credit standards (4)

banks face a genuine dilemma. If they ignore the market and apply standards rigidly they will avoid credit losses but lose the good business and market share they need to meet shareholder aspirations . while models of risk-adjusted capital are widely used and returns related to them , shareholders contribute actual real money capital and want returns on that.it is hard of banks to sit with a lot of real capital and keep ignoring the demand to leverage it .
A strong credit culture can help achieve the right balance. If the bank genuinely understands its customers and has the right sort of relationship with team,it can choose when to bend standard a little and when to adhere to them . It is possible , in the context of a strong customer relationship to persuade even the most macho of customers to see the bank is point of view.
Relationship banking is a two way street and customers will expect support when they need it.But where transactional banking is the norm,the risks are greater in boom times when the marketeers are driving and reasonable protections are being sacrificed to 'market conditions' .if you want to get something outside the market in the good times , you need to be prepared to give something back when the customer is in a less strong position.
relationship banking is not a complete panacea against bad debts , but it is likely to make losses less in recession , albeit at the price of not doing as much business in the boom times as some more aggressive transaction getter in other banks .