How Do You Rate?: Q&A with VERIBANC President

Mike Heller Veribanc

We recently spoke with VERIBANC, a company that provides bank ratings on all U.S. federally insured financial institutions. Michael Heller, president of the company, told Banking.com about what the VERIBANC does and who they work with.

 

Q: Can you tell us more about VERIBANC?

A: We’ve been in business since 1981 and our bank rating system has helped banks, consumers, business people and government offices manage banking risk and protect their deposits and investments against bank failure and fraud.

Q: How do you develop your bank ratings?

A: The ratings are developed using our existing ‘Beyond CAMELS’ quantitative only methodology. This methodology has been audited and approved by several insurance companies for use with insuring deposits in excess of the FDIC’s limit. No bank or holding company has ever paid us to rate them. We have always published our track record (ratings effectiveness) and not just a few of the good years.

Q: What does your track record look like?

A: We don’t claim to be perfect, just optimally tuned. Our current ratings effectiveness rate is over 99 percent, while our false alarm rate is about 20 percent. Our rating system is unique in that we do not “conservatively adjust” our criteria so that a large part (30 percent or higher) of the banking industry winds up in our lower rating categories – so as to improve or inflate our predictive results. Instead we balance predictability of bank failure with false alarms, so we can provide our customers with true value. We even publish our track record on our website at: http://www.veribanc.com/TrackRecord.php.

Q: What products do you offer to help Banks and Credit Unions meet regulatory standards?

A: Our most popular report for banks is our Regulation F Report. Comparable to this for Credit Unions is our Section 703 Due Diligence Report.

Q: You released your Q4 ratings at the end of 2013. Can you share an excerpt with us?

A: Our Director of Modeling at VERIBANC, Milton Joseph, wrote the following on “Size Equals Strength”

The FDIC’s recently released September 2013 (Quarterly Banking Profile) reveals an overall sound condition and continued financial improvement among the nation’s Insured commercial and savings banks. For the quarter, the sector achieved a nearly 1.0% return on average assets, and, as of September 30th, the industry’s Leverage (Core Capital) Ratio reached 9.4%. Nonperforming Assets-to-Assets fell to 1.8% at that date. At mid-year, comparable percentages were 9.3% and 1.9%, respectively.

Our asset size review indicates that small banks and thrifts, those with assets of less than $100 million, demonstrated particular strength. As of September 30th, that category of institution reported a Leverage Ratio of 11.7% and a Loss Reserve-to-Noncurrent Loan Ratio of 87.4%. Both percentage were the highest among any of the measured asset-size peer groups.

Interestingly, at September 30th, deposits held by FDIC-Insured institutions exceeded $11.0 trillion. Included in that total were deposits of close to $1.6 trillion that were higher than the FDIC’s $250 thousand Insurance limit. Nearly all of the $1.6 trillion of Un-Insured deposits (91.6%) were held at large institutions with total assets greater than $10 billion. One might conclude that size does continue to equate to strength 

 

To learn more you can go to www.veribanc.com.

What All Financial Institutions Should Do on Social: Q&A with Sprinklr CEO

Reports claim that financial institutions are struggling on social. But why? Many brands in other industries have found creative ways to use social media to solve customer service woes, create deeper touch-points with users and keep members apprised of important information. To gain more insight on ways banks and credit unions can ramp up their social cred, we recently spoke with Ragy Thomas, founder and CEO of Sprinklr, a social relationship infrastructure company. Ragy shares his insight with us on what FIs are doing wrong, how they fix some of their biggest problems and banks and credit unions to look up to.

Ragy Thomas Sprinklr CEO

Banking.com: According to CEB TowerGroup, 65% of banks have plans to replace or adopt social networking management technology. Why do you think there is such a need to change services or adopt new ones?

Previous generations of social management technologies and solutions were designed to achieve single-issue “point” solutions, fulfilling one or two social needs such as social publishing or social analytics.

