Earlier this month, President Trump signed an executive order “guaranteeing fair banking for all Americans.” The order prohibits banks from declining services to law-abiding businesses and individuals based on “political or religious beliefs or lawful business activities.” Among other things, it also prevents banks from using “reputational risk” as a reason to deny services.
The move – cheered by some and lambasted by others, as with anything in our political environment – has tremendous implications for communicators in the financial services industry. Most notably, banks can no longer cite reputational risk as a reason to deny working with companies whose values might not align with those of their customers.
This means banks will need to walk the tightrope between reputational risk and compliance risk – balancing how they bank for potentially unpopular industries and the ire of those staunchly against said industries. Further fueling this is the regulatory ambiguity behind the order – creating potential tensions between the agencies enforcing the order and the court systems, with banks caught in the middle.
Those that are unprepared might find themselves dealing with a dual crisis, facing fines from the administration and an army of social media activists boycotting the brand.
What should banks expect in the coming months?
More activism from stakeholders
Even if the bank is legally required to work with an entity, that doesn’t mean the court of public opinion will like it. Banks need to prepare for the very real possibility that they’ll find themselves in the spotlight on this topic. A strong social listening program can help pick up any chatter on activism, and a scenario planning exercise will ensure no one is caught off guard if the conversation takes off.
As part of these planning exercises, communicators will need to reinforce its key message that providing these services is about equal treatment under the law, not siding with any one party. Messaging documents, FAQs, holding statements, social media posts and all other materials should be created in advance and tailored based on the scenario that unfolds. This way, the bank can take control of the narrative should its clients become public knowledge.
Employee morale could tank
No one enjoys being told what to do. Communicators might see a dip in morale as employees work with companies whose values don’t align with their own. It will be extremely important for communications teams to work closely with human resources and internal communications to message this appropriately. Further, managers need talking points for difficult employee conversations focusing on the importance of equal and fair access, while staying committed to the company’s values.
Investors might push back
Dropping “reputational risk” might change how banks go about their business, but investors are still free to apply these criteria as part of governance processes, and many still screen against these types of risk. It’ll be important for banks to focus on compliance-based criteria, including fraud, Know-Your-Customer (KYC) and other anti-money-laundering protocols and operational risk. This way investors can be reassured that banks are doing the appropriate due diligence to assess reputational risk AND remain complaint with the order.
At the end of the day, reputational risk will continue to exist in the eyes of stakeholders – whether it be the public, investors or employees. The executive order adds a regulatory layer to this – empowering the government to fine financial services companies it feels isn’t promoting fair access. For communicators, balancing this dichotomy comes down to preparedness and not losing sight of their true goal: protecting the bank’s reputation.