In order to improve confidence in the banking sector, it is important for banks to reach agreemen with their stakeholders about the objectives they want to pursue. Continuous dialogue between banks and stakeholders is necessary about (at least) the following objectives:
Perhaps more so than other organisations, banks are expected to behave like good corporate citizens. The positive way in which banks can contribute to society can be divided into two components:
a) Comply with applicable laws and regulations.
b) Behave in a reliable, transparent and honest manner, whereby customer interests are truly prioritised and have a positive impact on the environment in which the bank operates. In order to be a good corporate citizen, it is not enough to simply comply with applicable laws and regulations. For instance, to promote this, the government has imposed restrictions on the remuneration policy of banks and has introduced the mandatory banker's oath.
New technologies like big data can be useful in both components.
One of the main functions of banks is to finance the real economy. However, opportunities for banks to do this have been restricted by stricter capital requirements, and another major role is played by immoveable property financing on bank balance sheets. In order to contribute to the real economy, it is important to pay attention to the ratio between financing for moveable and immoveable property.
FinTech companies that focus on lending tend not to form a new source of financing; they do not place risks on their balance sheets and merely transfer risks between providers and credit customers. FinTech companies like crowd funding suppliers, peer-to-peer lenders and aggregators offer bank customers access to alternative sources of financing. Collaboration with such parties is thus an option for banks if they want to serve customers that do not normally qualify for bank credit. This, for example, involves customers that do not yet have a credit track record and find it more difficult to get a loan.
A stable financial system is essential for a healthy economy and a prosperous society. But banks themselves will have to be in good financial health if they want to contribute to this financial stability and become an integral part of such a system. This will require a sustainable and futureproof earnings model which manages to find a balance between profitability - need to maintain solvency, finance future investments and offer returns to shareholders and savers - and an acceptable risk profile.
Customer Practice Leader Financial Services, PwC Netherlands
Tel: +31 (0)88 792 75 83
Director, PwC Netherlands
Tel: +31 (0)88 792 74 21
Director, PwC Netherlands
Tel: +31 (0)88 792 51 20