Lost in transmutation, 10 years after the crisis
Marcel le Gouais
Many shrewd economists have tried to pinpoint the definitive, incipient juncture back in 2007 that signalled an imminent financial crisis.
It was all the rage towards the end of the summer, 10 years after broadcasters’ camera crews captured the run on Northern Rock. Business editors have blogged en masse on 10-year macro trends, with some highlighting eye-watering increases in the UK’s debt to GDP ratio – now at 87 percent compared to 35 percent in 2007.
But while some reporters ruminated on banks’ failure to calculate risk a decade ago, they failed to use their own calculators, somehow overlooking the fact Lehman Brothers entered administration in September 2008 – nine years ago.
Two utterly inappropriate soundbites increasingly being used to describe the period between August 2007 and the autumn of 2011 are ‘the great financial crisis’ and ‘the great crash.’
I flinch every time I read this. There was nothing ‘great’ about that period; though it’d be great if press release writers gave up a desperate race to be remembered as the first to coin a phrase they hope will be etched into history. Does anyone know was first to define the decade of 1929 to 1939 as The Great Depression? Does it matter?
It’s remissive to characterise in three words a chain reaction that started with US sub-prime defaults and ultimately unleashed multiple, destructive crises. UK public sector finances are still feeling the pain.
A painful period for collections organisations – namely the investment required for compliance, conduct oversight and huge operational hurdles to achieve authorisation from the Financial Conduct Authority (FCA), is now largely over.
In those 10 years, a seismic shift in the balance of power within lenders to the risk and compliance teams has in the main, created better outcomes for customers (not debtors), if not the different journeys they’ve taken.
Lenders, particularly Nationwide Building Society, and large numbers of collections firms have led other industries in overhauling their approach to helping customers in multiple forms of vulnerable circumstances, with warmer hand-offs to debt advice agencies and specialist support charities. I doubt whether many anticipated this trend back in 2007.
In short, there is now so much more emphasis on the right tone and customer-first culture in the setting of policy, and execution in operations.
But in this 10-year transmutation, what has been lost?Has everything that’s changed been good? In a strictly business sense, not always, but not always for customers either.
Risk appetite in some quarters has diminished the prospects for open, frank and progressive discussions to flourish in the public domain, and privately, for such a dialogue to reach mutually beneficial conclusions for lenders, suppliers and customers.
For its part the FCA has hinted several times that pragmatism might help, and would justify outcomes in certain circumstances, rather than a slavish advocacy of process.
Other changes to the buyer/seller dynamic have brought about a new playing field, from which some have been subbed with little or no hope of coming back on. Lenders are now able to manage oversight on only a drastically reduced number across their contingency and debt sale panels, but would they prefer more competition and new opportunities for a champion/challenger analysis?
Current regulatory requirements, barriers to entry and the need for a demonstrative track record, allow no room for either. And even for those who traversed the barrier, the next 10 years is riddled with uncertainty.