A need for ‘compassionate banking’

An environment lacking in compassion is not good for business and the country in the long run. Business is also about humanity.

IS THERE such a thing as compassionate banking? The concept is basically about the banking system acknowledging difficulties facing borrowers in trying times.

The banks are supposed to approach them, guide them, offer solutions and alternatives rather then sending lawyers’ letters to demand immediate settlements.

Don’t get me wrong. I have lived with banks all my adult life. I am not their exemplary client, I defaulted from time to time.

When I lost my job in 1998 I almost lost my house. Thanks to a friendly banker, he helped me reschedule my loan. I will always remember him as my “compassionate banker.”

Perhaps he is a contrarian among bankers. The rest are more concerned about their Key Performance Indicators (KPIs). I have no quarrel about banks making money, tonnes of money.

That reminds me of the entire conversation regarding ethics, compassion, CEOs’ pay and workers’ salary. Earlier this year, at the United States House Committee on Financial Services hearing involving CEOs of several major banks, lawmaker Katie Porter of California confronted the CEO of JP Morgan, Jamie Dimon using a hypothetical employee of the bank as an example. She is a single mother making RM66 an hour, who can’t make ends meet and in fact running a budget shortfall of RM2, 268 a month.

On the other hand Dimon received a compensation of RM124 million that year.

Porter has this to say to Dimon, “What I’d like you to do is provide a way for families to make ends meet.”

It is certainly not Dimon’s or his bank’s responsibility to do that.

But the moral of the story is, workers (in most industries, not just the financial or banking industry) have difficulties in managing their finances.

In most cases their entry-level income is insufficient. When they have families, things become dire. When they lose their jobs, things could only get worse.

The truth of the matter is, on the economic front, things are not all rosy here in Malaysia.

People are struggling to make ends meet. Many have to find a part-time job to compensate their meagre income. Cost of living is not coming down. Prices of essential goods are going up.

More worrying is that many are losing their jobs. Companies are citing tough times and dwindling profit margins for retrenching workers.

Take the case of the media industry, in the last three years it has shed more than 3, 000 workers.

The case involving 769 current Utusan Melayu workers and the 800 others who took the Voluntary Separation Scheme (VSS) is something worth looking into. For those still working they have not been paid for the last three months.

When the National Union of Journalists (NUJ) called for a media conference, they raised the issue about workers not being able to buy milk and pampers for their children. A worker even substituted syrup drink for milk for his baby.

They have other headaches as well. They are defaulting on their mortgages and loans.

In most cases, financial institutions have little interest on the situation they are in. Here lies, the role of compassionate bankers.

Perhaps it is time for Bank Negara to come up with guidelines on how banks should deal with such situations.

However in most cases central banks are reluctant to interfere with how banks should be dealing with defaulters.

Bank Negara in fact is listing defaulters on the Central Credit Reference Information (CCRIS) and demanding that banks reduce their non-performing loan (NPLs). On the other hand banks have to abide by all kinds of rules and regulations.

The defaulters are on their own.

But this is beyond the normal banking practices. I am not arguing about ethical banking which I sincerely believe, a standard has been set. At the same time we do not want the bankers’ conduct to fall below community standard and expectations. This is about the banking system responding to people in need.

We are dealing with mostly lower income groups here. Many do not have savings. And worst, they are the sole breadwinners.

We are not expecting anything more than the banking system take a serious look into their social responsibility. Borrowers are humans, they should not be dealt with just on contractual perspective. An environment lacking in compassion is not good for business and the country in a long run. Business is also about humanity.

We are in a difficult time now and we need a different approach in managing the crisis. Many more will lose their jobs before the economy rebounds, hopefully sooner rather than later.

Johan Jaaffar was a journalist, editor and for some years chairman of a media company, and is passionate about all things literature and the arts. The views expressed here are entirely his own.