Learning Objectives:

  • Define strategic bank management and distinguish it from operational management.

  • Understand the unique challenges of strategic management in banking.

  • Identify the key stakeholders and their conflicting perspectives.

1.1 What is Strategic Bank Management?

Strategic bank management is the formulation, implementation, and evaluation of cross-functional decisions that enable a bank to achieve its long-term objectives . It is concerned with higher-level strategic questions, not day-to-day operations . The Macquarie University course defines strategy as distinct from “effectiveness” and focuses on how banks generate returns for shareholders within a complex regulatory environment . The University of Genova course outlines a framework for strategy formulation covering “corporate, competitive and functional strategies” .

Strategic questions addressed by bank management include:

  • In which markets should the bank operate?

  • What products and services should the bank provide?

  • How should the bank’s assets be funded?

  • Should the bank grow organically or through merger and acquisition?

  • What is the appropriate business model for the bank?

  • How should the bank respond to changes in regulation?

1.2 The Unique Challenges of Bank Management

The Macquarie University course notes that the global financial crisis of 2007-08 highlighted “the dependence of the real economy on the financial sector” and how “subtle flaws in bank regulation can result in a failure of the financial system as a whole” . One response has been “more restrictive banking regulation,” which has “made the task of generating returns for bank shareholders significantly more challenging” . Strategic bank management must navigate “the new dynamics of the financial system and the objectives of the various stakeholders within that system” [citation:1,5].

1.3 Stakeholder Perspectives

The SOAS Banking Strategy module examines the “objectives of the various stakeholders” within the banking system . The Western Sydney University course identifies “conflicting perspectives of financial services firms stakeholders and arising challenges and opportunities” . Key stakeholder groups include:

  • Shareholders: Seeking returns on investment.

  • Debtholders/Depositors: Seeking safety and stability.

  • Customers: Seeking fair treatment, good service, and value.

  • Regulators: Seeking financial stability and consumer protection.

  • Employees: Seeking fair compensation and job security.

  • Government/Society: Seeking economic growth and financial stability.

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