At The Clearing House Annual Conference in New York, many of the panels and talks emphasize industry concerns such as faster payments, interest rates and cyber-security but a panel of Federal Reserve presidents tackled a more external issue: concern that the industry is seen as unethical and that the loss of public trust has a real cost. This panel signaled a shift from more technical emphasis to looking at issues with banking culture— both its inner workings and the view from outside.
The conundrum of perception was introduced by moderator Richard K. Davis, president and CEO at U.S. Bancorp, who cited the mistrust of banks since the financial crisis of 2008. He also framed a potential solution. “We need to do a better job of telling our stories,” he said.
President of the Federal Reserve Bank of New York, William Dudley, wasted no words tackling the subject. “The problem is that you have an industry that’s not viewed as ethical,” he said. “We have trouble attracting good quality people and so the whole industry is gonna go downhill.”
He contended that this has sweeping repercussions. “Over time those institutions might eventually be put out of business,” Dudley said. “So this is existential at some level.” The positive, he suggested, is that the industry is “taking this much much more seriously.”
As far as identifying the source, Federal Reserve Bank of Atlanta president & CEO, Dennis Lockhart, sees a clear pattern. “I believe very strongly that almost in a spooky sense, financial institutions and corporations take on the personality of their leadership,” he said. “The tone at the top is absolutely essential.”
Dudley said that ethics matters a lot more to younger employees who want a business to be meaningful, not just pay a good salary. So a negative perception of the industry is all the more a vital challenge to take on. When asked, Lockhart agreed. “There are concerns to a degree with the pipeline of talent coming up,” he said.
For Brian Gordon, a financial consultant and conference attendee, it’s an issue that definitely comes up.
Gordon asks job applicants coming out of college all the time if the they think there’s a negative perception and whether it concerns them. “They said no and I take that as a positive,” he said. But he also added that in a job interview, it would be unlikely that they’d bring it up.
As for the negative perception of bankers since the financial crisis, he said it’s practically impossible to fully resolve. “It’s a big industry. There are hundreds of thousands of people involved,” he said. “You can’t control every single one of those people.” He said it comes down to a few bad actors. “Generally people in the banking industry are good people trying to do the best job that they can.”
“It can be discouraging to have people say ‘all bankers are bad evil people’ and all bankers are not bad evil people,” he said. “It’s a very disappointing thing to be perceived as negative when you personally are not doing anything negative.”