22 May Revelations of an Ex-Banker
(Yes that’s Ian fishing for dinner at midnight on Greenland’s west coast).
With 20 years of banking stacked and compressed into a professional experience called life, I can deliberate 7 drawn conclusions that underpin the relationship and dynamics between borrower and bank.
Given the extenuating circumstances we all find ourselves now operating in, I thought it is only prudent to share my suppositions with curious & prudent business masterminds.
1) Market Intelligence
Market intelligence empowers decision making. There are no public scoreboards to benchmark your bank’s performance against market capability. This process must be attained privately through due diligence.
2) Corporate Governance
Good corporate governance overlays the business with standards attaining to risk management and strategy. Financial performance leans on extracting maximum value from all the resources within a business. Both of which support extrapolating market intelligence from the banking fraternity to maximise both governance and performance.
3) Funding Risk not Price
The credit cycle is tightening. Exploring and executing strategy to minimise funding risk should be a primary focus for all businesses. Price is secondary.
4) Fluid Dynamics of Banking
Banks change over time and a borrower’s business changes over time. What banking arrangements that may have been competitive and relevant upon inception may not be as competitive and relevant in the future. Banking is never set and forget.
5) The True Cost of Loyalty
Loyalty is expensive, it flows one way and can be easily confused with having a “good relationship”. Professional courtesy, financial acumen and competitive tension are needed to create an environment of optimal competitive service offering to flourish.
6) Conflicted Interest
Bank managers operate under their mandate with the bank’s shareholders interests in mind, not the clients. Hence their funding proposals and advise will always be biased and conflicted. The Royal Commission exposed some (but not all) of these cultural behaviours. A layer of independence will promote functionality and efficiency as well as removing bias and conflict within your banking and funding structure.
7) The Search for the Holy Grail
Good bankers seek out good business operators. Good business operators seek out good bankers. Seldom do these two meet.
There is a deeper thesis behind this rhetoric, but they can be deployed on another day.