The dramatic fall of the Monte dei Paschi

What all happened to the banks in the last years? With the fall of Lehmann Brothers the situation which should have never happen could be seen. With the downturn of interest rates, a big part of banks business is lost and much more severe, the normal way of recapitalization and playing on the interest band is no longer possible. And if this would not be enough, we have more and more regulations for banks and on the other side young smart Fintechs that attack the banks in their own home turf Business.

Where are the ideas?

So how could it be that the smart people that re-invented the financial industry in the mid-eighties are now losing ground? Where are the new ideas, the astonishing concepts and the market maker as banks held themselves for it?


Banks as innovators - long time ago

If there is an answer, it would not be just a simple one. What we see is, and that’s why I held the fall of Monte dei Paschi as so dramatic, is, that a whole industry which was the engine of new markets for centuries is now only a shadow of itself. The Monte dei Paschi for example was founded for organizing small loans and little savings for the poor people around the area of Siena. Over the centuries the bank grew and was finally one of the first banks handing out money for land. This

was tremendous avant-garde!

It is not the only bank that was modern, full of ideas and at the edge of technology for a long time. But now it seems that banks have lost their innovation power and do only administrate what they have already gathered. And then we see new companies like weibo, coming from complete different markets and introducing easy ways of transferring money.

This just because they need it to keep their customers!


Keep and defend the status quo

Why is this service not coming from a bank? I have now not a real answer, but what I think is, sitting in the middle of one of these banks, that banks simply have not the power to create new ideas. And this is not because banks are too much taken by fulfilling regulations. I think much more, banks have not the right people to meet the new requirements. The average banker is today someone trying to cut costs and Change the huge fix costs of IT and staff into variable expenses. Doing this, a lot of investments are not done in both resources and thus the agility is shrinking more and more. If a bank is willing to survive, the way of reducing costs is a false friend. New products, new technology and new markets are the real friend, but they are costly and right now no one gets rewarded for increasing the expenses. We have and not only in German history an example for this. The steel industry can give a good role model what happens if the innovation diminishes by cost cutting. We will see, if banks can change the direction…


Stay tuned


Yours K-Street6 team