Communication from the major banks and authorities during the financial crisis 2007 – 1 July 2009 Report by Hallvarsson & Halvarsson for FSPOS 20 Sept 2010 HALLVARSSON & HALVARSSON SVEAVÄGEN 20 P.O. BOX 3666 SE-103 59 STOCKHOLM SWEDEN TEL +46 8 407 20 00 ORG. NO. 556505-0837 WWW.HALVARSSON.SE Contents 1 Summary conclusions and proposals.....................................................................................4 1.1 Approved crisis communication – Confidence was maintained in functions important to society ......................................................................................................................4 1.2 Inadequate communication on risks and insecurities ................................................4 Action ...............................................................................................................................5 1.3 Lack of knowledge in society about the financial system............................................6 Action .............................................................................................................................. 6 1.4 Initially inadequate resources for handling an exploding demand for information – the media took command of problem formulation and acquired scope for speculation ......................................................................................................................................7 Action ...............................................................................................................................7 1.5 The banks found “society communication” difficult – inadequate cooperation between the private and the public sectors ................................................................ 8 Action .............................................................................................................................. 9 1.6 Real-time crises now – reviewing of websites, monitoring of Internet information and participation of social media .......................................................................................9 Action .............................................................................................................................10 2 Introduction – questions...................................................................................................... 11 2.1 Material and implementation of the survey..............................................................12 2.2 Structure of the report ...............................................................................................14 3 2007 – 15 September 2008 – escalation of the crisis threat............................................... 15 3.1.1 CRISIS CONTROL AND CRISIS COMMUNICATION......................................... 15 3.1.2 The confidence model..........................................................................................16 3.2 2007 – good times, but increasing risks....................................................................19 3.1 1 January – 15 September 2008 – the unrest became a serious crisis threat ......... 20 3.2.2 NEW EU REQUIREMENTS............................................................................... 23 4 2007-15 September 2008 – analysis and discussion ..........................................................25 3.1.1 Stability reports – a good signal tool? ................................................................ 26 3.1.2 The banks – comprehensible risk description?...................................................27 3.1.3 Components of confidence ................................................................................. 29 3.1.4 Take bad times into account in communication ................................................ 32 5 15 September 2008-1 July 2009: crisis communication.................................................... 34 5.1.2 September: The Lehman shock .......................................................................... 34 5.1.3 NEW RULES FOR BANKS IN CRISIS ............................................................... 36 3.1.5 October – “crisis communication!” .................................................................... 38 5.1.4 THE COLLAPSE OF ICELAND .......................................................................... 40 3.1.6 November – the crisis in communication reaches its peak ............................... 46 2 (93) 3.1.7 December - the macrocrisis ................................................................................ 49 3.1.8 January 2009 – the threat remains.................................................................... 50 3.1.9 February - press releases (of unaudited annual earnings figures, etc.).............. 51 3.1.10 March – Annual reports and annual general meetings ......................................54 3.1.11 April – annual general meetings and summaries ...............................................57 3.1.12 May – greater stability........................................................................................ 60 3.1.13 June – 0.25 per cent interest...............................................................................61 6 15 September 2008-1 July 2009: examination and analysis of crisis communication ......61 3.1.14 The Riksbank ...................................................................................................... 64 3.1.15 The National Debt Office .................................................................................... 70 3.1.16 The Financial Supervisory Authority ..... Fel! Bokmärket är inte definierat. 3.1.17 The government ...................................................................................................76 3.1.18 Communication by the private organisations and the mortgage debate........... 78 3.1.19 Nordea................................................................................................................. 80 3.1.20 SEB...................................................................................................................... 82 3.1.21 Swedbank ............................................................................................................ 87 3.1.22 Handelsbanken ....................................................................................................91 3 (93) 1 Summary conclusions and proposals 1.1 Approved crisis communication – confidence was maintained in functions important to society The crisis communication of Swedish financial bodies during the acute phase of the financial crisis is approved as their efforts led to Sweden avoiding a full-blown financial crisis. On the other hand, the subsequent economic downturn developed into a deep macro crisis. However, one exception to this is Swedbank, where errors in communication helped to bring about a crisis of confidence in both the bank and its executive. Good crisis communication requires good measures, and the general perception is that Swedish public bodies handled the crisis very well. It is extraordinarily common to “blame” communication when something goes wrong. For example, Swedbank's executive at the time displayed such tendencies. However, the shortcomings are often to be found in poor decisions or inadequate measures. In general, it appears that communication worked best when it formed an integral part of the corporate executive's “crisis strategy”, with short decision paths and synchronised statements. When the communicators “picked up pace” again following the Lehman crash, they acted quickly and professionally and took transparency as their guiding principle. They participated in close cooperation with executives and specialists in organised “crisis teams”. They resolved the communication problems pragmatically as they arose under conditions which were periodically extremely difficult and uncertain. However, this general conclusion does not contradict the fact that there were shortcomings and there is room for improvement in a number of respects as regards communication. 1.2 Inadequate communication on risks and insecurities Now, after the event, we are able to state that communication on the development of the risks and uncertainties and the threat of crisis – before the acute crisis stage – was imperfect. It is the “ordinary periods”, those before and during the escalation of the crisis threat, which are the important periods for building confidence. This is the time when legitimacy, expertise, transparency and integrity have to be incorporated in confidence capital. This is the time when organisations have to be vaccinated with good communication to create confidence which can keep the infection of crisis at bay when things are hotting up. If organisations have built up their protection, they have more chance of being allowed to have their say, of getting their statements out and having them interpreted correctly when the crisis threat escalates and the media set the agenda. It is also obvious that no organisation or assessor understood the liquidity risks and their links with confidence in the banks, and hence they were unable to communicate about this vital causal chain with a view to prevention. The Riksbank and also Finansinspektionen have developed a conceptually effective way of describing the development of uncertainty and risk. This is perhaps rather subtle for the media 4 (93) and people less familiar with the developments of the financial markets. However, with standardised language and wording which can be varied according to actual development on the market, success is being