01.05.09 GET OUT OF THE TRENCHES

Over the past few months, a constant deluge of criticism has been targeted at banks. Banks have been continuously lambasted for creating the credit crunch, for making access to credit too easily and for leading us into the current economic recession.

Furthermore, banks have been heavily criticised for not understanding the complexity for their business, particularly the vehicles used to bundle 'toxic - assets' together for onward sale, and for making inordinate bonuses to employees for the 'profits' generated in these good times and for the way they handled the removal of previous management teams. I could write about this and many other areas being left at the banks' doors, but enough has been said elsewhere on these matters.

It is no wonder that the banks' employees - once the most confident and dynamic of the business community - have retreated to the trenches to hide away from this constant barrage. An attitude of 'I can't do' now appears to prevail.

However, when we take a step back and review the situation, can we actually lay responsibility for all the current economic issues at the door of bank employees any more than we can anyone else in the business community?

it is clear, again in hindsight, that we were all aware of the risks underpinning business over the past ten years or so and that lending criteria had moved from a traditional model based around a secondary secure exit to one predicated on future cash flows and an ever increasing growth in the value of property. The business community were all happy to ride the crest of the wave and reap the rewards. They, too, ignored the increased risk from which this wave arose and inevitably crashed.

You, the bank employee, have been hit as hard as anyone in this economic recession. The uncertainty in the future of UK banking has resulted in significant job losses and uncertain employment for those remaining. In addition, your job has become increasingly difficult as lending criteria is tightened and public confidence in banks is at an all time low. This is clearly de-motivating.

In my opinion, we all must take some responsibility for the current economic situation, and we should all work together to get out of it.

We must all change our attitude. We must be positive and dynamic. Yes, many situations are out of our hands and the criteria to which credit departments are willing to lend will result in less new business and significantly more difficult conversations with clients for all of you.

You can, however, work closely with clients and their accountants and provide other benefits which are outside the traditional scope of the banker, but will build new and more vibrant relationships with clients.

Get out of the trenches. Meet with clients and their accountants to discuss the issues which are affecting them all. Some that immediately spring to mind are:

• The quality of their management information and how this can be improved;
• Discuss break even and 'cash even' positions with clients and alternative strategies of cash management;
• Talk to the client about reduction of overheads and try and network clients to the benefit of all;
• Agree tax saving strategies (often simple techniques such as changing year ends can reduce tax payable);
• Discuss re-organisation plans and 'what if' scenarios should issues deteriorate;
• Be seen to be fighting the client's case internally with your credit committee.

This proactive approach may not provide clients with the funding they require, but clients will be clear that you are fighting their case, walking the hard walk with them and not riding out the battle from the security of the trench.

This is a time to build relationships and help each other. Being close to clients through the good times is easy. Staying close through the rough times is where it counts, and will result in a much more vibrant and trusted relationship when the wave starts to rise in the future.

Publication: Chartered Banker
Author: Peter Gallanagh