Wednesday, March 12, 2008

How will the banks handle the settling dust?

By: Ross Hendin, Hendin Consultants

From the perspective of a communications strategist, this week is certainly chalked full of anticipation as the Restructure Plan is expected to be disseminated this Friday. The phones seem to have quieted a bit, the articles in the media seemed to have softened, and even the irate and very vocal Facebook group seems to be simmering down with a touch of resentment. Everyone sits with baited breath while we wait for the Pan Canadian Committee to release what is sure to be a very technical restructure proposal few of us will understand - it brings the market one big step closer to assessing the damage and finding some relief money.

The noteholders in general have been fairly quiet though most of the last many months - waiting patiently to see what the Restructure Plan is going to look like, what it will mean to their notes and ultimately their corporate holdings. The now famous retail noteholders have also shown they will stop at nothing to be treated fairly and have somebody buy back their notes. They are going to be a group to watch in coming weeks I'm sure.

But what this is leaving, across the board, is a very bad taste in a lot of customers’ mouths. When the proposal comes out in a few days, and noteholders vote on it in a few weeks, some will just make adjustments to their books and go about their business, but others will want compensation - or at least an apology - for their troubles.

From a legal perspective, the situation is very much systemic. There is no one group or person to blame here because so many groups were involved and interacted to make the CP machine function so well for so many years. From a publicity perspective however, noteholders are going to turn to the companies that sold them the paper the way cell phone users expect to return their Nokia cell phones to Telus or Rogers. Many noteholders have done or tried this already.

And for a number of reasons, most of those institutions have not bought back their product. To put it in consumer-product terms, the resellers "have not stood behind what they have sold". So, when the dust settles on this Restructure Plan, and the notes are able to trade on a secondary market, it will raise a question about what the banks are willing to do to put a smile on their client's faces. Will they buy notes back with interest, buy them back at all, facilitate trades, etc? And what will they do about the lost faith between their clients and themselves? A downside of our very small Financial community is that everyone's involved in this mess, so a client would be going from a devil they know to a devil they don't...

I feel strongly that since the end is now in sight, the banks need to seriously consider how they are going to posture themselves with respect to the notes, and they need to decide clearly just how important customer satisfaction is to them. Perhaps with the wave of write-downs and bad press that banks have had in recent months, some more bad visibility from annoyed client's won't matter. Perhaps, however, the banks may still feel that trying to help their clients as much as possible, and putting their best PR foot forward makes sense. I haven't gotten any sense at all that the banks are doing anything publicly to help burnish their image on this matter, and that's disappointing to me.

The unfortunate reality is that a lot of businesses and lives hang in that balance.

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