The present global financial crisis has totally shaken the confidence of people on financial markets, institutions and their products and services. It is true that considerable efforts have already been initiated by the governments, central banks as well as by banks themselves to counter the crisis and create confidence and stability in the financial markets globally. In fact the present crisis has exposed the gullibility of large number of customers operating in financial markets and investing in financial products and services without adequate comprehension of latent risks in such products and services. The climax however reached when investment banks developed and introduced complex instruments developed on highly sophisticated mathematical models called as collateralized debt obligations (CDO) and Credit Default Swaps (CDS). These turned out as highly risky investment instruments and therefore impacted very badly the global financial markets. These in fact have generated the present universally spread out fearsome financial crisis known as Global Meltdown.
EXPLOITING THE GULLIBILITY OF CUSTOMERS
This global financial crisis has exposed not only the universal gullibility of investors- rich or poor, educated or uneducated- but also has brought poor supervision of both bank management and regulatory authorities and consequent lax in their oversight supervision. In fact this sudden overflow affluence generated ‘irrational exuberance not only among noveau rich suddenly emerging from growth of income and return from such investments and this also made politicians to overlook the phenomena and developed aversion towards applying and/or creating some stringent laws to punish those who have deliberately confused public and have led them to believe the advertised benefits of these sub-prime products generated by highly reputed investment banks and supported by globally reputed universal banks. Such blinking by the state as well as regulating agencies have led to such a crisis that these institutions have to be bailed out by doling out heavy amount of tax payers money from the exchequer and still some high and mighty like Lehman Bros. sunk and applied for liquidation
SPREAD EFFECT LIKE RISING FIRE
The impact is now universal as now it has also spread in the emerging markets of Asia like India and China though for quite sometime it was regularly advertised that these markets are decoupled from this global financial crisis particularly happening in USA UK and Europe and perhaps leading these countries to recession. This also led to questioning of liberalization initiated by these counties as it has been constantly argued that regulatory independence and or voluntary regulation as propounded by capitalist countries has ultimately brought these counties to such a chaotic condition. So much so that in some responsible quarter people and political parties have started doubting capitalism and are seriously looking for alternatives like socialism and communism making communists to speak out boldly against democratic form of governments.
SHED OPPORTUNISM AND ADOPT TRANSPARENCY
However if one leaves out such opportunism and make an in depth analysis it would be obvious that banks’ age old conservative policy of maintaining confidentiality and adopting opaque instead of transparent strategy has largely contributed to such an havoc in the financial markets primarily in Europe and United States and gradually spreading all over the world. In fact the Core Principles for effective supervision and regulation enunciated by the Basle Committee in 1977 emphasized the regulatory independence, transparency and consistency with an appropriate and well defined oversight of bank governance, risk management and control. It is true most of the banks all over the world strictly adhered to capital adequacy norms as prescribed by the Basle Committee I and II but both in Asian crisis as well as in the present Global financial crisis it has failed to keep the banks in pink of health as these crisis eroded capital of these banks so badly that their survival itself have became questionable. In fact considerable amount of capital has to be inducted through sovereign wealth fund or even by the state or central banks to enable them to survive temporarily as these also proved to be inadequate and for that reasons some of them have to be merged and some have to change as universal bank from investment bank. However the financial markets almost all over the world is still under doldrums and no one can predict whether it has reached the bottom or not. Such fragility has happened largely due to total evaporation of confidence of people in financial markets due to growing lack of faith in financial instruments largely because of their complex and opaque nature.
PRESENT EFFORTS TO AVERT THE CRISIS
It is true that most of the state governments and central banks have been making an all out effort to restore liquidity in the market to empower both people and market to operate with ease and get back their mutual trust and confidence and in this manner help financial markets to become once again normal. It has however failed to revive markets as both lenders and borrowers have lost confidence on each other. Lenders have lost confidence as most of the borrowers have failed in their commitments and similarly borrowers have no confidence on lenders or sellers of financial instruments as all of them gave false hopes of higher returns and safety of their funds invested in such products and services. To add to this illusions these products were not only put to test through highly complex mathematical models to prove high returns and safety of these products but also added additional proof from world class independent rating agencies that these instruments are safe and have no risk to investors with regard to both principal and return on these investments.. But subsequent events proved all these are based on wrong premises and hence failed to deliver the assured return and subsequently even the principal amount invested in these also become more and more difficult to be repaid to investors due to growing blood bath in the financial markets all over the world.
