Friday, June 19, 2009
During the last seven months, the banking industry has been front and center in the global financial crisis. While much attention has focused on the too-big-to-fail banks -- such as Bank of America Corp. and Citigroup, Inc. -- a recent Wall Street Journal study <http://online.wsj.com/article/SB124269114847832587.html> of 940 small- and mid-size banks revealed that commercial real estate loans could generate losses of $100 billion by the end of next year if the economy’s troubles deepen. According to the study, more than 8,000 lenders throughout the country are being squeezed by the recession and commercial real estate-related loans which could account for nearly half the losses at the banks analyzed.
The findings provide a stark reminder that the U.S. banking industry’s problems stretch far beyond the 19 giants scrutinized in the recent government stress tests. For banks that are stable and performing well in the current market, many are “guilty by association” with regard to public perception. Even though one-third (approximately 300) of the small and mid-size banks examined by the Wall Street Journal were found to have capital levels deemed “healthy” by Federal regulators, it is our assertion that key stakeholders – including current and potential customers, customer-facing employees, local communities and media – aren’t receiving effective communications to reinforce the stability of these institutions. If you are not telling your story effectively and proactively, who is?
While silence may be golden according to ancient Egyptians, staying quiet can be costly for organizations in turbulent times. For the banking industry, a lack of communication can cause the public to assume the worst. As such, it is important that banks communicate early and often with customers and staff about what the environment has in store and how the bank is performing both in the short- and long-term. It is also important that every customer-facing employee – from tellers to relationship managers – is armed with a consistent set of messages for use in responding to inquiries, particularly as the frequency of media reports on these issues increases.
It’s important to note that communicating effectively doesn’t require a substantial investment of time or money. Rather, it requires up-front preparation and a thoughtful communications strategy to deliver credible, authentic messages to key stakeholders in a manner that advances the following objectives:
• Bolstering stakeholder perceptions and understanding of the bank’s continued health and stability
• Communicating the diversity of the bank’s portfolio and its conservative, risk-averse management strategy
• Equipping customer-facing bank staff with a set of crisp messages to be used when asked “how the bank is doing” to ensure a consistent and uniform response
• Countering ongoing media reports directly with targeted messages to avoid having the institution grouped with an unappealing peer group.
In addition, communications activities should be geared to a variety of stakeholders who touch the bank directly and indirectly, including customer-facing employees and their networks (family, friends, neighborhood associations, church groups, etc.), current customers, prospective customers, communities in which the bank operates, government regulators and, of course, the media (both traditional and social).
As the economy fights its way out of this unprecedented recession, don’t let the current reporting environment affect how your bank is perceived in the marketplace. With a little planning and preparation, small and mid-size banks can benefit greatly from a targeted and organized communications approach.
John Corey is president and founding partner of Greentarget.
John Corey
jcorey@greentarget.net