Bear Stearns' collapse in March 2008 changed the tone for financial news coverage, and banks and other financial institutions have been under fire ever since.
Whether the topic du jour is TARP, stress tests, executive compensation, regulatory oversight, risk-management practices, or investor anger, the traditional and digital media have cut the banking industry little slack. Of course, bankers, frustrated by the media's affinity for bad news, haven't taken the criticism lying down. Many have taken their messages directly to the public - sitting for interviews, publishing opinion pieces, holding town hall meetings, and becoming increasingly active in Washington.
The question at this critical juncture of the financial crisis is whether these outreach efforts have been effective enough, and, if not, what more can be done to restore credibility and trust to an industry sorely in need of both?
In terms of the effectiveness, the results are mixed. Recent findings in the Chicago Booth and Kellogg School's Financial Trust Index show that, in June, 34 percent of consumers said that they trust the banking industry, up from 29 percent three months earlier. While that figure dwarfs the percentage of Americans that currently trust the stock market and large corporations (13 percent each), the vast majority is still wary. To best capitalize on the momentum they've generated, banks need to step up their communicative efforts and define their own path forward by detailing the metrics for success against which they will be judged.
Talking about stronger earnings, increased capital reserves, and other traditional financial metrics are but a small piece of the puzzle. These milestones on the road to recovery must be articulated in the context of the how they positively impact consumers' and investors' day-to-day lives. That's how banks will reach stakeholders on an emotional, rather than strictly intellectual, level - and how they'll best begin to move from being seen as part of the problem to part of the solution.
Banks would also be well served to better leverage the power of symbolic gestures. The numbers show that there's still a great deal of residual anger toward the financial sector - due mainly to the fact that consumers and investors haven't seen financial leaders sharing in the economic hardship that they helped bring about. By taking steps - even if only until anger subsides - to rein in executive compensation, lavish bonuses, and the myriad excesses that made headlines for the better part of the last year, banks can further demonstrate a departure from business as usual.
Finally, and perhaps most important of all, industry leaders must better understand the new communications paradigm established by the emergence of digital and social media. With most journalists now reading blogs and other online sources for story ideas, financial institutions are left with a simple choice: either fully commit to vigilant monitoring of, and engagement with, the online denizens who increasingly serve as the media's assignment editors; or miss out on critical opportunities to shape their coverage before it negatively influences share value, customer perception, and analyst reports.
Given the power that digital and social media now wield over the perceptions that drive government action, traditional coverage, and stakeholder concerns, every financial institution must strive to protect their reputations in times of crisis, while also proactively engaging stakeholders to build communities of trust and elevate brand equity in times of relative calm. These efforts are no less critical than monitoring the financial pages or the ticker on CNBC.
Last year, one of America's largest financial institutions took a correct first step by developing an online social networking profile to provide current and potential consumers with updates on products and services, as well as plans for the future. More than 2,000 followers - each of whom is a potential brand ambassador - have signed on to track the bank's messages, yet the bank has not issued a single communiqué to its followers in more than seven months. Meanwhile, a rival network of critics has its own profile that has attracted more than 1,000 followers, who host regular "cancel-your-account" drives that reach tens of thousands of potential new members through the viral nature of social networking.
Whether engaging in reactive or proactive outreach efforts, the message is simple: banks need to stay committed to them, or they risk alienating existing and potential customers.
