he COVID-19 pandemic has been typified as a so-called “black swan event”, an unpredictable event which has a major socio-economic impact and cannot be rationalized with the benefit of hindsight once it is over. While the COVID-19 crisis, first and foremost, is a global public health crisis, one of the aspects that elevate it to “black swan” status, is the crippling effect that the pandemic and subsequent lockdowns have on the global economy. The impact is of such magnitude, that multiple commentators have referred to the financial crisis of 2008 to look for ways to mitigate this impact; which measures have worked; which ones have not? What makes this exercise so interesting is that several countries within the EU have taken different approaches to it.
An Opportunity to Right Wrongs in The Netherlands
In late March, the three major banks in the Netherlands (Rabobank, ING, and ABN Amro) announced that SMEs need not worry about repaying business loans for the next six months; payments would be deferred. Homeowners with mortgages and people with consumer credit can also apply for delayed installments. Real estate managers who are missing out on rent can ask for support as well. Finally, prominent banks also temporarily halted dividend payments to their shareholders and announced they would not pay out bonuses for top-level management. For a brief moment, these support measures led to a reaction in the Dutch press, which was generally positive.
However, by mid-April, SMEs started to criticize these initiatives. Specifically, they complained about long waiting times, excess paperwork, high costs, and too little personal contact with banking personnel in gaining support. The abrupt outbreak of the crisis demanded a lot from the operational capacity of the banks. Another point of criticism was that banks also wanted to determine whether a company was fundamentally healthy, before granting extra credit.
Faced with the latter, the banks pointed to the government. For example, through its CEO Wiebe Draijer, Rabobank called on the government to remove a provision on the extended guarantee for small and medium enterprises (BMKB). Currently, this provision sets a commission which can amount to up to €3,500, making it a bitter pill in already unpleasant times. The answer from Economic Affairs? Banks are free to determine their own rates. Besides the start-up problems, which are somewhat understandable in these unprecedented times, banks are demonstrating, and emphasizing, that they are at the very least attempting to support their clients, instead of using them only for financial gain through risky constructions. The media circus accompanying the CEOs of the three major banks, is of course part of the efforts to boost their reputation, which has been questioned over recent years. This crisis might cost them liquidity, but maybe it is also the best they could have wished for reputation-wise.
A Reckoning of the Past in Belgium
What is interesting is that in Belgium, ostensibly, it was the federal government that took the initiative, not the banks themselves. In late March, the Minister of Finance Alexander De Croo, proudly stated that he had successfully urged banks to financially support consumers and businesses. “We did a lot in the past ten years to make the banks safer and very strong capital buffers have been created in Belgium. Those buffers serve for crises, such as this one.”
In Belgium, financial support from banks consists of deferment on repayment of loans, both for businesses and consumers, and a government guarantee scheme for all new credits with a maximum of 12 months for all financially healthy businesses. In the eyes of the public, the government was the main driving force behind this, while banks only reluctantly agreed to cooperate. However, the Belgian situation is not completely different to that of the Netherlands, by mid-April, stories also started to surface of the difficulties in getting requests processed—which further affected the public image of banks.
A Matter of Perception
Essentially, banks in the Netherlands and Belgium took almost identical steps to respond to COVID-19. Yet, the crisis revealed the different ways they are perceived in both markets. In the Netherlands, on one hand, large banks realized they had a weak public reputation because they had received major government support during the 2008 financial crisis. Therefore, they took the initiative in their COVID-19 response to emphasize a portrayal of being more socially aware. On the other hand, in Belgium, banks generally enjoyed a better reputation. The late response by banks could be used by Minister De Croo to portray the government as effective and decisive.
The COVID-19 crisis led to similar actions in both countries but was used as an opportunity to boost reputations by different stakeholders; Dutch banks with a poor reputation and a Belgian federal government which is often perceived as weak. It remains to be seen whether these covert branding attempts have a lasting impact. In a broader sense, the reaction to COVID-19 in both markets illustrates that banks, governments, and companies as a whole, are under strict scrutiny. In some cases, industry calls for specific government action, or vice versa. But in both cases, public perception and notions of societal use are the key drivers behind this interaction. It shows that in these times of unprecedented change, public affairs are more important than ever.
