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Global banks adapt to uncertain economics and regulations - Improving bank customer relationships - EY - Global

Global banks adapt to uncertain economics and regulations

Improving bank customer relationships

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"The business model will need to change in drastic ways, and the sooner, the better."– Summit participant

Since first convening in 2009, participants in the Bank Governance Leadership Network (BGLN) have discussed the critical, though sometimes strained, relationships between banks and their customers.

At the 2010 Bank Directors Summit, directors agreed that improving customer service would both help repair the industry's reputation and create pathways to more loyal, profitable client relationships.

Strengthened consumer protection: is it fair play?

Political reaction to the financial crisis has extended beyond concerns that banks were unaware of the risks. There is also a deeply held perception among policymakers that banks were putting themselves first, ahead of the customer, and that belief has motivated a host of regulatory actions since the crisis began.

Among them is strengthened consumer protection, leading to:

  • The establishment of new agencies with tougher powers and broader mandates
  • Even less clarity about what it means to treat one's customers fairly
  • Greater need for banks to adopt a truly customer-centric culture

How flexible is consumer protection regulation?

While directors believe their banks are accustomed to changing their product approval and sales processes to protect consumers, they are less confident in their banks' ability to manage such changes in other client segments. They know the costs of delivery will rise, as will associated legal risks.

Several directors noted before the summit that they were spending more time understanding the product development and approval processes for institutional clients. Others reported that their audit committees were watching those processes more closely.

Major changes to core business models

Banks are being forced to consider radical changes to the business models that underpin some of their core banking services. For example, the withdrawal of services and new pricing strategies have prompted directors to wonder whether lawmakers have fully considered the unintended consequences of their actions on consumers in need – specifically:

  • Major adaptions to credit card pricing
  • The slow demise of "free" checking accounts
  • Reform of housing finance

Serving consumers and clients presents challenges

New laws are forcing banks to change the way they interact with their customers and price their products and services. However, consumer and political discontent is making such changes difficult to execute.

Now, more than ever, bank boards should engage their executive teams in active dialogue on their overall customer and client strategies. These issues will have a huge impact on the bank's reputation, economics and underlying compact with society to continuously offer critical banking products and services.

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