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Fainé: Savings, retail banks face 'New Reality'

Fainé: Savings, retail banks face 'New Reality'
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​​​Keynote address ​
by 

Isidro Fainé

Caixabank Chairman and President, Spanish Savings Bank Association

24th World Congress of Savings and Retail Banks

25 September 2015

Washington, D.C. 



Dignitaries, ladies and gentlemen, dear colleagues,

Good morning to everybody. 

It is a great privilege for me to speak at this important gathering of savings and retail banks from all over the world, especially at this crucial moment of time for our sector. 

As the world emerges from the worst financial crisis since the Great Depression, retail banks are waking up to a new reality. From my experience as Caixabank chairman and as president of the Spanish Savings Bank Association we are facing an entirely new banking environment.

More specifically:
  • consumer behaviour and requirements have changed dramatically
  • restrictive regulation has strongly impacted our relationship with our customers
  • low interest rates have never been experienced... for such a long period
  • new technology has radically changed the way in which business is done
  • new players are emerging to compete in the market.

However, as Franklin D. Roosevelt said: “A smooth sea never made a skilled sailor”.

So, let us focus on what we can learn from adversity and use it to quickly adopt new approaches;
  • ​having foresight,
  • being cautious but nimble will enable us to successfully adapt to the new circumstances.
If not, we risk being left behind.

To prevent this, let me briefly address some key goals I am convinced we should achieve to face these difficulties and strengthen our institutions:

First of all, we should regain the confidence and trust of our customers, which was in decline throughout the financial crisis and for that we will have to work hard.

Yesterday, most of the speakers talked about trust and this is because in our business, we thrive on our customers’ trust, on the relationship of confidence that is built up between:
  • customers and their banking entity
  • or, more precisely, customers and our employees
This is a fundamental premise: If there is no trust, there is no business. 

Trust is:
  • professionalism
  • empathy 
  • dialogue 
  • honesty
  • taking on the spot decisions in front of the customer, and finally
  • vocation of service: we should give customers more than they expect (Go above and beyond the call of duty).
Secondly, in order to achieve this, we have to ensure, through our lobbying activities, that regulation helps us to achieve our mission: that is, to maintain close, interactive relationships with the individuals, families, independent business professionals, SMEs, and other Institutions we serve by offering a wide range of financial services to every segment of the market.

If we do so, we will be a strong and unbeatable financial network.

We just need legislation to respect and understand the activity of our WSBI members, given that we provide:
  • stability to the financial system, and 
  • a major supply of finance to the real economy.
Thirdly, the most important thing is that our products and services are truly useful to our customers thus providing us with recurrent income and profits.
For instance, there are several lines of business that we, WSBI members, can further develop with the aim of increasing our revenue:
  • foreign business: import-export operations, money transfers, exchange and so on.
  • securities: build up portfolios for our customers.
  • insurance services: distribute life, non-life and healthcare insurance as well as a wide range of private pension plans.
  • consumer finance: promote finance services for private consumption.
    (These business lines are our bread and butter. So, we should lead these segments of the market)
In order to achieve this, we must not forget to have permanent dialogue with our customers. We have to be very close to them to be in a position to understand their needs. 

Better customer understanding enables better service, which generates a better customer experience, which, in turn, leads to greater customer loyalty and income.

On the other hand, we have got to revise our costs, some of which can be found in: 
  • over-staffed Headquarters: If we streamline Headquarters in line with the present situation, we streamline costs.
  • financial structure: We can surely improve it, given the abundance of liquidity. 
  • financial margin: We need to pay close attention to the risk premium we apply to each customer, while also taking the cost of capital into account.
  • levels of risk weighted assets: due to the continuous changes of regulations, it is also highly advisable to systematically review the calculations.
  • conduct risk: we should be very cautious and absolutely compliant with banking regulations in every country we do business in.
(Misunderstandings made in this regard carry costly unforeseen fines, something we have never before encountered. Even more importantly, it can seriously hurt our reputation.) 

Now, let me move on to Human Capital and Values.

One of the most important issues, from my point of view, is to know to what degree the morale of managers and employees was affected during the global crisis. 

(It is clear that the sooner our teams recover confidence in themselves, the brighter our future will be).

I am convinced that, in any modern retail bank human capital management has to be at the leading edge of change. 
For this we need:
  • competent professionals
  • well-prepared professionals
  • and motivated professionals to drive the changes. This is not an easy task, but we can make it possible by renewing our culture of management and leadership. 
I have said on many occasions that managing is not giving orders. 

Managing and leadership is:
  • growing our people in terms of professional experience and training,
  • recognising and freeing talent
  • taking decisions and not passing the buck.
Leaders must be self-confident, but good leaders, in addition have to know their people well and be aware that:

What moves people most are:
  • their professional development,
  • learning beside a good manager, 
  • the challenge that lies before them,
  • the effect they have on their Customers,
  • the respect of their Colleagues,
  • the work climate in the company
  • and of course, their salary. 
In a nutshell, we must recover this work climate in all our organisations.

Every good Manager has formal power and personal power that stems from the recognition he gets from his employees as long as they consider that his orders are correct and are worth complying with because they benefit everyone. 

As a result, the only way a Manager can gain authority among his subordinates is if he is capable of earning their trust and respect. 

