Preserving capital at all costs is the rule of the day - or likely the year - as banks cut IT projects, compensation, bodies and dividends. Hunkering down is now the national obsession, with consumers ratcheting spending back so far that the U.S. personal savings rate hit 5 percent in January, the highest since 1993. That's an admirable trait in a different time, but every dollar not spent is a dollar that doesn't go toward stimulating a still-spiraling economy.

The same's true of bank spending, particularly cutbacks in technology investments that a bank can use to innovate its way out of trouble. TowerGroup estimates financial institutions' IT spending will fall by nearly four percent from 2008 through 2009, the first such decline in history. Even worse is where the decline will come from. Senior research director Virginia Garcia found that spending on new technology - as opposed to relatively routine outlays for replacement or maintenance costs - will decline by 11 percent this year.

But sacrificing on innovation surrenders the future to the past. Far too many initiatives that can improve customer service and retention, or offer the gleam of forward progress or stability, will be postponed until earnings improve. The projects that remain on the table are those that improve efficiency, the bottom line, or have become regulatory mandates. Not surprising, nor inspiring.

But not everyone's going to hibernate until next spring, and institutions that stay on the innovation sidelines do so at their peril. Garcia predicts that when the economy rebounds the financial services landscape will be more radically divided into leaders and laggards. The differentiating factor may be how they spent their money during the crisis.

"You don't want to turn the banking industry into the airline industry where they cut everything that touches the consumer," says Dennis Jacobe, chief economist at Gallup. "Capital preservation has to be everybody's survival mode, but it's important how much you maintain customer service both in technology and in people because that reflects stability."

Jacobe's opinion is backed by the resounding voice of American consumers, who tell Gallup pollsters they have no intention of abandoning banks that aren't "besmirched by a general popular view of weakness," he says.

But marketing and PR touting a bank's strength isn't the greatest display of leadership, nor the best way to convince customers. Continuing to invest in innovation, and developing new products that answer changing consumer needs and showcase industry progress, are better responses. The very best CEOs, CIOs and directors will show their mettle by maintaining investment in the future, and demonstrate that they can see beyond the crisis to the reshaped landscape that will emerge on the other side.

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