Over the last three years, the debate about and life at banks has been dominated by the need for more rules and better results. Now, at the start of 2011 it seems we can turn the page and open a new chapter. On the results front, banks have attained decent stability, with a mix of profits coming from lending, retail banking, and asset management no longer based on euphoria, in a context of low interest rates. The attention to costs and credit restraint has contained potential losses. On the rules front, the  coming into being of Basel 3 has defined a road map for capitalization requirements.
The new element emerging is strategic positioning around three issues: territory, people, governance.

On the territorial front, the challenge is to go back to understanding local needs. For smaller banks, it's always been so. But proximity to clients has to make sense also in a global economy, in order to support small firms in the international arena. For larger banks, the reconquest of the territory is to be based on the promotion of the quality of products, efficiency, as well as economic compatibility. On the people front, the challenge is to recover trust and a clear sense of purpose. And people are customers as well as human resources. For customers, the simplicity and clarity of retail products, high customization, sophistication and expertise in the relation with corporate and private clients are the roads to be followed. As far as employees are concerned, the challenge is to reward talent. With regard to good governance, stronger capitalization requires strong governance and a stronger role for shareholders who have to support this either with their own funds or by accepting new members to the club.

If governance is merely about the balance of power within the bank, then territories and clients fade into the distance. The key issue is the role of owners and their ability to impart strategic objectives to banks. As Giorgio Ruffolo said almost thirty years ago, shareholders of banks have in their hands the extraordinary power of complex institutions. They thus must support firms and institutions and give their decisive contribution to the growth of the economy. But such power must be accompanied by wisdom. In this sense, the reflections of Cesarini, Monti and Scognamiglio in their 1980s report to the Italian Treasury which opened to privatizations are still valid: it's not so important the private or public nature of shareholdership, but what long-term vision the controlling shareholder has for the use of available financial resources and if he/she can be trusted to lead a key institution for the economic system.

by Stefano Caselli, Professor of Finance, Universita' Bocconi