Now’s the Time to Talk to Your Local Banker
“Get to know your banker” has always been an adage of the banking industry. This may be the time to do it, whatever it means.
Everyone else is involved with banks right and left. Legislators keep talking about giving them new powers, even while they’re trying to correct misuses of old powers. Government authorities are taking over many banks and savings and loans. Banks (and S&Ls;) are taking over other banks (and S&Ls;).
It’s not all easy to understand. But it sure indicates some flux in the industry--flux that should encourage consumers to revise their idea of what they want in a bank and to act on it.
First, a short subway ride through flux.
For the consumer, banking changes started with deregulation. Banks and S&Ls; were freed to unbundle and reprice their products, rebundling them with enough terms, interest rates and conditions to “obscure what the fees and services actually are,” says Ken McEldowney, executive director of San Francisco-based Consumer Action.
Then came banking troubles. The industry’s enthusiasm for making loans to unstable Third World countries lost some banks a lot of money, and its lack of enthusiasm for lending to poorer minority communities at home won some a lot of criticism. With the economic downturn, real estate loans both bad and good began falling through. There were S&L; (and sometimes bank) failures, S&L; (and sometimes bank) buyouts, and government insurance funds (both S&L; and bank) were soon exhausted.
Banks, meantime, are pushing to compete in new businesses--insurance and securities. And they’re dissolving old competitions in mergers, some huge--Manufacturers Hanover and Chemical Bank, Bank of America and Security Pacific, NCNB and C&S;/Sovran in the Southeast.
And what is the consumer to do with his banking business in this environment? No one’s even sure what consumers want from a bank any more, apart from convenience, as always. Banks believe that image is most important to consumers: Those confronting mergers are studying the best way to accomplish a name change without harming that image.
Actually, we find few people who care about the name over the door, or even the specific entity behind it. “They’re all the same,” is the most common response.
Customers don’t even go to banks much any more, conducting loan and credit card business by mail, making deposits and withdrawals by ATM, getting account information by telephone. No wonder 66% of consumers were “very satisfied” with their bank’s service, according to the trade journal American Banker’s 1991 consumer survey.
Those drawn to some special service have no guarantee that it will continue. Mergers may eliminate uncertainty in terms of stability, but may create uncertainty in terms of service. Manufacturers Hanover, for example, can’t promise that its highly competitive, no-fee, $1,500-balance checking account will be available beyond another year.
Consumers are probably less demanding about how their money is stored and accessed because they have more pressing concerns--the lack of money. But that’s the very reason they should be more demanding.
They could certainly protect themselves better. American Banker’s survey indicated that 46% of consumers (only 23% three years ago) believed that the banking system was “unhealthy” and 53% were concerned about the safety of their deposits. News stories constantly report that federal insurance covers $100,000 in deposits. Nevertheless, Community National Bank and Trust Company on Staten Island, N.Y., declared insolvent last weekend, held 174 accounts of more than $100,000, or $12.6 million in uninsured deposits.
Given the unstable economy, financially stable consumers might well get themselves better service from banks, which want more than ever to cut risks and limit losses.
Banks still solicit for credit card customers, more often now offering premium cards for preferred risks. Many offer substantial credit lines, and no fee the first year. Assuming a known bank, a standard grace period and no hidden cash advances on acceptance, one should consider taking them in place of one’s current card. Better yet, one should take them to one’s current card-issuer and request the same terms.
People already in some financial distress should be equally assertive--even before missing any payments, suggests the American Bankers Assn. in Washington. Banks are experiencing more delinquencies on both credit card and installment loans, and rather than suffer losses, would consider, says the ABA, “refinancing, extending payment periods or consolidating loans.” Indeed, ABA spokesman Virginia Stafford says, they’re already “reallocating people from their collections area to their loan work-out area.”
One might even choose a bank accordingly. Categorizing banks in size from under $100 million in assets to more than $1 billion, ABA statistics show that the smaller banks are more likely to attempt such renegotiations, and very much more likely to succeed.
Maybe consumers could offer beleaguered banks the kind of “relationship” banking that banks themselves have always promoted. Who knows what good fees, rates and terms they can negotiate by offering a bank all their business?
They might get another “no.” They might also get a banker they can know.
