make sure the values play apart in how bank measure individual and business performance. Performance assessment must be based on the ‘WHAT’ and ‘HOW’. Bank must ensure they reward people for making the bank money in a way consistent with their values. Rewards should be link to the upholding of the values.

Conclusion

Banks have been around for centuries. Their success and longevity has been based on integrity and its attention to customers and clients. When Banks have forgotten that, they have paid the price. If Banks continue to combine the right values with the right strategy, banks will build more successful business in the years and decades that follow.

No bank can continue to be successful – nor do they deserve to be successful – unless they live by their values. The business of banking is values-driven business.