Redemption awaits the Dutch Banking system?

The mortgage system in Holland is unique. It is the only place in Europe where your mortgage interest is tax deductible whilst not paying any capital. In simpler language if you are looking to buy a house, the bank will decide, subject to conditions (income history and job security etc)., to raise the full capital and simply charge you interest which is tax deductible! The bank effectively owns the place but buys it in your name and under your signature. Consequently the banks can lend up to 5 even 5 and half times your annual income assuming of course all risk factors are taken in to account. Clearly one can see the advantages (Most people like the idea of ‘owning’ a house, and it can work quite well in a growth economy) but the system can have its colossal disadvantages. Let me explain a recent story that captured my interest published in a Dutch daily news article.

A man who had difficulty paying his interest payments got into around €15.000 in debt to the bank in back payments. The bank wanted to repossess the house to auction it. As demand in Holland is weak and house prices were falling, the borrower knew that the auction would be disproportionate to what he owed and that he would fall further into debt. It was estimated he would lose a further €50.000. (The loss in value of the house from the time of the purchase falls under the responsibility of the individual to repay and not the bank and this would work out as a debt of +/- €65.000) The colloquial terms the Dutch use are houses ‘under water’. He therefore went to court which was a first of such a case. The borrower won his case as the court decided that in fact if the bank auctioned the house the individual would be at a greater loss and it was simply unfair.

Sources in Holland inform us that more and more people are in this kind of ‘under water’ situation and felt that the banks were constantly putting profit before interests to their customers. No one trusted their banking sector but people lacked courage to do anything about it. Their opinion was that the banks were simply too powerful and that they needed to change their culture or perhaps the system required changing. 

Another Dutch person we knew currently had a really impressive business going with a great idea. He is providing a service where there was a real need. ‘We are booming’ he said. He also needed help from the Banks to help carry this growth. I asked him if in fact they were helping him. He responded they were being extremely difficult and simply not willing to help.

Stories of this nature are recurring more and more. It seems that everyone could be in a fix. The lawsuit can set a precedent in Holland. Clearly all this could get out of hand and Time MCG argues that it all adds to the fact that we need a positive culture change in the Banking sector not just in Holland but in Europe before some sort of battle guns may arise between differing societies versus our battered banks. Even the European Union is asking for a different attitude in our debt ridden countries.

Bankers we knew were certainly very good and in many cases geniuses but somehow along the way many have lost their talent, their true gifts their sense of purpose and in the end a sense of themselves. Is it the fault of the regulators or are we reverting to the same path as the previous lost decade? In our article on culture versus our itentity we spoke about our identity crisis and conflicting values linking this to our cultural problems in the current economic system further exasperating our lack of conscience, confidence and purpose. Arguably this may have a direct link to our inability to move forward. 

 

In truth it is no good really pointing fingers and somehow we must share part of the guilt of our past conduct and find solutions. Again what are our options? The retail banking sector in Holland could be sitting on a golden opportunity like in the UK even in Belgium and France. Most well balanced professionals we speak with now understand that a different mind-set is required instead of this ‘Ipseite’ and ring fenced approach which will only lead us to further problems and professional unease. 

When I lived in Holland, it was a service minded trading culture that had a great entrepreneurial spirit and always on the lookout for new ideas. (They speak their mind too!)  To help the banks revert back to a service minded attitude, we would encourage them to make a more determined and tangible effort in their mission statement and purpose in order to reach out to the general public in so far as the general public can understand or grasp. More efforts would need to be made regarding their core values and business principles making them more compatible to their services. SNS Real a well-known Dutch bank which has just been taken over is now making a concerted effort. ABN Amro requires further encouragement to help get away from the hubris of the past. The two of them are after all owned by the Dutch tax payer. This will lead to a more increased transparency, trust and a renewal of people belief that is so desperately lacking at the moment. For now Time MCG under our ‘Barometer Effect’ will have to classify these banks as still in the storm.

An idea of a tangible mission statement could be for example ‘Our mission is to make money work for small businesses as well as social, cultural and environmental change. Then follow on from this. In short it could be time for money to serve people and not to rule and in particular for those who look after it to help bring us into a new era.

The Netherlands is a country that could take onto this. Is it not time that we took our responsibility in hand in our leadership and to revert to the real needs in our societies? A need is about filling in a void that is beneficial for others. This is how our human nature works it is linked to our predominant human driver which is all about how we can provide value for others. Or what do people value? Is it not time for our banking sector to think along these lines and not the other way round? After all we would not want the Banks to go 'under water' would we?

‘To serve is to lead’

How to make banking beautiful?

