Why reward a bank in these times when the banking system is accountable for the financial crisis and a large part of the economic crisis?
It is natural to ask this while attending the presentation of the Of – Best Bank 2017 prizes, an initiative organized by the Osservatorio Finanziario (Financial Observatory) at the Milan site of Via Copernico on an “almost-hot” Wednesday, May 17th. Yet, the award ceremony evening is not just an opportunity to present a renewed role of the big data management platform, to outline some reference point benchmarks for the banking business and explain OF-POW, the new banking super-index [www.osservatoriofinanziario.it/ofmiglior]. It is also an opportunity to bring the banking issue back to the center. The awarding of prizes, rather than a media celebration typical of other organizations, seems to me, in this case, to have a more intimate sense of “award-recognition,” of a “symbol of acknowledgement”: more than a prize, therefore, it is an indicator of recognition in a historic moment in which banks seem to have lost the intimate sense of their mission.
It seems strange, in this regard, to deliver a “best loan” award when banks are focused on non-performing loans and many of them are implementing an “inverse business,” creating internal incentives to generate profits on non-performing loans generated by the bank itself. Less surprising is also the “best current account” award, albeit in spite of the increasing absolute and relative poverty and financial exclusion rates recorded in recent years, and not only in Italy. It is the banking identity, therefore, that comes from the comparison: in this function, the “award-recognition” finds its most vital reason for being. It is beyond doubt that banking intermediaries have lost the way to recognize themselves today, enduring an identity crisis that has never been experienced: the structure of interest rates renders credit intermediation less profitable, the operating structures have consolidated costs which are hardly sustainable or rational today, the competition of new intermediaries and the growing distrust of savers and investors accentuate the processes of disintermediation on the assets and liabilities sides of the balance sheet. It is urgent for banks to declare a new business model that can reconcile traditional business with other more innovative components and seek new positioning in the financial markets. Given the urgent need to clean up the budgets and strengthen assets, this is the strategic challenge that matters, which cannot be addressed without full awareness of its position. It is important, therefore, that models that outline benchmarks for products and processes are being addressed by individual banks and are used, in conjunction with internal ones, to better meet customers’ requests and to verify the achievement of announced goals. It is in the combination of internal and external evaluations that the bank achieves greater awareness of its identity. Growth always goes from here: from the perceptions that others have of our work; it is also valuable for banks that, nevertheless, are driven to identify “the other” in the sole “authority” – by now national and European — without ever having an “elsewhere”. This “elsewhere” is the market, the perception that the market expresses as compared to a bank, and to the whole banking system, its demands, its frustrations. Perceptions and requests are translated into orderly, measurable, and comparable summaries. The indexes, therefore, for the reasons stated, must find a natural evolution to offer an analytical contribution that internal processing cannot provide: (i) exalting the value of quality elements – typical of the economy of the wealth – for the banking stakeholders, (ii) capturing new products and new business lines that can configure and promote a more sustainable and inclusive bank model.
Welcomed, therefore, at the new special prize for the “best sustainable bank”; a first experiment that can be renewed and fostered. On this path, the same OF-POW could include, already next year, indicators dedicated to microcredit transactions. Microcredit is an tool of recognized inclusive value; according to the data from the Italian National Body for Microcredit, each microcredit is able to generate 2.43 jobs, in addition to promoting social inclusion and recording default rates significantly lower than those of traditional credits. Italy is at the forefront of microcredit and it is among the few European countries to regulate this form of credit in the new Title V of the Consolidated Banking Act [in this regard, there is my article “Microcredit is law” http://www.goodinfinance.com/microcredito-legge-si-orientano-gli-italiani/]. The National Microcredit Body — in its role as a public agency dedicated to promoting the microcredit market — has today signed 14 conventions with several banking intermediaries, providing a ceiling of about 200 million euros to be allocated to beneficiaries that are excluded from the traditional financial system, but bear micro-entrepreneurial ideas with a potential for success. This could be a first panel of banks to be considered for a specific benchmark. A prize for the “best microcredit product” could be an elitist benchmark for an inclusive bank that reacts with concrete responsiveness to the events of the crisis. In a scenario like the current one, that has a strong confidence gap in the banking system, a “best microcredit product” award can be a useful way to stimulate reconciliation between banks and customers and promote inclusive economic growth.