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Small Business Banking in Europe 2011

Small Business Banking in Europe 2011

What is the right service model?

Tight cost management remains an economic reality for most banks. In this vein, last year’s report questioned the value of the relationship managers. It recommended that the use of relationship managers (RMs) should be re-assessed to focus on adding value to customers and the bank, in order that their cost can be properly justified.

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The 2010 Efma – Finalta Small Business Banking Report was written during a period of relative stabilisation following the earlier financial turmoil. At the time of writing this year’s report (spring 2011), the European economy remains challenging. Significant differences now exist between countries, however. Some economies are fragile, especially those with sovereign debt issues. Other economies are growing again. Looking forward, despite downside risks, the overall outlook is one of slow improvement.

Many banks report that credit demand continues to be dampened, with small business owners being cautious about the future. Nonetheless, the small business segment is emerging from recession more important than ever. Why is this? Firstly, lending volumes (which are central to small business banking) are currently playing a fundamental role in overall retail banking revenues due to improved margins. Secondly, banks are preparing for higher SME activity associated with economic resurgence.

So, small business segment leaders are being challenged to grow. However, the current economic context dictates that this is often required with fewer resources than before, or better use of resources than before. To this end, Finalta argued in last year’s Small Business banking report that the role of the relationship manager should be critically assessed. It identified specific areas where relationship managers add value to banks and customers, and common ways that they do not.

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