Looking at the big picture, somehow our society has to be brought together and not left to run in every different direction as is happening today. Arguably it is linked to a total misconception of individual freedom, loss of identity, lack of conscience and belief resulting in repeated conflicting interests at the top and misery at the bottom. In reality most ordinary honest well balanced professionals are aghast by what they see and experience daily not to mention the increasing difficulties seen in the workplace. Beneath the surface we hear the rumbling. A report by Gillian Guy was written on 20th May in the Daily Telegraph. ‘Redemption awaits Britain’s battered Banks.’

 

Time MCG knows that the banks are being pulled in all directions which must be very difficult for them and understandably so. Is there not a way out? We believe the Banking Sector has a golden opportunity to ‘make the wind instead of being bent by it’ and help us enter into a new era that Europe so desperately seeks.

What options do we have? In order to help breathe values, one would have to incorporate a belief. One idea would be to encourage the banks management to rattle their brains even further and make greater efforts in a renewed more tangible approach in their mission statement and purpose, thus concentrating on where the real need is and to transmit this meaning to their employees and even to their customers. This would have to be done in such a way that our different societies can grasp and understand. A real need is not about giving what people want or already have but more about filling a void that is beneficial to others. The question is therefore what is really missing in the global world?
 
HSBC came out with their first quarter profits for 2013. They mentioned they were focusing their efforts on where the high growth is in Asia.  Their purpose states: ‘Connecting customers to opportunities.' What does this mean?  Are we all opportunists!? Goldman’s Sachs as far as I am aware does not have a mission statement neither a tangible belief and neither does J.P Morgan. They only describe what they do and that part seems rather vague. In 2012 Goldmans made a net profit of USD 7.5 Billion. and J.P. Morgan USD 5.7 Billion. Without mission statements this would bring in genuine concern. We are still awaiting headlines from them both whether they are making efforts to change their culture from their past conduct. Rothschild’s are purely focused on wealth. In Time MCG’s ‘Barometer Effect’ we would have to classify these banks as still in the storm with limited efforts in changing their culture.

 

Quite frankly we all have a responsibility in this desperate world of ours and if it continues this way it will all end in tears. Is the solution then to print money and filter it through in order to enrich the investors and giving individuals the short term kick? Once, a leading CEO of a FMCG multinational mentioned to us that he was not at all concerned by the short term value of his stock but rather with the long term health of his company in providing customer care for the benefit of his employees.

 

Europe ought to be the ones that lead this change as we always have been the pioneers in re-inventing ourselves whereby the rest of the world can follow. All it takes is a little extra bottle from the top together with some plain common sense.  We came across another Banks mission statement in their offices. ‘Our mission is to make money work for positive social, environmental and cultural change.’ This is more like it! This small bank may set the precedent for immense possibilities ahead. This will also help solve Anthony Jenkins internal problems at Barclays by the flick of the eyebrow let alone everywhere else and the rest will follow. With all their ingenuity let’s return the beauty into banking to help bring a grieving Europe that does not have the stomach for another lost decade, into a new cultural era for the sake of our children. This way we can show the rest of the world what mettle we are made of.

 

‘By small accomplishments great things happen’

Fees versus our dignity

Looking at the economic system and our current business culture there are many things that capture my curiosity where changes in mentality, reform or improvement are drastically needed in how we treat each other whereby increasing respect, integrity and synergy. Many might disagree with me although, I am of the belief that this change must be linked to a renewed cohesive force in our moral behaviour, training, conscience and renewed purpose implying gentle changes and creative thinking in our corporate culture, sense of direction and business practices in the financial sector where Time MCG has its core focus.

To avoid getting carried away I would like to discuss the topic of fees. When I was in Executive Search in the Netherlands and before that in recruitment, regarding our fee structure we would charge clients on the basis of a third of the persons annual pay. I regret back then that I put price tags on people and I ended up looking at experienced professionals at how much they were worth or as a commodity as opposed to their talent.  There were often times I never acted in the interest of the candidate and only in my own interest resulting in poor misjudged advice both ways if the employer was keen to hire the person. I knew there was something wrong and towards the end of my tenure I started offering normal fees calculated on my work and contribution which in the end would allow me to look at others differently and therefore treat others with more respect. The system was not dissimilar to football and how players are bought and sold at prices that beggars belief with agents behind it.

It was also reported in the Daily Telegraph April 4th 2013, last year Anthony Salz, a veteran lawyer, investment banker and vice chairman of Rothschild’s was commissioned by Barclays last year to review their difficulties for a period of 8 months. Rothschild’s demanded €1.7million in pay from Barclays for his release.

I could imagine a future scenario whilst running a large business I walk into a chairman’s office of another large business and would ask my fellow peer if I could buy his Global Head of Lending for six months at a round figure because I may need to borrow him or her for a while. Imagine then that each person in their position had its own agent who was behind the buying and selling? Is this how desperate our economics is leading us to? Are we becoming like the footballers and their agents? Are people in their own right becoming their own profit centre?

