Banking on the new normal

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Banking on the new normal


In these turbulent times, banks are pressurised from all sides: they are expected to be compassionate towards their employees and ensure their health, safety and well-being, while satisfying the banking needs of their customers, who are affected by a worldwide health crisis, which has resulted in many of them struggling financially. In addition to these challenges, they are also answerable to the government, who is trying to salvage the economy. All this needs to be achieved, while balancing the regulator’s request for a strengthened balance sheet, and the shareholders’ call to be profitable.

Fortunately the financial services industry has been declared as essential during the COVID-19 pandemic, and providers are allowed to operate fully. Banks continue to fulfill their traditional role of providing re-assurance; security and safety; along with consistency and stability. Given the current global context, with an uncertain future, the challenges faced by banks seem to be insurmountable at times.

The upside is that during this global pandemic, banks have been perceived as rescuers of the economy and agencies for the government, instead of being blamed for the crisis as they usually are during a financial downturn. Capital buffers are also now much stronger than they were ten years ago, which has helped to a certain extent. Whether this is enough to survive the “new normal”, is too early to say. The current economic climate cannot be compared to any other major depressions in recent times, as there has never before been a planned shutdown of leading economies globally, with the prospect of having to cut down future production on a more permanent basis.

Desperate times call for desperate measures, so many governments around the world have started feeding additional liquidity into the financial system, in various ways. Some of the measures have not been successful (yet), and it is debatable whether a state intervention of a different nature is called for. In the past, it would have been frowned upon to use banks as vehicles for channeling state aid, but in the current context, it highlights the key value that banks possess in terms of their ability to reach businesses and households.

What is more, if we have to deal with the potential scenario of the economy only recovering in a U-shape, where structural economic changes are likely, and sovereign debt is at the center of the support packages that governments are putting in place globally, then banks need to prepare for rapid changes, with no time to differentiate between short- and long-term strategies.

Six aspects are worth considering for banks:

  1. Banks can easily achieve some tactical cost-cutting during this crisis; for example, through the reduction of travel and bonuses; and potentially delaying, or reducing, dividend pay-outs. They should explore alternative work solutions for their employees; for example, remote work schedules, which will allow banks to spend less and make necessary operational improvements. Constructive changes could even enable banks to postpone staff reduction.
  2. Banks need to review their digital readiness now more than ever, which could also open up efficiency gains.
  3. Re-skilling employees and revising performance management and incentives for the “new normal” will have to accompany the first two steps, as employee satisfaction strongly influences customer experience.
  4. Long-standing business assumptions, like general growth models, and customer business models, will have to be critically examined.
  5. The societal relevance and business resilience of banks has to be discussed at every level of banking institutions.
  6. What drives brand loyalty into the future should be explored in depth; this might lead to potential co-operations and/or mergers with other banks.


Dr. Antje Hargarter; Dean: School of Investment and Banking. 



Recommended resources:

Banerjee, I., Jacobson, R., Krivkovich, A., Libotte, G. and Rambachan, I. 2020. McKinsey. Shaping and safeguarding the banking workforce after Covid-19. [Online]. Available from: [Accessed on: 7 May 2020].

Bensley, E., Chheda, S., Schiff, R., Stephens, D. and Nicole Zhou. 2020. McKinsey. Remaking banking customer experience in response to coronavirus. [Online]. Available from: [Accessed on: 7 May 2020].

Lee, P. 2020. Euromoney. Can banks withstand the impact of Covid-19? [Online]. Available from: [Accessed on: 7 May 2020].

N.A. 2020. Accenture. Covid-19: Navigating the impact on commercial banking. [Online]. Available from: [Accessed on: 7 May 2020].

N.A. 2020. PWC. How retail banks can keep the lights on during the Covid-19 crisis – and recalibrate for the future. [Online]. Available from: [Accessed on: 7 May 2020].

Vater, D., Frazzitta, R., Naso, G. and Soares, J. 2020. Bain and Company. Banks in the Age of Covid-19: Protect, Serve and Build Resilience. [Online]. Available from: [Accessed on: 7 May 2020].


27 May 2020