REVAMP ADVERTISEMENT STRATEGY
It is therefore imperative to highlight all policy measures adopted by the state, central banks and financial institutions in simple and transparent manner intelligible to common people to bring back the confidence of the public in financial institutions, products, and markets. This would be possible not only by introducing intelligible, transparent and effective monetary and fiscal policies but the same has to be reached to the public by undertaking sustained and truthful advertisement campaign to help educate investors with regard to risk and return of various types products and services provided by the financial institutions. This obviously has to be in simple but effective language and popular media. In this regard recent advertisement campaign undertaken by the ICICI bank is perhaps worth noting. The bank started with very appealing slogan that they are with customers at all situation and further emphasized the relationship as core function and went further to explain complex products and services to customers in simple language to educate them with regard to these services and products. Similarly some banks have come out with an advertisement campaign to captivate customers by becoming sharing partner of customers dream. The slogan as adopted by the Union Bank is ‘your dreams are not yours alone’ they have also introduced a new logo to differentiate them from other banks. All these however will not instill confidence and would help developing more consumerism among customers. It would be necessary for financial institutions to develop innovative advertisement campaign like that of ICICI to bring back confidence of common people and to create their advocacy through their simple and transparent products and services that could be easily understood both by the executives of financial institutions at all levels and also by investors of all types- rich, poor, literate and illiterate. Such campaign should focus beside other core points like transparency, reliability and simplicity. In this regard another commendable advertisement is that of HDFC bank. In this the bank has not only emphasized that they are with their customers right through but also the most coveted desire of a customer has been taken care of as they need not run from counter to counter to get their products and services as bank has empowered single executive contact system to get a job done. These obviously help simple people to enter bank with confidence.
ESSENTIAL INGREDIENTS TO DEVELOP EFFECTIVE ADVERTISEMENT MODEL
The factors that should be focused in such advertisement campaign could be summarized as follows:
- The structures, strategies and systems that have been adopted by the financial institutions to be highlighted and drafted in simple and intelligible language by the institutions and advertising agencies;
- The viability and the governance of the institution offering such products and services;
- The observed and possible risk factors have to be enumerated in simple and intelligible language;
- The adherence and compliance with all regulations to be spelt out in detail and in bold letters with adequate visibility and time to read and comprehend;
- The rating by independent agencies should also be highlighted boldly;
- The campaign should be constantly undertaken and reviewed.
FOCUS ON HAND HOLDING TO RESTORE CONFIDENCE
Indeed it is imperative for copy writers to originate some very effective and forceful advertisement for banks to restore and re- build confidence of customers on financial instruments and institutions as these are conduit and catalytic agents for economic growth. In fact confidence is sine-a-qua-non and virtually an intangible asset for banks as this helps banks to build rapport and advocacy with customers and prospective customers.. It would be therefore necessary to undertake advertisement campaign not only to bring out brand name as perhaps Union bank of India is doing these days but also to highlight what special advantage and security they are offering to public to create better customer advocacy for them. Moreover it would also be necessary to live up to their promises made in advertisements. This it self is a difficult task as for this necessary advance preparation is needed and bank executives should have to be adequately empowered to satisfy the promised services and products to live up to their expectations as focused in the advertisement. In this it would be interesting to recall the advertisement campaign undertaken by the USA during the last recession in 1929-30. it was observed with great distress by the banks that their advertisement campaign stressing security and safety of funds with them did not restore confidence instead the visuals of their solid building structures wherefrom they serve the public created some confidence in the minds of public as they felt such solid structures are not only valuable but also invincible. In fact it could drive home in their minds the invincible and stable character of banking institutions. It would be therefore imperative for banks to project themselves as partners and risk sharers of customers instead of advertising the innovation and value additions they have been introducing from time to time in their products and services. It is needless to emphasize that during these challenging times banks willy-nilly have to reinforce their image by adopting a transparent, honest and customer friendly strategy to serve people. In fact they should become friends in need and thus a friend indeed. These institutions should come forward to hold the hands of their customers in their distress also. The campaign should bring out genuine partnership relations in between customers and banks.
Indeed majority of the public almost all over the world is fast loosing confidence in the financial institutions and financial markets for obvious reasons. It is therefore high time to revamp their advertisement strategy to bring back their faith in financial institutions and their products and services. It would not be possible by building brand image or even changing brand names as people have passed through a very bad period for totally depending on brand image as they observed institutions like Lehman Bros collapsed like a pack of cards. It indeed could not survive the severe onslaughts of the financial markets originating from their complex hedge products based on most modern technology and sophisticated models. It would be highly gruesome task for the financial institutions to revamp their strategy keeping in view fundamental difficulties that are being faced by the financial markets globally. The current financial crisis has seriously affected the advertisement industry. It is therefore necessary for both to re think and revamps their strategy to come back in a big way in their respective businesses. In this regard the best advice would be to become more and more transparent and intelligible to common people and avoid creating false hopes, hidden risks and giving more stress to their own margins instead of making efforts to create and highlight accruing real benefits to customers. This obviously would require a radical change in the mindset of executives of both financial institutions and also of advertising agencies and to give more stress on truth and a little on trapping gullible customers. The main focus of advertisements by banks should be to build customer confidence and acceptance of their products and services in good faith. This obviously help building and developing customer advocacy. It is of no use to follow the past practices of building a halo around them as its hollowness has recently been proved with the collapse of once behemoth and infallible investment bank like Lehman Bros. The emphasis therefore should be on restoring confidence and building emotive relationship with customers along with business creation.....