Money Matters
How to find a stable & secure bank in turbulent times
by Janet Davidson


During this difficult economic environment, it is more important than ever to select a strong, stable bank that can protect your assets and help your family business grow to the next level.

Here are a few important factors to examine when determining if your bank has the ability to meet the needs of your company now and in the future, no matter the economic cycle.

Liquidity – Your bank should be well capitalized and able to meet your short and long-term operating needs, even in an economic downturn. There are stable, healthy banks that are continuing to lend money the right way in this tough economic environment and can help you take advantage of opportunities that may arise.

Conservative practices – One theme that has emerged from the recent turbulence in the financial sector is that conservative lending and credit policies often lead to more stable financial institutions. Banks that had the discipline to avoid the short-term gains of the risky residential subprime lending market in favor of more rigorous mortgage lending standards demonstrated their commitment to levelheaded, conservative business practices. How a bank treats its loan portfolio is another indication of its business philosophy. Does it make risky loans, and then sell them off to other institutions? Or, does it underwrite loans with the idea that it will keep the loans on the bank’s books, and thus create a long-term relationship with customers?

Longevity – Stable, secure banks have often been in business for several decades. They are experienced operating in different economic cycles. They also have a consistent strategy for operating in market sectors rather than aggressively chasing business in the “hot” sectors of the moment, only to drop that specialization when it cools.

References – Ask to speak to a few of a bank’s long-term clients who have been with the bank through up and down cycles. How a bank treats its clients in a downturn may be more important than how it treats its clients when times are good.

Breadth of services – It is especially important for family-owned businesses to have a bank that offers a multitude of services. A bank that offers personal and commercial banking can be convenient and beneficial for developing long-term banking relationships. As your business grows, you may need other assistance, such as advisory services in foreign currency markets and information on interest rate hedging techniques. Or, perhaps you could use advice on treasury management to collect receivables faster, make payments more efficiently and improve how you manage cash flow. A bank that offers commercial banking services for small and mid-sized companies in addition to large corporations will enable you to remain with the same bank as your company grows.

Staff tenure – Customers can benefit from a financial institution that has a staff of experienced employees with long tenures. Bankers who work with the same clients grow to deeply understand their business over time. In addition, employees that have worked at a financial institution for many years know how to operate effectively and efficiently inside the organization, which also helps their clients.

Key introductions – A banker deeply rooted in the community will be able to introduce you to other well-regarded professionals who can help your company. Perhaps you need help with estate planning or long-term business forecasts. Or, you would like to get sound advice on transitioning the ownership of your company to the next generation. Look for a bank with connections that can help your manage all aspects of your business.

As seen in
Connections Magazine