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Published: November 2, 2009
 / Winter 2009 / Issue 57

 
 

What Banking Needs to Become

Why Banks Still Matter

Banks — whether government controlled or privately held, whether specialist, regional, or universal players — are still the heart of the global economy. They pump the funds on which productive human enterprise depends. Banks must perform this role well, with all the diligence we would expect of any expert or custodian of an essential task.

Banking organizations must refocus on those fundamentals that are unchanged by the financial crisis — their core purpose, customer needs, and capabilities — while recognizing that profound market changes have occurred and will affect how these capabilities need to be delivered. Those leaders whose banks can respond to the times and enhance their capabilities will be to­morrow’s winners.

As customers of banks, we must recognize that this sort of trust and long-term relationship is in our best interest. It will allow us to share information and make better decisions, and it will also give us greater access to scarce credit liquidity.

As investors in banks and bank securities, we may have to accept lower returns as a trade-off for greater transparency, greater security, and a form of economic growth that reliably, if more slowly, does a better job of lifting all boats.

As citizens, and as the regulators of banks, we need to make sure that the core purpose of the financial-services industry is fulfilled. The capital security of individual institutions must be guaranteed, and the risks of the overall system must be managed. We must continue to encourage innovation, best practices, access to global capital, and the best talent. Banks need all these elements to function, and functioning banks are indeed critical to the recovery and prosperity of our nations.

Reprint No. 09405

Author Profiles:

  • Vanessa Wallace is a Booz & Company partner and leads the firm’s financial-services practice in Asia, Australia, and New Zealand. She specializes in strategy, postmerger integration, and restructuring in retail banking, wealth management, insurance, and the public sector.
  • Andrew Herrick is a senior associate with Booz & Company based in Sydney. His expertise is in retail and business banking, with a focus on strategy, organizational transformation, and operational excellence.

 

 
 
 
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Resources

  1. Shumeet Banerji, Paul Leinwand, and Cesare R. Mainardi, Cut Costs, Grow Stronger (Harvard Business Press, electronic book, 2009): Step-by-step insights for reducing expenses dramatically by focusing on a coherent system of capabilities.
  2. Alan Gemes, Peter Golder, and Thorsten Liebert, “Global Financial Governance: Improving Stability and Mitigating Future Threats,” Booz & Company white paper, September 2009: Basic principles for the next generation of financial-services regulation.
  3. Henry Kaufman, The Road to Financial Reformation: Warnings, Consequences, Reforms (Wiley, 2009): A banker’s perspective on thehistorical precedents for the current crisis, its likely aftermath, and the impact on regulation and the industry.
  4. Yoshiyuki Kishimoto, Hiroyuki Sawada, and Chieko Matsuda, “Follow the Customer, Follow the Car,” s+b Leading Ideas Online, 12/17/08: Lessons from Japan’s “lost decade” reinforce the imperative of being close to the customer and the dangers of excess capital.
  5. Andrew Turnbull, “Is State Control Making a Comeback?s+b Leading Ideas Online, 04/28/09: Why permanent government control of banks is unlikely — but a new regulatory environment is assured.
  6. For more thought leadership on this topic, see the s+b website at: www.strategy-business.com/finance.
 
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