A Kinder, Gentler Banking Industry?

Banking.com Staff

By Banking.com Staff  Wed Sep 5, 2012

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David Shankbone / Flickr source

In genre-defining books like “The Bonfire of the Vanities” and “Liar’s Poker,” there’s a particular image that comes across of the highest echelons of the financial services. They’re the Masters of the Universe, Wall Street titans who live so large they make rock stars look puny. They’ve got swagger to spare and the talent and instinct to back it up. All consumption is conspicuous, and reality is what they make of it. This is a world where unlimited budgets are too small, braggadocio is a virtue and nothing succeeds like excess.

All this was years ago—and again, as popular as the image got, it realistically applied only to a tiny sliver of the industry. But like so many other attention hogs, it helped (ill)-define the discipline.

Well, that was then. Today, not so much.

Battered by everything from bankruptcies and bailouts to criminal investigations and convictions, across-the board compliance is the order of the day. In sum, bankers are being told to behave themselves, and that’s having some odd implications.

CNBC reports of ‘paranoid’ environments in European institutions, with executives encouraged to attend behavioral sessions where they learn how to interact in social settings, such as bars. If someone brings up a sensitive subject or gossips about bank business, everyone else must say something like, “No, don’t talk about that,” and perhaps walk away. Those who fail to comply will pay the price.

These are not just empty threats. While policing every pub where investment bankers gather might be a little difficult, companies are certainly going out of their way to maintain a high standard of self-policing.   There are regular sweeps of emails and other recorded conversations, with special software that can identify keywords from phone conversations.

The official explanation is that bankers who play by the book have nothing to worry about. However, that still leaves many finance professionals on the edge—given the natural ebb and flow of any business-related dialog between longtime colleagues, the feeling is that it’s too easy to be found wrong, and trying too hard to be right imperils day-to-day operations.

Misfiring

In the U.S., meanwhile, the path to ensuring full compliance is hitting road bumps too. Imagine a customer service representative who gets fired from the job he’s had for seven years, after the bank learns there’s fraud in his past.  Sounds fair, except that the employee in question is a 68-year-old Vietnam veteran who’s apparently led a clean life since his dark days. His crime: Putting a cardboard cutout of a dime inside a washing machine. . . in 1963. The dastardly deed from his teen years was not expunged from his record, and he paid the price with his termination in May of this year.

This is (hopefully) an extreme case, but the passage of new federal banking and mortgage employment guidelines in the past two years has had some harsh effects. While exact numbers are hard to come by, it’s been reported that many low-level employees have been dismissed because of alleged transgressions.

No one is suggesting that fraud be taken lightly. The new regulations have been put in place for a reason, and they’re designed to rebuild trust in an industry that surely deserves at least some of the blame it’s gotten. It’s also understandable that in the wake high-profile scandals and other problems, the pendulum can swing too far the other way.

That said, it may be time for a reality check. Main Street turned on Wall Street not because of small problems but big ones—corporate malfeasance, big payments that were perceived to be undeserved and taxpayer-funded bailouts of supposedly rich companies. If the industry’s brand is in trouble, then efforts should be made to fix it. But it’s also important to ensure that the measures being taken help solve the problem, not exacerbate it.

Banking.com is a blog providing topical and timely insights for the financial services community.

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