#BTEditorial – Confidence and trust not easily acquired

There is a reason why thriving organisations invest significant sums and resources into ensuring they are viewed favourably by clients and stakeholders. They are mindful that perception is reality, and no matter how good a job you are doing, if people perceive otherwise, the road to success becomes that much harder.

There are occasions when the message being communicated by organisations about who they are and what they stand for, do not gel with the reality of the culture and activities within the organisation.

We can take, for example, the current debacle that has led to the takeover/merger on the weekend of Credit Suisse, one of the globe’s leading financial institutions, by its Swiss rival the UBS Group.

Credit Suisse is a big name, a mega player in global financial circles. But even with all its status,  international brand identity, and high-paying executives, the Swiss banking giant has still been rocked by years of scandal and losses. The reality and the perception were simply not aligned.

As news reports have revealed, its competitor UBS, has grabbed the mega bank for what could only be described as a “fire sale” price of US$3.25 billion.

In order to preserve the financial system in Switzerland and to avoid a repeat of the devastating financial crisis that engulfed the world starting in 2008, the Swiss Central Bank is providing a loan of 50 million Swiss francs (US$54.02 billion) to support Credit Suisse.

In the US, citizens there are also anxious about the collapse of  Silicon Valley Bank and Signature Bank. The stock markets are reflecting increasing jitters despite repeated assurances from the US Treasury and the American President that the country’s banking sector is safe.

In a world where perceptions are critical to maintaining confidence, US Treasury Secretary and Federal Reserve Chairman Jerome Powell issued this statement: “We welcome the announcements by the Swiss authorities today to support financial stability. The capital and liquidity positions of the US banking system are strong, and the US financial system is resilient. We have been in close contact with our international counterparts to support their implementation.”

At the national level in Barbados, the administration is also challenged with instilling confidence in our capital market following the selective default and debt restructuring pursued by Government in 2018 in order to right the country’s finances.

After refusing to touch government paper with a ten-foot pole, commercial banks and other institutional investors are tepidly resuming the purchase of bonds and other issuances from the state.

Government had been dangling its Barbados Optional Savings Scheme (BOSS) Plus bonds but have had less than the desired response from commercial banks who are awash with cash, and precious little in which to invest.

In Prime Minister Mottley’s 2023 Budgetary Proposals, which are now being debated in the Upper House, she indicated the Central Bank of Barbados will soon be issuing Treasury notes, the more attractive investment instruments due to their shorter maturity.

This is all in an attempt to resuscitate flagging interest in government-backed bonds and other debt instruments.

Commercial banks in 2018, reported millions of dollars in credit losses which they blamed on the domestic debt exchange. Republic Bank Financial Group, for example, reported that its Barbados operations were expecting $194.4 million in “credit losses”.

Despite the burn the regional bank suffered, managing director of Republic Bank Barbados Anthony Clerk informed us days ago that the institution was “back in the domestic market as it relates to the government bonds”.

In a statement of growing confidence in the economy and how it is being handled by the administration, Clerk pointed out: “A few years have passed since the debt restructuring and we feel that the Government is doing all that they can to resuscitate the economy. It has brought the economy through COVID-19 quite successfully and Barbados is back in a growth mode again.”

This represents an important step forward at a time when there appears to be turbulence in overseas financial markets.

As Credit Suisse’s chairman Axel Lehmann explained at a press conference, “the accelerating loss of confidence” was also responsible for the hastened decline of the 167-year-old bank.

These situations have proven beyond a doubt that reputation and confidence are not tangible assets that can be easily valued on the ledger but are critical to success.