According to public surveys, bankers are crooks. If you listen to their marketing departments, bankers are great. According to Dutch economist Marcel Canoy, neither of these stories are true. And banks are too important in our society to leave it there, he says.

Therefore, he asked and got unrestricted access to Rabobank, a Dutch bank active in 38 countries worldwide, with a focus on food and agriculture. His book “The Bank of Good Intentions” paints a nuanced picture of what is happening inside this bank. This bank is trying to foster its human side, but rules and technology make this a difficult balancing act.

(Even though his book is in Dutch, a series of three podcasts (web, Spotify, or iTunes) now brings across his key points to an English-speaking audience.)

After the Global Financial Crisis in 2008, in which big banks like the Lehman’s Brothers fell, the financial system as a whole was reportedly close to collapse. Governments had to step in to bail out banks. There was a public outcry, and rules for banks were tightened. There was also a call for banks to take their ethical obligations more seriously.

What is the situation now?

One clear thing that has changed after the crisis is the composition of management. It used to be an old-boys club, but now both the age and gender structure has changed. There are more women in high management positions, and some young people too. Canoy is a believer in mixed teams, because they bring more diverse perspectives, and he thinks this is a positive development.

Another clear improvement is transparency. At least for Rabobank opening its doors to a writer is unprecedented. The CEO wrote an email to the whole bank that Canoy could be trusted, and that they could talk to him freely about their work. This clearly served him well during his research. He was even allowed to sit in on management meetings, where he was so surprised at the amount of jargon they used that he included a slightly satirical chapter on it in his book. But their desire to be transparent is clearly an improvement.

Rules and the human measure

Canoy tells the story of his visit to Tanzania, where he was able to join Rabo banker Tom Borghols and his colleagues. He visited clients together with Borghols and got a good impression of what he was doing. According to Canoy, Borghols is the perfect banker: he makes clear, business-like decisions with the well-being of the bank firmly in mind, but also with an eye to the human dimension of his clients. When needed, he displays a degree of trust in them, which motivates the clients to not let him down when loans need to be repaid.

At the time of interviewing, Borghols explained that he didn’t look forward to going back to the Netherlands, because there, his type of banking was no longer possible because of all the rules. That’s clearly not good news. Should we de-regulate then?

Even though this example may suggest it, I don’t read Canoy’s book as a plea to de-regulate banking altogether. The book is not an argument, it is mostly descriptive. But from what he saw, it does seem that the human dimension is in danger of drowning in the ocean of rules, which calls for discernment. Where should rules be firm, where should there be room for the human element, which inevitably includes failure?

Digitalization

Canoy thinks that the human dimension is also threatened because of computerisation. People increasingly tend to arrange their banking business via internet. This is leading to unprecedented situations in the local banks. Local offices have become way too big for the people that work there, because people visit them less frequently. It is clear that personal contact with a local banker is less intense than it used to be.

There is a danger in this trend for bankers themselves too.

Canoy illustrates this point with behavioral economics experiments which show that people are less likely to cheat with real money than they are with ‘chips’ which are interchangeable for real money. If it doesn’t feel real, there is a lower emotional bar to cheating. Before the crisis, some bankers became really good at constructing complex ‘derivatives’, financial products in which the link to reality became increasingly abstract. When everything is digitized and abstracted, bankers are dealing with money that doesn’t ‘feel real’ all the time. Just some numbers on a screen, that’s all…

Behavioral economists have been looking for ways to deal with this issue. And next to keeping financial products simple, there could be some other solutions. There’s a pension fund where employees are shown photos of pensioners before making a big transaction, for instance, reminding them that they’re working with real people’s money. Canoy proposes that Rabo hire a ‘behavioral risk manager’ to look into these kinds of solutions for the bank. But so far, the management has said this is a job they can do themselves.

The virtues of dialogue without pressure

I think there is a lot to like about this book in terms of its content. But what I like most is the approach. Banking is one of these areas where a moral outcry has led to negative feelings about the whole industry. And those feelings were justified and necessary. But to go further we need to re-establish dialogue in which head and heart are equally involved. That’s what Canoy has done so successfully.

To me, this book is a good example of the kind of deep dialogue we should see more of. My own modest initiative in this direction is a monthly E-zine called “Relax, Relate, Reflect about Big Questions”. In the context of this project, I decided to work a lecture Canoy gave about “The Bank of Good Intentions” into a series of podcasts. In this way his main insights are now accessible to an English-speaking audience, even though the book is still only available in Dutch. You can access the podcast series here (web, Spotify, or iTunes).

Canoy is very clear about why he took this rather unorthodox approach — sometimes conventional approaches just don’t give answers to the questions being asked. A mathematical model may be very useful to predict some aspects of a bank’s operation, but they cannot tell you what’s happening to the culture of a bank. In-depth dialogue can at least give you a sensible impression, without claiming to tell everything there is to say.

Canoy shows that in-depth dialogue can clarify certain questions better than financial models can. Banks may want to show their human side, but rules and digitalization are obstacles that cannot be easily cleared away, because they are necessary too. In the end, we need in-depth discernment, to which Canoy has made a positive contribution.

Daniel Bernardus (Daan) van Schalkwijk writes from the Netherlands. He teaches about health at a university in Amsterdam and is the director of Leidenhoven College, a collegiate hall of residence. He edits a monthly ezine called “Relax, Relate, Reflect about Big Questions”.   

Michael Cook

Michael Cook

Michael Cook is the editor of MercatorNet