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Financial brands in trouble – bank on it!

Advantage Magazine – September 2012 issue

The past few years, marked by economic recession, haven’t been good for banking brands. Off shore there’ve been stories of massive bail-outs for financial institutions. The fact that tax payers had to rescue banks didn’t exactly leave a good taste in the mouth, but when it was discovered that in some instances management had taken cream off those rescue packages, tax payers became resentful, if not bitter.

Bank of America’s Merrill Lynch bore the brunt of much of the hate, likely because in the US Troubled Asset Relief Program (TARP) bailout under George Bush, the wealth managers took bonuses of some $3.6 billion – about a third of the funds they received through TARP.

At the same time Lehman Brothers made history by filing the largest bankruptcy in US history. When the rot was laid bare it was found that Lehman executives used creative accounting to make their finances look much more robust than they actually were. This was done through repurchase agreements but in essence was little better than lying about their financial status. Ultimately, the Bros were blindsided by the subprime mortgage crisis they helped create.

The banks were under intense public scrutiny when, inspired by the Arab Spring, Adbusters gave the world the #occupy movement which began with Occupy Wall Street and then spread virally across the rest of the world. Very soon protestors were occupying bank managers’ offices, as a new era of digitally produced transparency shined a harsh spotlight on banking practices that were previously hidden. Banking brands – once revered – were now under threat.

It was against this background that the Barclays’ Libor scandal broke. Once ranked 12th in the Brand Finance assessment of the top global banking brands, Barclays’ reputation was savaged after it was implicated in a series of frauds connected to the London Interbank Offered Rate (Libor), which is controlled by the British Bankers’ Association.

News of this came first through and article in The World Street Journal in 2008, but it only started to mainstream after being corroborated by economists in 2010. When the U.S. Department of Justice launched its criminal investigation in 2012 Libor and Barclays was global news, along with CitiBank, Bank of America and a few others.

Barclays got a £290m fine for manipulating the bank-lending rate (Libor) and has had a spectacular fall from grace in the international media, which has shredded a reputation built over centuries – the bank was first founded in London in 1690.

This is not the first time Barclays has been involved in scandal, but it is certainly one of the more spectacular and widely covered. The Barclays brand came under attack for being involved in SA during apartheid, and has been accused of money laundering, tax avoidance and various conflicts of interest. But the Libor coverage has been unprecedented because of the extent of the coverage and the timing – the news broke in a news frame that saw banking brands under siege.

The 500 banking brands in Brand Finance’s 2012 study saw a drop off in collective brand value fall of $94.78 billion to a total of $746.7 billion. The bottom line is brands are still incredibly valuable, but under siege.

Which is what makes FNB so very smart as a local banking brand. It has repositioned way ahead of the curve as a consumer ally, a street-smart wise-guy (or gal). It is the anti-banking brand. In an era consumers are becoming increasingly suspicious of banking brands, FNB is the smartest banking brand by far.

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