When communities come together; they outperform. Usain Bolt outperforms his individual world-record 100 meters time when he runs 4x100m with other Jamaicans, per 100 meters. As a young banker in Lagos, in Diamond Bank (diamond lives forever), during the training school, one of the leaders in the bank, Ben Oviosu, explained the concept of Win-Win in the industry. The next day, another leader in the bank, Chinedu Uzoho, educated us on the 7 Habits of Highly Effective People. By the time we were done, we were bankers, not just engineers or accountants, across many domains of banking ordinance.
Diamond Bank training school remains one of the most important experiences I have ever received in my professional life. It was a transduction process which moved me from one state to another in a positive, dynamic, and impactful way. The lecture on treasury by Ohis Ohiwerei was iconic. It took him hours and deconstructed the mystery of finance. I asked so many questions and he gave me the nickname “Prof” – and that was it throughout my time in the finest bank ever created, but which did not live forever, unfortunately!
But in the training, there was a theme: win-win and co-opetition. Yes, do things that advance not the bank but the banking industry. Before the training, it was like Zenith, GTBank, STB, etc were “enemies”. But when we finished, we saw them as partners to advance our collective mission.
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Why this history, American banking did a win-win today. Yes, banks pooled funds to save another dying bank: “Eleven banks deposited $30 billion at First Republic on Thursday afternoon, in a government-backed bid to bolster the ailing lender and boost confidence in the U.S. banking system”. It was not a charity. If they had not done that, their stock positions would have continued the days-long evaporation in the New York Stock Exchange. But saving one of the weakest would ensure the strong can live. Learn from this: it is a message we need in our world.
Eleven banks deposited $30 billion at First Republic on Thursday afternoon, in a government-backed bid to bolster the ailing lender and boost confidence in the U.S. banking system. Bank of America, JPMorgan Chase, Wells Fargo, and Citigroup each contributed some $5 billion, while Goldman Sachs and Morgan Stanley kicked in $2.5 billion a piece. First Republic had seen its shares crater following the collapse of Silicon Valley Bank, as investors worried over its high level of uninsured deposits. The regional bank’s stock closed 10% up after the rescue package was announced.
The banks’ uninsured deposits will have to stay at First Republic for at least 120 days.
In the last week, banks have taken out nearly $165 billion in short-term Federal Reserve loans, taking advantage of two backstop tools to shore up liquidity.
I wish Diamond Bank was that lucky; it was the finest bank ever created, but which did not live forever, unfortunately!
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Comment: Indeed, business strategy would generally dictate not to allow competition to fail in sensitive industries like banking.
Failure in this sector can result in legal and reputational issues that could harm other banks’ image and brand, and may result in fines, legal fees, or even legal action if other banks were in somewhat similar situations and/or if new regulations were created.
And don’t forget the loss of capital from savings and the cascading affect that would have, i.e mortgages and business loans as well.
So it is more effective to save the reputation of the banking sector by collectively saving a competitor. This action could also be affective in developing your own competitive advantages and differentiators , like building strong brand equity, which in turn develops a stronger loyal customer base. After all your the bank who saves banks…..BOOM!
My Response: It seems counterintuitive when you examine all the efforts we put to outcompete the others. But here, banks could have seen one competitor out, but magically, they realized that it would take others to the bottom of the ocean, if not rescued with boat-loads of $dollars
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It’s a family affair thing, you do not leave one of your own out there to get destroyed; it will definitely affect you negatively.
Perhaps we need the same construct to save our ailing republic, because at the rate we are going, if we do not arrest the slide, we will end up destroying a constituent part, which in turn will make everyone look terrible.