never ending banking. reconsidering the western banks’ approach to reputation management in...

Reconsidering the Western banks‟ approach

to reputation management in developing markets

on the example of Ukraine

14th International Conference

"The Sustainability Imperative: A Strategic Role for Reputation Management”

Reputation Institute

19-21 May 2010

Rio de Janeiro, Brazil

Never ending banking?

After the series of economic and financial shocks which hit the post-Soviet

economies in last decades, the trust in banking system has reached such a

low level in Ukraine that the citizens preferred to keep their savings at

home „under the mattress‟

Post-Soviet shocks

You

can do

as you

please,

but

I am

off

“

“

The coming

of Western banks

to the Ukrainian market

was meant to correct

such a situation

The active expansion of Western banks on Ukrainian

market after Orange revolution took place without

taking into account expectations and awareness

of consumers

During 2005 – 2009 foreign banks‟ share has grown from 17% to 44%

Consumers had no experience what so ever of work

with bank loans and financial services

The domestic branches of Western banks actively issued

bank loans in foreign currency to Ukrainian clients

The business model used by the foreign banks was based on extracting

profit from the difference between the interest rates for consumer loans

and the interest paid for resources attracted in the foreign European

markets.

The Western banks have got the reputation

of “kind uncles” who materialize the dreams

of the clients such as purchasing whatever they want

Banks‟ communications were focused on describing the opportunities

to their clients and neglected to inform them about the responsibilities

But,

After the onset

of the global

financial crisis

the majority

of Western banks

have suffered

colossal losses

in Ukraine

This was caused not only by the negative

economic developments but also by numerous

past mistakes in banks‟ communications with

their customers and their reputation

management on this market

GfK Ukraine: by the end of

2008 the level of distrust

in banks in Ukraine has

almost doubled from

Ukraine‟s GDP in 2009 dropped by

the record 13,9%

Consumers easily stopped

repaying and servicing their loans

28,4% to 56,2%

Not prepared for such a challenge the Western banks

are considering and developing various exit strategies

for the Ukrainian market

The reputation damages has been done

also to Ukraine financial market.

Bankers tried to solve the problem at

the expense of more capable borrowers

by increasing the interest rates on their

loans. Additional reputation damage

has been done by the National Bank of

Ukraine‟s directive to freeze the

withdrawal of deposits for 7 months.

After the freeze has ended, customers

began actively to withdraw their

deposits. Clients did not trust banks.

Clients did not make deposits

Today banks do not issue credits, because they are

not trusted anymore

Such low numbers for popularity of banking services are mostly the result of the impact the crisis

had on the households and of the spectacular drop of banks‟ reputation, including those with

foreign capital

Ukrainian Customer 2009:

Relation to banking services

(deposits and loans)

The Ukrainian branches of Western banks face a

tremendous task of damage control:

Bringing to consumers the better understanding

of the risks of making the loan which could hit

the short-term performance of banks

Still it guarantees long-term stability and prosperity of

credit institutions

The best information

source in this case could

be the banking

association, which is able

to take on some negative

aspects of the massage

Educate clients

Lobby own interests in Government

Communicate profitably with large debtors

The Great Piggy Bank Advanture is

an interactive experience that

brings basic savings and

investment concepts to life in fun

way.

The Disney Attraction includes a

series of games that teach guests

how to set goals, save and spend

smartly, stay ahead of inflation

and diversify investments.

Questions?

New Concept Group

T. + 38 044 289 4517

F. + 38 044 287 5316

http://www.nc.ua

blog.nc.ua

72 A Velyka Vasylkivska Street

03150 Kyiv

Ukraine