The word “bank” covers a lot of ground. It can refer to a traditional commercial bank, a savings and loan association or a credit union. It can also describe financial services companies like a telecommunications company that offers a mobile app for money transfers or an online merchant that accepts payments with debit cards. And it can describe an investment firm that offers mutual funds, stocks and bonds.
When evaluating banks, customers can look at fees and interest rates, but they should also consider security. They can read news articles about a bank’s cybersecurity, or they can do an online search to see which institutions have had the most data breaches. And, of course, they can ask other people for recommendations.
Ultimately, choosing a bank comes down to trust. The best banking institutions have an internal culture of cooperation and collaboration, where relationship managers trust product specialists to do what’s right for the institution and its customers. In contrast, poor cultures where departments don’t work together can lead to mistrust between the bank and its customers.
High-performing banks have strong profitability, consistent revenue growth and solid capital adequacy. They can also withstand economic volatility and have good liquidity, which is crucial in volatile markets. They can raise replacement funding through a combination of sources: directly borrowing in the cash and capital markets; issuing securities such as commercial paper or bonds; or temporarily lending securities they already own for cash (liquidity transformation and securitization). Independent ratings from Moody’s, S&P and Fitch are important indicators of quality.
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