Coping With The Credit Crunch

COPING WITH THE CREDIT CRUNCH: OPPORTUNITIES FOR CORPORATE BANKING IN EUROPE

By. Stefany Garcia

This article is about a serious punctual points were happened in 2008, regards to the data of McKinsey Global Banking Survey, which show us, some items which banks should into account, currently in order to avoid some mistakes and to benefit of them.

Banks contribute to the economics’ performance, is a part of its revenue, which help to keep the balance in the economy of any country. This survey findings show us several viewpoints which can demonstrate how banks should handle their operations (back office) and sales products teams in order to satisfy the customer and to create value for them. Also, the survey presents some graphics in which we can compare the European’s banks with others. Finally, at the end the author emphasizes many of advices that banks should follow.

Despite banks don’t bright as much as the last decade, they even are looking for tools and strategies to introduce and to generate profits in the short – medium terms. When the bubble state appeared not only affected banking system at all, but also they affected the global market which involves Europe, because without money, it can’t deal. But, not all was bad, because when it happened, some small banks joined to big ones, the reason was that banks were interested more in bigger accounts than smaller, that means in corporate accounts. But increased interest rate spreads and a more risk-averse business environment should promote other products and services, including cash management and corporate risk mitigation. Banks have been forced to take more leveraged-buyout debt onto their balance sheets, and large backlogs remain. They also had to change their terms and take unwarranted risks. Even though they can’t grow fast, they prefer just a continued growth plan instead to do nothing.

The survey detailed comparison of product revenue structures, sales models, incentive structures, and credit process efficiency across more than 35 leading European banks. Banks should take action when any problem appears, because then may be late and those effects can affect everyone inside the industry and the country.

The product opportunities

Still, for any bank is complex to growth with bad external conditions. So, how can banks exploit the opportunities?. Regards to the survey there are different ways, such as: raising the payments and deposits, to promote mitigation risk plan to corporate business.

Traditional lending

European’s banks have decline outcomes, because their processes were based on: capital, risk, and operational costs, that means its process just to lend money but they didn’t sure that money came back.

The graphic that article present us of European`s banks determine the risk to lend was bigger than the benefit that they got for them. So, “ the message was clear: banks can’t make economic profit from lending”, because there are too risk and others back office mistakes.

But the survey can reflect that the top players achieve higher interest margins and, at the same time, earn higher fees how? “Banks should follow the example of the leaders that use a rigorous yet standardized risk assessment to price loans. This approach challenges the notion that lending to midcorps has a specific “market price” and suggests that corporate banks can adjust what they charge in order to reflect the risk in their portfolios” this phrase represent the cost of risk to the borrowers and a safety plan for lenders, because they don’t have to lose anymore.

Payments and deposits

Payments and deposits already account for around 11 percent of total corporate-banking revenues in Western Europe and around 19 percent in Central and Eastern Europe. This stage represents the main funds of the banks, which can be managed carefully in order to avoid a bank run, or many rumors to lead the same result.

In each country, banks handle in a different way, and they have different kinds of accounts inside of the balance sheet, but all of them need to be connected and should increase the deposits and payments because is the crucial source to operate.

Also, banks should classify its segment because it can help to recognize the customers’ requirements in order to satisfy their needs on time and to offer them add value post sale. The logistic and good communication inside the lines of managers

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