There have been traumatic events here in UK over the last 7 days that will ultimately have a profound impact on all B2C companies. It concerned Northern Rock, a medium sized building society (savings and loan) that became a bank.
Northern Rock experienced a run, that is all its customers wanted to remove their savings at the same time. This has not happened in the UK for longer than anyone can remember. The cause was a market rumour in the wake of the sub-prime collapse in the US.
On Friday the press first sparked concern and then fanned the flames by filming long lines of concerned customers outside Northern Rock branches and publishing in national newspapers and broadcasting on prime time national news. Northern Rock, we were told by the FSA (regulator), is financially solid but is experiencing a minor ‘short term liquidity’ problem.
The Bank of England and the UK government stepped in but both fell short of guaranteeing the safety of customer savings. This only fuelled concern and the lines grew. The website had long since collapsed under the deluge of customers wanting to move their money. Their anger at not being able to get at their money online was reported on the news and the spiral was now out of control.
On Monday morning the Chancellor of the Exchequer (Finance Minister) stated on national radio that the government would only guarantee 80% of savings above £35,000 ($70,000). Share prices began to tumble as the panic started to spread to all banks and building societies. On Monday evening the government had to make an embarrassing U turn and guarantee that all customer savings would be protected, not just for Northern Rock but for all banks. The implications of this announcement are highly significant and will have long term ramifications.
There are many casualties in the affair. The Governor of the Bank of England is not expected to remain in his post. Gordon Brown’s government seriously misjudged the crisis and did ‘too little, too late’ to avert it. The FSA maintained that its regulatory processes had worked but it was clearly evident that these were not designed to protect bank customers. And confidence has been damaged in the UK banking system which is not only the envy of the world; it is one of the pillars of the global economy.
Categories: Blog • Chief Customer Officer • Customer Experience • Customer Loyalty • Customer Strategy • Digital Marketing • Leadership • Sales Performance • Service and Support • Voice of Customer