With no end in sight to the financial industry's reputation crisis, agency executives are urging banks to show a “human face” to consumers and stakeholders.
The banking industry's reputation took another blow last month when Barclays agreed to pay $450 million to settle claims that it manipulated the London interbank offered rate, or Libor. The widening investigation into interest rate fixing, which forced the resignation of Barclays' CEO, COO, and chairman, could implicate other major financial institutions.
Before Barclays' settlement came to light, JPMorgan Chase & Co. disclosed in May that it lost $2 billion after a faulty investment strategy. JPMorgan reported an 8.7% year-on-year drop in second-quarter earnings on Friday, as well as a double-digit decline in revenue and a $4.4 billion trading loss. The bank has said that the losses will far exceed its initial estimate, totaling $5.8 billion.
“The financial services industry is in a volatile state. When is the next shoe going to drop?” says Claire Koeneman, EVP and financial communications practice leader at Hill+Knowlton Strategies. Koeneman and other agency executives cite the European sovereign debt crisis as another growing concern for the banking industry's reputation.
Such events, following the financial crisis of 2008, highlight the ever-increasing need for banks to be more transparent with stakeholders, communication leaders say. The 2012 Edelman Trust Barometer found that banks and financial services were the two least trusted sectors of the economy.
“The 2008 crisis showed that the impossible is possible – even the largest, most sound, and respected financial institutions can face tremendous reputational risk,” says Josh Passman, SVP at Prosek Partners, formerly known as CJP Communications. “They're human just like everyone else.”
Many agency executives say JPMorgan CEO Jamie Dimon's response to the trading loss is a prime example of how banks should communicate.
“Dimon is a reputation dream,” says Michael Bayer, EVP and North American corporate practice director at Cohn & Wolfe. “He always stands up in front of the cameras when he needs to.”
JPMorgan global director of corporate communications Joseph Evangelisti told PRWeek in May that “the message is ‘we made a mistake; we were sloppy.' We're sorry and are working to make sure it doesn't happen again.”
Dimon's admission of the bank's mistake is important because openness is key to rebuilding trust in the industry, communications leaders say.
“Banking institutions should communicate the negatives candidly and be transparent about their business,” says Michael Gross, partner and president of RLM Finsbury. “The old maxim is true: the cover-up is worse than the crime.”
Yet many banks are not doing enough to communicate openly, Bayer adds.
“They're hiding. They need a human face,” he says. “It's one thing for a bank CEO to go on CNBC or Fox News, but they're kind of preaching to the choir. I'd love to see one of them go on 60 Minutes or Today, really think about their institution's role in society, and not be afraid of it.”
Representatives from JPMorgan, Barclays, Citigroup, and HSBC declined to comment for this story. Goldman Sachs, Wells Fargo, and Bank of America did not respond to requests for comment.
Rebuilding the industry's reputation hinges on positive storytelling, Passman and others say. Banks should communicate about their risk management, improved business practices, community work, and contributions to the economic recovery.
“A lot of firms have many good stories to tell about the people working there and the work they're doing,” he says. “That should be part of your business process, to tell those stories and create good will with stakeholders.”
To do that, a number of financial organizations formed the Partnership for a Secure Financial Future in January to educate the public about improvements in the industry and what financial companies are doing to drive economic growth and support communities. The partnership, which comprises the Consumer Bankers Association, Mortgage Bankers Association, Financial Services Institute, and The Financial Services Roundtable, sends out email newsletters twice a month and manages a website, Facebook page, and Twitter account. It also commissions the Hamilton Financial Index twice a year, an economic analysis measuring the industry's safety and soundness.
“We won't deny that there's a reputation problem, and we recognize it's going to take time to improve,” says Richard Fawal, executive director of the partnership. “The correct way to do that is to continue to gather and produce the facts on what the industry is doing, how it's maintaining its safety and soundness, supporting small business, helping job growth, and contributing to the economy.”
Steve Bartlett, CEO of the Financial Services Roundtable, calls the rebuilding of the industry's reputation “an incremental process.”
“First you make changes and improvements, then your customers notice, and you communicate with your customers,” he says. “We're still in a bad place as far as reputation, but as the economy begins to improve, people will realize that it can't improve without our industry being strong.”