However, authority is lost when formal power is used incorrectly.

And this happens in three cases:
  • When power is used unfairly.
  • When power is not used and should be used.
  • Or when power is used unnecessarily.
As I said before, authority is not imposed, it is earned, above all by giving example with our acts and showing coherence between what we say, what we do and how we do it. 

And authority is cultivated by:
  • giving meaning to the work of our teams,
  • being able to draw others towards a vision, a goal and not push them in that direction, and
  • having permanent communication with collaborators because we need them to know: 
    • what they do, 
    • why they do it and
    • what lies behind their actions.
Nevertheless, managers must also be prepared to constantly overcome their own limits. 
This is not easy either. Getting there demands:
  • hope and optimism, to strive to maintain a dynamic attitude
  • efficiency, to be able to solve problems (Knowing what we want and acting accordingly)
  • flexibility and empowerment, to let our teams get on with their work
  • perseverance, to overcome difficulties, and
  • never forget that courtesy is an important part of our service.
A manager should also:
  • know his limitations and concentrate mainly on his strengths. (Preferably we should use our energy on issues we know well).
  • avoid, as Warren Buffet says, the ABC of business decadence: Arrogance, Bureaucracy and Complacency.
  • and not shut ourselves away in our own knowledge. 
Let us:
  • have an open attitude towards continuous learning,
  • be modest enough to learn from others, and
  • be critical of ourselves.
In short, a good Leader must be: 
  • a good strategist and also
  • a good executive, capable of structuring the organisation, selecting his people well and suitably communicating the tasks to be carried out, and
  • able to motivate his people to deal with the challenges and achieve their qualitative and quantitative objectives. 
Everyone agrees that good management is a necessary condition to accomplish targets, but nowadays without new technologies it would be impossible to provide a modern 24/7 service to offer the widest range of financial products and services through digital and mobile channels. (as we have seen over the last two days).

Consequently, we need to combine a bricks and mortar presence with full capability in internet and mobile banking. Digitalisation and innovation are key areas, which will deeply affect us. 

The digital revolution offers us a range of opportunities (as you have surely heard during the Congress): 
  • to be even closer to our customers,
  • to know them much better, by using the capabilities of "Big Data", and 
  • to be able to offer them a better, faster and more targeted personal service.
As a result, we have to push forward new strategies and approaches that embrace the necessary innovations: 
  • in the field of processes, 
  • delivery channels, 
  • digital products and services, 
  • IT platforms that are simple, personalised and in real time,
  • “Big Data” applications,
  • 5G communications that will provide us with instantaneous connection. 
In this way, we will be at the forefront of retail banking and will be more than ready to compete with a large influx of new entrants offering payments and other financial services;

And we will be able to ensure that we remain the main players in the banking ecosystem.

To reach these goals we must keep in mind that the WSBI can be used as a platform:
  • to support our members
  • to gather knowledge and expertise
  • to exchange views on banking issues, and
  • to help implement innovative business strategies
If we do not have a strong platform, we can be pushed into a corner.

Finally, I would not like to end without mentioning our commitment to society, our social commitment. 
  • It not only contributes values to customers, shareholders and employees
  • It is, above all, a commitment to contribute to the development of a fairer society.
Retail banks are active members of the community and as such we must be sensitive and supportive, but never indifferent to others.

I believe we have to reinforce our social commitment by getting involved in the real problems of society, which public institutions do not take care of.
(Our member banks in Europe invest $1.3 billion in social welfare programmes, apart from paying their corresponding corporate tax).

As president of the European Savings and Retail Banking Group I am truly committed to boosting these activities.

Therefore, a fundamental priority should be to develop social and welfare programmes. 

Most of all, I am absolutely convinced we must actively contribute to eliminating financial exclusion.
Financial exclusion is generally derived from unemployment, very often, long term unemployment. 
This creates:
  • frustration, 
  • irresponsibility and 
  • distrust within society: which lead to:
  • drug addiction, 
  • alcoholism,
  • offences
  • and a “couldn’t-care-less” attitude, especially among young people, the future fabric of society.
In conclusion, the economic environment we will face in the next four years, I trust, will be better than the one we have just left behind, but it is obviously not without risk or possible radical changes. 

But in any case, I am sure you will all agree, “The best way to change the world is to stat with oneself and one’s reality”. I believe we should all apply this principle when we deal with the many important challenges ahead of us. 

However, irrespective of the nature of these challenges, it is important that we continue to remain true to the basic 3-R Principle of the WSBI, which guides our activity: retail, regional and responsible.

I am sure that if we do so, we will regain the confidence and trust of customers, which will help the recovery of our recurring profitability. Nonetheless, I would not like to end on this point because I know that, as with many great entrepreneurs, profitability is not the only question that is at stake.

We should really like to see our teams eagerly coming to work, as we ourselves try to do day after day. 

Yes, the bar is high and difficult but with motivation and tenacity we can make it happen. 

Personally, I still believe what the classics say, “What depends on ourselves is always achievable”.

Thank you.

Information Technology; Banking Distribution Channels; Business cases/models; Communication - institutional & commercial; Double bottom-line; Financial inclusion; Responsible Business; Social business; Human Resources Management; Performance Management; Banking Technology