Latest news
The long-term effects of the credit crunch
Fishburn Hedges Director, Jason Nisse, spoke to Argent, the quarterly journal of The Financial Services Forum, about the credit crunch
Recently my wife was gazing at the front page of the Financial Times and spotted an article about the problems of the Icelandic economy. She pointed out that both of us had savings accounts with ICESave and wondered if we should close them. After reassuring her that even if Iceland disappeared into the Atlantic, we’d still be covered by the UK deposit protection scheme, I’ve heard nothing more about it.
This encapsulates the long-term damage that the credit crunch will have on retail business for the banks. A lot of worry but not much action. The business pages may fret about capital ratios, rights issues and long term reputational damage. And this may have deep effect on banks’ relationships with corporations – who, after all, want to deal with institutions who they hope have a better understanding of the financial markets than they do.
But for the average consumer, retail financial services brands have an astonishing resilience. Even when the institutions behave dreadfully – as life companies did in the pensions mis-selling scandal – their brands deflect the flack and 
business is barely dented. Only when people think the company may actually go bust – as they did with Northern Rock – do they think about withdrawing their money. There may be a small margin of people who will shun banks which have had a wobble, but this will be massively outweighed by customers swayed by the best-buy tables.
There is one caveat to this – in the wealth management area. Here it is not so much the brand damage as
the internal damage that is going to hurt banks. Top bankers like working for winning teams – not least because they tend to be the ones that pay the best bonuses. So when wealth managers – or private bankers as they often like to be called - see other parts of their bank losing billions on complex investments built on shaky loan books, they search out pastures new. Private banking is a relationship driven game, so when supposedly top banks lose their top bankers, they soon lose their top clients and cease to be top dogs.
There has been a lot of investment in private banking in recent years, with pots of money chasing the even greater pots of money held by the so called “mass affluent”. The big question is whether the aspirant rich will behave like the genuinely rich, and follow relationships - or, like the rest of us, stay put.