WSBI-ESBG Managing Director Chris De Noose opines on the merits of decentrlised, locally focused banking in times like these.
The following piece is an editorial from WSBI-ESBG Managing Director Chris De Noose who looks at the merits of decentralised, locally focused banking, especially in times of need such as the current Covid-19 pandemic.
>> See: ESBG statement on Covid-19
>> Read: WSBI statement on Covid-19
BRUSSELS, 2 April 2020
“Count the significant events, the technological changes and the inventions that have taken place in our environment since you were born and compare them to what was expected before their advent. How many came on shedule? […] How often did these things occur according to plan?
This quotation comes from Nassim Nicholas Taleb’s book “The Black Swan”. Even if it is too early, and we first need to do whatever we can to mitigate the consequences of this pandemic, we should also heed its lessons. And one of these lessons is, as Taleb says, that crises happen. Just as Europeans were convinced that black swans could not possibly exist, until they saw them in Australia, we are unsufficiently aware of the unexpected events and risks that lurk in every corner of our global world.
A rogue trader in Singapore brings down the respected British investment bank Barings. Salespeople in the U.S. sell mortgages to people who cannot possibly afford a house and a few years later the accumulated risk brings the whole financial system to its knees. A virus spreads from a little-known Chinese city and two months later the whole world is locked down and thousands of people lose their lives. Countries in the heart of Europe block roads with containers to close borders that citizens had come to consider as folklore from long-gone times. These and many other events changed our world, yet came as complete surprises.
In times of absolute urgency, when citizens’ lives are in danger, they turn to their local, regional and national authorities for answers, rather than to supranational organisations. The medical doctor in our street, the local hospital, the workers in the shops and supermarkets are the people who deserve our admiration because they take care of our basic needs: food, housing, health.
The consecutive waves of globalisation that we have known over the last decades have neglected this local level in favour of decision centres in far-away countries and global supply chains encompassing various continents, even for very simple goods. Think of the surgical masks or the hydro-alcoholic gels that only the Chinese seem to be able to produce.
Too many connections, too many global structures, too many conglomerates lead to a system that has become exposed to too many risks, to a system that has become too fragile and that one can compare to a giant with clay feet. Instead of developing our own communities, our own regions, we have been searching profits at the other side of the world, often to the detriment of the local communities there. The current crisis, with its horrible toll of human lives should make us consider the benefits of a decentralised model that aims first and foremost to develop and improve its own region. This is not a selfish, egocentric mentality, on the contrary: if everybody works to its own strengths, all the citizens will be better off, and not just the anonymous shareholders of large corporations.
The decentralised system of savings and retail banks can fall back on a high number of physical and digital access points and a decentralised decision power. It is ideally placed to cope with crisis situations. It does not engage in short selling or other activities aimed at short-term profit but focuses on the essential in crisis times: keeping the credit tap open and solve problems in close cooperation with the clients. A decision for a loan to bridge a few difficult weeks or months is taken by the branch manager and not by the distant head office. Our employees know their clients well, they often live in the same village. That trust does miracles when a quick solution is needed.
A decentralised, locally-focused system thrives thanks to the principle of subsidiarity that once was a driving force of the EU but now seems to be forgotten. The local level and its strengths are worthwhile considering, as a valuable element of a system that is strong thanks to the diversity of the elements that compose it and thanks to the proximity to its end-users. Applying the same rules and regulations to all the segments of the system would surely be detrimental.
The crisis we are going through and that has sadly taken the lives of so many of our fellow citizens should push us to consider whether we are going in the right direction, whether we have established the correct priorities and whether we have sufficient resources to go where we need to go. The advice to “stay at home” saves lives in this crisis, but it can also be applied to financial service providers who have become global without ever having been local. Because without the local level, without the people working and living in our regions, in our cities in our communities, the global level will be nothing more than an illusion.
Chris De Noose
Managing Director, WSBI-ESBG