As the world economy emerges from recession, uncertainties remain over the prospects for long-term sustainable growth. Given public anger about the role played by bankers in the global financial crisis ÔÇô particularly in the West ÔÇô not surprisingly, trust and confidence in banks and political support for the industry is at a low ebb.
Banks must acknowledge the part they played in causing the crisis and help to put the global economy back on a path of lasting expansion. They have already taken important steps in raising capital and tightening credit standards, but need to do more to regain public trust.
This means that banks must continue to build businesses that can support people in buying homes, starting enterprises and investing for the future. And, more than ever before, it means banks must articulate clearly the benefits this brings to economies.
Banks can be socially useful, just by doing what they do well. At its heart, banking is about helping customers to make payments and to be paid, to protect themselves against risks and to purchase things that would take years of savings. As we grapple with banking reform in the wake of the crisis, we must not forget this. We must not lose sight of the many ways in which banks contribute powerfully to economic and social progress.
In the wake of a crisis that left deep scars on the real economy, there has never been a more important time to look at how banking can be socially useful.
We want to understand our social usefulness, so that we can make a greater contribution across our footprint in Asia, Africa and the Middle East.
That is why ÔÇô for the first time in our 150-year history ÔÇô we have commissioned an independent study to map our socio-economic footprint in one of our key markets, Ghana in West Africa. This, and subsequent further studies looking at our impact in other countries, will help us understand how to maximise our contribution across economies and societies.
As highlighted by the study, international banks like Standard Chartered impact on societies in a multitude of ways beyond obvious contributions such as the provision of credit.
They help to address some of the most pressing challenges facing communities, for example by taking environmental and social impacts into account in the projects they fund ÔÇô or by widening access to finance which can help lift people out of poverty.
Under one roof, international universal banks offer the products, services and skills that support companies at every step of their journey.
As a start-up grows, its banking needs evolve, from basic cash management and loans to more sophisticated products. An international bank can meet these changing needs. As the company seeks to export overseas, the bank can provide international banking services, and as it expands yet further and becomes a success, the bank can help it to float on a stock exchange.
Crucially, international banks enable trade and investment flows by making markets in commodities and financial instruments, thus helping clients to manage risk in an ever more volatile world.
The complex financial products that have attracted much criticism are a necessary tool for this. For example, to offer fixed-rate mortgages to their customers, banks must be able to offset their own risk with interest rate swaps.
And in order to protect small and medium-sized enterprises (SMEs), from the currency risk that comes with foreign trade, banks must be able to buy and sell currency derivatives.
Because of their global platforms, international banks can help companies grow beyond borders by providing them with vital research and advice.
Global trade flows are changing rapidly, and banks play their part in building and growing new trading regions. Standard Chartered, for example, with its unique footprint is ideally placed to assist companies as they explore regional Asian trade and emerging trade corridors between Asia and Africa.
International banks encourage the movement of labour by providing cross-border banking services that support migrant workers. By operating in many markets, they reduce the costs of delivering products and services.
They support the growth of deep, liquid capital markets which help to fund development of private enterprise. And they underpin financial stability, as they can use global pools of liquidity to support clients in markets that are experiencing financial turbulence.
By introducing new products, international banks help spur innovation. In Botswana, for example, Standard Chartered was first to provide rand dispensing ATMs, a 24hr Customer Contact Centre and a dedicated SME department.
In Ghana, we support and lend to the country’s emerging micro-finance industry, which is widening access to finance for thousands of Ghanaians.
International banks also train local staff and provide them with opportunities to work in foreign markets. This too, is the case in Botswana where Standard Chartered Bank has become something of a training ground for senior bank staff, with many of its young managers currently gaining international exposure on the journey to become experts in banking.
We commissioned our study on Ghana to deepen our understanding of how we can contribute more across our footprint. To the best of our knowledge it is among the first such studies to be conducted for a major financial institution.
All banks, including Standard Chartered, need to recognise public concern about the part played by banks in society. But at the same time, we need to show the real contribution that a bank can make, to progress and to long-term development.
Further to talking about being socially useful, we must demonstrate it ÔÇô to our customers, to communities and to regulators ÔÇô through what we do as banks every day.
(David D Cutting is the Chief Executive Officer of Standard Chartered Bank Botswana)
