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Playing ping-pong with bank’s yachts

After my note the other day about the thoughts of folks in transaction banking,  followed by the results of the US banks that shows a big slowdown in equities, fixed income and commodity trading, it struck me that like a double-dip recession we are now in a ping-pong interregnum.

What do I mean?

During a period of long-term stability, like the early to mid 2000s, where results were relatively predictable, markets were resilient, conditions were benign and the headwinds favourable, all the banks invested in innovation programs for growth.

Then we hit the turbo turbulence of the Global Financial Crisis and everything went bananas.  Nothing was certain, everyone was panicking, markets were tumbling, and everything was going south, all the banks invested in cost cutting and risk management.

By the end of last year, things seemed to have come back to some kind of norm and so the talk of growth and investment was back on the agenda.

Now it’s going off the agenda again, as headcounts are being shed and cost cutting is back.

In other words, the uncertainty of markets is causing many banks to have strategies that are about as robust as a yacht with a sail full of holes.

The yacht’s going nowhere, regardless of the wind’s direction.

Last quarter, it’s growth and innovation.

This quarter, it’s cost cutting and risk.

Next quarter it’s growth and risk.

The quarter after that, it’s innovation through cost cutting.

Who knows what strategy some banks are following, as it’s just completely tactical and reactive.

The thing is that you cannot have a wholly reactive strategy.

A wholly reactive strategy is a strategy shot through of holes.

So what do banks need to do in these turbulent times?

Well, they need to have a strategy for a start.

The strategy has to be where they want to get to in the next few years

We could talk missions and visions, objectives and key performance indicators but, more importantly, we need to talk about a direction.

A place the bank wants to be.

At least if a bank has that direction, then they can change the yacht’s course to suit either wind: the strong headwind that wants them to turn or the supportive tailwind that sets them on their way.

After all, with a direction, at least the bank can turn from the headwinds but still know what course they are going to charter, rather than these ping-pong strategies that just say speed on, turn back, speed on, turn back.

Guess what?

That gets you nowhere.


About Chris M Skinner

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here…

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  • Chris, to continue your yachting analogy. If this was an around the world race, every time the yacht sailed into a different sea (regulator), the rules of the race would change; more crew, less crew, use the engine, three sails, two sails, go inside the bouy etc. And of course, for some yachts, they would need to comply with the rules of their own sea as well as those they were sailing through!