Can I trust my banker?

Aside from the duplicity of Fortis’ former president Maurice Lippens a few weeks before the collapse of Belgium’s largest bank at the time (see Le Soir of September 23), there are certain figures that have made for painful reading and have been growing worse for the banking sector since 2008. There has been an increase in the number of complaints, according to the sector’s financial ombudsman, a lower confidence index and continuing loss of clientele, and not a day goes by that consumers don’t have bad memories of the banking industry.

“Yes, our image has deteriorated. Recent revelations about Fortis are not very encouraging for those who are working to rebuild the industry’s reputation. Those revelations aren’t new: they were included in a report by Dutch experts published three years ago following a lawsuit in the Netherlands. However, the industry has taken and continues to take measures that will restore consumer confidence,” says Michel Vermaercke, manager with Febelfin, the Belgian financial sector federation.

Confidence in banks continues to fall

There is a lot of work to do. Worldwide, according to a recent study by Ernst & Young, consumer confidence in banks continues to fall: 40 % of the 25,800 people surveyed in 35 countries say they lost confidence in the banking sector in 2012, while only 22 % say they are more confident. Not surprisingly, confidence is the weakest within the European Union. “The recent London Whale scandal and last year’s Libor scandal tarnished our image even more, to the point where we have to advise our clients only to buy what they understand,” says one banker, who asked to remain anonymous.

“These affairs are regrettable, but we aren’t sitting on our hands,” adds Vermaercke. “The mediation service is the only one in the world, to my knowledge, where the consumer organizations’ representative has veto power and where, if there is litigation, the resolutions board is composed of judges. Overall, everything has been put in place to reassure consumers about the financial sector. Our banks’ risk profile has been reduced. Banks’ balance sheets have been reduced by 35 % and equity has increased by 20 % or close to €10.4 billion. Commercial credit, including credit to the smallest businesses, continues to grow. The sector has stabilized and continues to play its role in the economy,” says the banking lobby representative, “which should restore the industry’s credibility in time.”

“Certainly, Europe has taken significant measures to improve the banking sector’s stability, especially in terms of reserve requirements, but that’s not enough,” says our banking source. “When compared to more industrial sectors, banks still do not have adequate capital compared to equity. If there were another crash, they would still not be safe. It’s difficult to have confidence under these circumstances.”

“We need to qualify this,” responds Bruno Colmant, finance professor at the Leuven School of Management. “We can’t forget that central banks can easily create money to dilute the effect of a lack of capital.”

Will other measures restore consumer confidence? “Yes. Training bankers is one measure. Between now and the end of 2014, 20,000 people will have taken courses from FSMA, the market authority. In addition, we have put a moratorium in place, established by this same FSMA, which calls on banks not to sell complex products. I know that all the bad banking practices haven’t disappeared, especially in big banks, but give us time to finish what we’ve started!” Vermaercke concludes.

F.M.

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