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Sunday, 14th April 2024
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Media bashing of industry may have serious implications for future development of sector Back  
In the rush to criticise recent developments in the international financial services industry, ‘we’ve created a distorted caricature of the industry here which is not deserved – and which can be counter-productive’, David Went recently told attendees at a Leinster Society of Chartered Accountants meeting, on the same day, April 6th, that William Slattery, chief executive of State Street International, delivered the same message at the 6th Annual Finance Dublin Conference, indicating the strength of feeling in the industry regarding the handling in the media of recent developments at General Re.
I’ve spent much of the past month or so travelling to meet our shareholders and analysts in the UK, Europe and the United States following our annual results and I was struck by two thoughts on my return.

David Went - 'the standing of the industry in the broader community will become one of the critical issues for the industry for many years to come - indeed it may be the critical issue.'

Firstly I was struck by how fast things change in Irish business nowadays.

The second thing I noticed on my travels was the difference in attitude towards financial services here in Ireland and overseas.

I’ve spoken before – and I’ll continue to do so – about the need to challenge the cynicism which has become a feature of public debate about the industry here and the need for the business community in particular to
ensure that any debate about the financial services sector is reasoned and balanced.

Now even as I say this, I’m aware that many people will throw their eyes up to heaven and say that this is just another example of a banker putting on the poor mouth.

But it’s not as simple as that.

I have consistently argued that individual banks must earn the trust and respect of their customers and of the wider community.

And I fully accept that individual banks have made mistakes which have undermined that trust, not necessarily by making the mistake (for heaven knows we’re all human) but in the way the mistake was dealt with, particularly failing in the duty of transparency to customers and the regulator.

But my concern is that in the rush to criticise, we’ve created a distorted caricature of the industry here which is not deserved – and which can be counter-productive. In particular there is a dismal failure to differentiate between banks. Everyone gets tarred with the same brush.

I do think it’s regrettable if that cynicism towards everyone in this sector breeds a more hostile attitude towards our financial institutions - and possibly a more defensive attitude on their part to the broader community because that won’t be helpful to anyone.

And in the long term, it may actually impede our transformation into a more entrepreneurial, innovative economy.

For years one of the clarion calls of those critics was that the sector was uncompetitive. Well, if that was ever the case, it certainly isn’t now.

And indeed I’m happy to say that Irish Life & Permanent has been to the forefront in championing competition.

But of course we’re not alone in introducing competition. Look at Bank of Scotland and look at Danske Bank - both of them about to try to rebalance the competitive landscape in retail financial services.

So I don’t think the arguments that the sector is uncompetitive stack up any more.

However, the increasing level of detail in the regulations governing the sale of financial products to consumers threatens to overwhelm the whole process.

Indeed it may end up stifling product innovation completely if institutions decide that caution must triumph over innovation every day. Is that in the consumers real interest?

I’m reminded of a story which Bill Clinton recounted in his autobiography about a conversation which he had with Senator Bob Dole after their presidential contest in 1996.

Clinton and Dole were exchanging views on Washington and the culture there and Clinton asked his older colleague – who had decades of service in the Senate – whether politicians in Washington today were more or less honest than they had been thirty years ago and Dole replied that, ‘it wasn’t even close… they’re much more honest today’.

But then Clinton asked him whether people thought that they were less honest than previously and Dole agreed.

And there are parallels with our own experience. There is simply no comparison between the attention and thought that now goes into customer service across the financial services industry compared to the norms of twenty or thirty years ago… but in an environment where cynicism passes for analysis, you could be forgiven for assuming that the industry is less honourable or customer focussed than it used to be.

Looking forward, I think the standing of the industry in the broader community will become one of the critical issues for the industry for many years to come – indeed it may be the critical issue.

My concern is that after a period of pretty relentless criticism, we’re coming closer to a tipping point where the cumulative effect could begin to influence the attitude of international institutions towards the sector. I don’t say that glibly. One of our outstanding successes has been the creation of the International Financial Services Sector. The sector has been built up despite the most ferocious international competition for those companies and a key factor – not the only factor but a key one - in the decision of those companies to locate here was the belief that Ireland provided a supportive, stable and benign political, regulatory and consumer environment in which they could do business.

If you were reviewing the environment for financial services businesses here now and you were relying on the media reporting of the industry – and increasingly on political commentary about the sector – you would be justified in querying how reliable was that environment. It has been sort of interesting to see reaction to reports in the US media that Dublin and the IFSC were regarded as the Wild West of the financial services world. The reaction has been one of shock/horror among politicians, regulators, practitioners. I wonder how much the seemingly never ending and strident bank bashing that we have had over the past few years may have contributed to a warped international view.

So my message today is that the financial services industry in Ireland is a critical part of our overall economic infrastructure.

It has served this country and our economic development well. And while – as is the case in every other section of the economy – there is always room for improvement and progress, it is unfair and ultimately damaging to our wider interests to constantly undermine that sector and corrode confidence in its institutions.
Before I finish – I was struck during the week by a couple of paragraphs in Dominic Rushe’s column On Wall Street in the London Times. Quoting a director of ‘a couple of household names’.

Nobody talks much about marketing, advertising or even the customer these days – we are all too scared.
Nobody seems to mention customers anymore. These days boardroom discussions are ruled by one thing – fear. Companies spend much of their time discussing what’s going on inside the firm in terms of compliance and the disclosure of potential problems’.

Rushe goes on to say, ‘this new level of scrutiny will putt off many a valuable candidate from joining a board. Non execs are supposed to bring expertise from outside the company, act as a defence against insularity and turn a company’s gaze outward. Fear has turned their role inside out’.

As we move into an era of increasing director’s responsibility, compliance statements etc. perhaps we should be concerned if Rushe’s prophesy comes true. It really is the truth that you can’t teach ethics – you either know if something is right or wrong or you don’t. If you don’t, text books don’t help. Compliance statements don’t put crooks off – they’re happy to sign anything. Honest men and women on the other hand worry over it.
Let’s think about that as IFSRA goes through the consultation process in respect of fitness and probity for directors and managers of financial firms.

There are a number of important issues in the consultation document and I was pleased to learn that IFSRA has now extended the period for consultation to mid June.

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