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Reputation Management During a Pandemic: A Tale of Two Countries
May 24, 2020
T
he COVID-19 pandemic has been typified as a so-called “black swan event”, an unpredictable event which has a major socio-economic impact and cannot be rationalized with the benefit of hindsight once it is over. While the COVID-19 crisis, first and foremost, is a global public health crisis, one of the aspects that elevate it to “black swan” status, is the crippling effect that the pandemic and subsequent lockdowns have on the global economy. The impact is of such magnitude, that multiple commentators have referred to the financial crisis of 2008 to look for ways to mitigate this impact; which measures have worked; which ones have not? What makes this exercise so interesting is that several countries within the EU have taken different approaches to it.
An Opportunity to Right Wrongs in The Netherlands
In late March, the three major banks in the Netherlands (Rabobank, ING, and ABN Amro) announced that SMEs need not worry about repaying business loans for the next six months; payments would be deferred. Homeowners with mortgages and people with consumer credit can also apply for delayed installments. Real estate managers who are missing out on rent can ask for support as well. Finally, prominent banks also temporarily halted dividend payments to their shareholders and announced they would not pay out bonuses for top-level management. For a brief moment, these support measures led to a reaction in the Dutch press, which was generally positive.
However, by mid-April, SMEs started to criticize these initiatives. Specifically, they complained about long waiting times, excess paperwork, high costs, and too little personal contact with banking personnel in gaining support. The abrupt outbreak of the crisis demanded a lot from the operational capacity of the banks. Another point of criticism was that banks also wanted to determine whether a company was fundamentally healthy, before granting extra credit.
Faced with the latter, the banks pointed to the government. For example, through its CEO Wiebe Draijer, Rabobank called on the government to remove a provision on the extended guarantee for small and medium enterprises (BMKB). Currently, this provision sets a commission which can amount to up to €3,500, making it a bitter pill in already unpleasant times. The answer from Economic Affairs? Banks are free to determine their own rates. Besides the start-up problems, which are somewhat understandable in these unprecedented times, banks are demonstrating, and emphasizing, that they are at the very least attempting to support their clients, instead of using them only for financial gain through risky constructions. The media circus accompanying the CEOs of the three major banks, is of course part of the efforts to boost their reputation, which has been questioned over recent years. This crisis might cost them liquidity, but maybe it is also the best they could have wished for reputation-wise.
A Reckoning of the Past in Belgium
What is interesting is that in Belgium, ostensibly, it was the federal government that took the initiative, not the banks themselves. In late March, the Minister of Finance Alexander De Croo, proudly stated that he had successfully urged banks to financially support consumers and businesses. “We did a lot in the past ten years to make the banks safer and very strong capital buffers have been created in Belgium. Those buffers serve for crises, such as this one.”
In Belgium, financial support from banks consists of deferment on repayment of loans, both for businesses and consumers, and a government guarantee scheme for all new credits with a maximum of 12 months for all financially healthy businesses. In the eyes of the public, the government was the main driving force behind this, while banks only reluctantly agreed to cooperate. However, the Belgian situation is not completely different to that of the Netherlands, by mid-April, stories also started to surface of the difficulties in getting requests processed—which further affected the public image of banks.
A Matter of Perception
Essentially, banks in the Netherlands and Belgium took almost identical steps to respond to COVID-19. Yet, the crisis revealed the different ways they are perceived in both markets. In the Netherlands, on one hand, large banks realized they had a weak public reputation because they had received major government support during the 2008 financial crisis. Therefore, they took the initiative in their COVID-19 response to emphasize a portrayal of being more socially aware. On the other hand, in Belgium, banks generally enjoyed a better reputation. The late response by banks could be used by Minister De Croo to portray the government as effective and decisive.
The COVID-19 crisis led to similar actions in both countries but was used as an opportunity to boost reputations by different stakeholders; Dutch banks with a poor reputation and a Belgian federal government which is often perceived as weak. It remains to be seen whether these covert branding attempts have a lasting impact. In a broader sense, the reaction to COVID-19 in both markets illustrates that banks, governments, and companies as a whole, are under strict scrutiny. In some cases, industry calls for specific government action, or vice versa. But in both cases, public perception and notions of societal use are the key drivers behind this interaction. It shows that in these times of unprecedented change, public affairs are more important than ever.