Unfortunately, their inability to work together, or solve for the many other needs mature social management requires (e.g., social engagement, compliance, workflow, listening, governance, etc.) now renders point solutions insufficient.

As in the case of other cross-department infrastructures such as CRM or knowledge management, brands need a true social infrastructure. Financial institutions are realizing they need a single, interconnected infrastructure to effectively manage conversations, campaigns, content and community at scale. They need to be able to collaborate as a team to create a unified customer experience across all channels.

What do you think the biggest challenges are for financial institutions on social?

Compliance, security and privacy are still big challenges for financial institutions when it comes to social.  To go into more depth though, people now expect every brand to know who they are, regardless of which “division” within the brand they connect with. This paradigm is particularly stressful for financial institutions, perhaps more than any other industry, who typically suffer from “business inertia” — internal departmental, divisional, and locational business groups that typically don’t work together smoothly.

Inter-departmental friction flies in the face of arguably the sharpest disruption social has created — the expectation among consumers for a “unified experience.” Regardless of whether they are talking to a teller at the branch, on the phone with customer service, or tweeting out their frustrations, people want to be recognized and cared for as individuals in a personal manner. This comes into play especially when it comes to the extreme sensitivities associated with financial matters. When internal systems are not aligned and don’t “talk” to each other, and internal divisions are not encouraged or rewarded for collaboration to meet customer expectations, customer satisfaction is likely a difficult goal to achieve.

To truly support the “omni channel customer and journey,” banks have to collaborate across teams, departments and divisions. They need to create new processes, and define “ownership” across the breadth and depth of a person’s entire brand journey. This is unfamiliar territory for most banks, with lots of land mines along the way. Given that the volume and pace of social conversations is only likely to increase in the future, the pressure to quickly put together a solution is acute.

Social can be a powerful lever for nurturing unified relationships and generating long-term, meaningful engagement. Every meaningful social conversation can be nurtured into a real relationship that can, over time, become a direct revenue opportunity, positive word-of-mouth, or direct referral. Used effectively, social can become a cost-effective lead generation and activation channel for banks. To start, banks need to build a contextually unified profile for every prospect and customer, the foundation of which is a comprehensive conversation history — combining interactions from Facebook, Twitter, LinkedIn, Youtube, etc. With these individual histories, banks will know exactly what has been discussed with each prospect or customer, and will have clear indicators for how to nurture relationships through social interaction.

What would you suggest as the best tactic for financial institutions when responding to negative banking experiences online?

Financial institutions need to be able to admit when something has been handled poorly and rectify it immediately. Additionally, banks must be empathetic and be willing to listen to and trust their customers. As an industry that previously championed process-based decision making, this is a radical change.

If financial institutions were to change one thing today about how they use social networks, what would it be?

Create a cross business unit team that can be an advocate for optimizing client experience across channels, teams, departments, divisions and locations. This can be headed by the chief client experience (social) officer who can champion the transformation to being a social business.

Is there an example or a few examples of banks and credit unions that are really nailing it on social?

Navy Federal Credit Union provides a great example of a financial services company that has employed a mature, holistic approach to social engagement. They intently listen to their social communities, and know which customers spend more and more time on social. As a result, NFCU today provides 24/7 customer service and have an SLA response time of less than one hour. Since 60% of their members log on to social through mobile, they also now make sure new apps work seamlessly on any mobile device.

Another example is Citibank, which serves more than 100 million customers in 40 countries. With more than a million of those customers following their social channels, there were a lot of conversations happening around the brand and it was hard to keep track of them. Citi adopted a social relationship infrastructure approach to help them provide better customer service through social. As a result, the banking giant was able to save roughly 20% of their community manager’s time that was previously devoted to customer service issues. They are now able to optimize resources to social engagement, where they are committed to creating meaningful conversations and escalating customer issues to the right people.

What these two brands have in common is that they use social to enhance the customer experience and make their lives easier. That’s what all brands should aim to do through social.