Money on Wikipedia by definition is described as any object or record that is used in exchange for goods and services. People are not added to this definition. Since when have I become a commodity, profit centre, cost or unit, service or good or part of a human capital?  How is it possible that an intelligent or educated person in business would want to buy and sell me or even rule me this way? I am a person that is unique in me who can add value and contribute that deserves to be respected.  My value added if you like is part of my talent, my core principles, my knowledge, and my skills.  I should hope that I am very beneficial to where there is a need and to where I feel most fulfilled at my choice without any chain.

 
Anthony Salz is described as a veteran lawyer, surely knows full well that the abolishment of slavery act was in 1833. UK as a nation was proud of being one of the first that unshackled people.

The solutions we will need to look at; reform and renewed thinking in contract negotiations for people and how we calculate our fee structures, eliminating percentages for example and encourage others to return fees down to sensible levels based on our work and valued contribution.  Perhaps more simply put, ban these modern medieval practices in all sections of our society which only incites greed, poor conduct and weak judgement. This way we can show the rest of the world how civilised we are in Europe with our economic system. I am certain these changes will allow ourselves to further unleash our creativity and talent in our advance forward in humanity. I dare say Arsene Wenger might not mind.

Our Culture versus our Identity.

President Francois Hollande, last year mentioned that Europe had lost its identity and we must concentrate our efforts economically on jobs and growth or Europe will get wiped away.
 

I would have to ask the question what is our identity? This is difficult bearing in mind it took me until my 40th year to find my true identity as I was for so many years compounded by my own inner struggle. I believe that our identity comes down to our understanding that we are all each unique human beings based on our talents, values, conscience and beliefs with each of us having an ability to contribute in whatever capacity or form. This is added by our innate desire to create and to do good that is coherent to our own values, natural principles and conscience which ultimately governs our behaviour and our actions. Our values and conscience are influenced or formed by our rich European Judea/Christian cultural heritage, our environment and education, our upbringing, and the love we are able to give and receive helping us to have a deeper understanding of right and wrong.

If this is what he means then President Hollande is right. It is clear that all this seems to be pulled apart, out of sinc, and  totally fragmented mainly by our inner selfish desires, linked to family breakdown, loss of values, individual freedom, money and consumption. If he is mirroring himself he may also be right as with regard to his own identity, beliefs and purpose we don’t really know where he stands.  As I understand with all due respect he has a mistress and parts of his government are corrupt.

An identity crisis could be linked to our very own inner conflict of values which is in a clear struggle against the current economic system resulting in a lack of belief, leadership, confidence and purpose which could be why we are forever stalling in Europe. Unfortunately I have to say that jobs and growth is neither a purpose nor neither a belief. They are the positive outcomes when getting the nuts and bolts right. Our identity in essence is the main part of these nuts and bolts and it is this that is fundamentally in crisis.

Furthermore it is also highly possible that a conflict in values has arisen between the concept of money as an emotive selfish desire and an obsessive measurement of success, consumption and status, linked to profits, entitlement, lack of belief or indifference and perhaps overall economics versus our natural desire to do good for others. Is it this that is pulling us back in Europe which exasperates our problems and therefore our identity? Is it sacrifice and purpose in each of us that might be needed? Or is it some fundamental changes required at the heart of the capitalist free market system? It is highly probable to deduce therefore that we have a cultural problem in our economic system which is in direct conflict to our want of a true identity leaving many honest and talented people in their careers suffering, feeling unfulfilled or exploited not to mention those that are left out.  It needs to be dealt with and very seriously. Otherwise we may very well eradicate ourselves off the map.

Governments are finding this particular part quite difficult, scratching their heads and not offering many solutions which is hardly surprising due to the debt they have assembled which has altered their focus. It is of no wonder it wants jobs and growth. It is fair but too simple. They are in a fix unless they change or a courageous miraculous leader comes in to take on the beacon of fire.

Who else then could take the lead? How about big business that carry much of the burden of responsibility in our society? Barclays Bank in the UK is a fascinating and a very encouraging example. They behaved and let our society down recently, now they could be really changing. The CEO Anthony Jenkins has cracked our fundamental problem. ‘The entitlement culture, elevated pay, governance and obsession for profits in the short term’ is being dealt with and reformed as far as their new drive toward culture change is concerned. They have a ‘transform’ program based on values, culture and learning. Their principles and governance on their website are excellent. In terms of Time MCG’s ‘barometer effect’ as it begins to take effect over time I am certain it will move out of the storm and become a very ‘sunny’ place to work in to the overall benefit of their customers and our society. Jobs and growth will surely flow from thereon. There are many, many more good examples out there. These examples are so needed in our culture and all in all it will help us to find our identity again whereby regaining our confidence and overall sense of direction which is really what is needed in Europe.

