During a recent meeting of the Indiana Bankers Association management team, a question arose regarding whether the image of banks and bankers is still damaged after the fallout of the 2008 financial crisis. If so, should we be leading an effort to repair that image? There were the usual opinions that yes, the image is still damaged, and yes, there should be an effort to restore it. This segued into a discussion about who could lead such an effort, and how it should be approached.
Specific opinions vary from person to person, but my view is as follows: First is that an individual state trying to lead a campaign is probably not cost-rewarding. The banking image devaluation resulted from the fact that the banking industry has never defined banks as insured depositories, yet deposits are what separate banks from other financial firms. Regrettably the national media, in the days following the financial crisis, essentially defined banking as mortgage lenders. Not just mortgage lenders, but any participant in the process of mortgage lending. That could include Realtors, title companies, appraisers, mortgage brokers, investment banks that put together secondary market bonds, and rating agencies. While this list is not comprehensive, it conveys the failure of the banking industry to have accurately defined itself. To amend the flawed definition thrust upon us would require more than the efforts of a single state; it would require a national media campaign. That national campaign would require a consortium of states acting together, or the leadership of a national organization.
The next issue is how to fund such a campaign. Not all segments of the banking industry were affected in the same way by this negative image, thus local and regional banks might choose not to participate in such a campaign. Much like the national politicians whose constituents love their congressman, but believe that Congress itself is broken, customers tend to love their own banks, but view the banking system as unfair. This phenomenon favors those community bankers who are serving a smaller geographical group of customers. Would small-town or regional bankers want to spend money for a national image campaign, when their customer bases are comfortable with their banks, even if critical of the banking industry? My guess is that they would not.
Could all of the state bankers associations collectively fund such an effort? The answer to this question is less clear, because not all states are created equally. Some still have hundreds of banks headquartered within their borders, while others have only a handful. Some have ample financial resources, while others have very little money in reserves. Some have tried image programs before, with mixed results, and some have not. It would be difficult to build the consensus needed for a nationwide image program to emanate from the state associations.
A national bank trade association could lead the effort, but the question is funding. Who would fund such a long and expensive campaign? Even a national association would struggle with getting all segments of the banking industry behind an effort, for the aforementioned reasons. All that is left is allowing the banking industry’s good deeds over many years to build up into an improved image. If and when that happens, I hope the industry will spend the time and money to proactively define what a bank is.
I thank the IBA management team for engaging in enlightening discussion on an issue that is, and will remain, an important topic for many years.
– S. Joe DeHaven