On the other end of the spectrum I met a banker from a leading French Bank who informed me that it was being led by 3 or 4 people at the top who spend their time with government ministers instead of working on their banks culture or even leading it resulting in many talented people leaving. Is there a conflict of interest (=value breakdown) right at the top? Are the French Government and their banks at each other’s mercy or in their own bubble? Is this why the French cannot get their policies right? In terms of potent drinks it could be one of the best toxic mix ever concocted. The only thing that would keep me standing would be my pride. Ok fair enough I would eventually fall over.

In brief the solution must be strong moral leadership or leadership by example, new purpose, regular re-training, and issues of reform on pay and new creative thinking that is required in solving our conflicting values. Values that are compatible to our natural principles which ultimately govern our behaviour. We have a rich European Judea/Christian cultural heritage.  Why are we here and what are we here to do? We are here to contribute, to make or to produce for the needs and benefit of others. We are here to serve. We are here to encourage and we are here to teach. Finally for those few we are here to lead with strength, cheerfulness and humility and we will be recognised. Not the other way round. Come on Europe, we have all the talent and skills to do this. Let’s take the lead in global change, get back on track, get the right people in at the top and show the rest of the world what we are made of.  We have so much to be proud of.

 

Become what you are

Armageddon to change or vice versa

Many of my articles focuses on conduct, culture as well as on values such as trust and integrity with a primary interest in the financial sector where much work is being done and certainly much more needs to be done. People still have very little trust in their banking system simply due to the entitlement culture which simply has to change. The Cyprus situation would send a shiver down any one’s spine. Allow me to recount a small story. The other day a friend of mine approached me and wondered where the safest place was to put her money as she had little faith in the system.

My initial response perhaps half serious was informing her to simply keep her cash under her mattress. She responded with a genuine concern of burglary or break in. What about real estate? She asked. The problem with this was that if anything happened to the banks which appears increasingly likely, the real estate market would plummet rapidly as their value was more often than not controlled by the banks through lending. Then there is the difficulty of the bank’s exposure to sovereign debt which becomes a nightmare when sovereign debt loses its credit worthiness as we can see with Greece, and maybe Spain and Italy. The Greek debt crisis is in fact what caused the Cyprus Banks to fail or more simply put from poor misjudged lending. Currently the UK is losing its credit rating which ought to add to our concern. Then there is the question of interest rates that may go up which will lose the value of bonds held by Banks. So at this stage these large banks unless they become more and more transparent and change their culture, are of a definite risk and in a fix.
 

She pressed on ‘So where then do you think I should invest or deposit my money?’
 

Well I told her a story of a banker who described the bank he was working  in. This was a small bank that had a specific purpose of only investing in sustainable development. Not to mention that its investments were made with the highest ethics and of integrity. Many of its services were a lot the same as any other banks such as payments, small loans and savings. The CEO fixed salary was not allowed to be more than 10 times more than the least paid person. There was no bonus except a few hundred Euros if the bank had a good year, which was distributed equally amongst the entire workforce. Bankers were knocking at their doors for employment.  Its assets were rising fast. Its employee workforce was doubling every year. This bank offered a purpose and a mission for its employees. On top of it all it offered job security, morale was high and people were happy. Their only challenge was ensuring the people they recruited had the right mentality. Here is a rare example of a bank that operated purely in the interest of its customer with the highest ethics and for a worthy cause.

I told my friend that this was the safest place to deposit your savings at therefore at minimal risk.

In brief, the large banks are really standing on the edge of armageddon. Have they burnt their bridges? Or is it too late? Angela Merkel pointed out that in future banking crisis’ it is up to the banks to save themselves with no aid from the tax payer. Mervin King, the Head of the Bank of England warned us upon his retirement that there were more Banks out there that will be needing support. I think the message is quite clear. Really what we need to see is the break-up of the larger banks as soon as possible, to separate the savings and normal services from the investment side. Nothing is secure at this stage. Another solution is to set up smaller banks like the example I gave with a sense of purpose and a belief in positive change. Both examples will not only re-instil trust but will also increase employee morale, job satisfaction and customer loyalty.

Our ultimate challenge is a change that is required in many parts of our wider business culture and that requires a change of mentality implying a change of heart and a better grip of our own conscience which the world is so desperately seeking. We all know how hard that is where money, consumption and our desires are concerned, less helped this time by my heading. This leaves me to wonder whether there must be something greater at play here. Which side of the coin are you on?