With a new year comes a call for renewed energy and enthusiasm, and we take that call to heart here at BankInnovation.net. In 2010, we plan to refine our approach on BankInnovation.net to make the site more relevant and accretive to members.

Let’s start by assessing the landscape. Banks continue to be challenged. Consumers generally disapprove of the banking industry. Regulators around the world are hellbent to reign in the real and perceived risks within the banking sector. And banks themselves continue to struggle to shore up their capital position, as well as contain their credit and operational risks. These challenges are real and they will remain challenges for the foreseeable future.

We want to help at BankInnovation.net. In 2009, we generally observed and shared insights on the emergence of banking from the cloud of the Great Recession. We watched as most TARPed banks shed the cloak with which the federal government saddled them. In many cases, banks were able to return to profitability – or at least return to a normative, non-crisis state. There were even banks that re-assumed a position of tremendous power (too much power perhaps?) in the US and global economies.

Now comes the next stage, sustainability. Bankers need to go beyond we’re-not-going-to-fail to a renewed business model of consistent value creation and sound risk management. The variables impeding banks in this effort are: a) capital; b) risk management; and c) product and brand innovation.

Capital

It was the warped ideas – some certainly hawked by regulators — surrounding what is and what is not bank capital that plunged the US economy into the Great Recession. When assets valued with dubious assumptions are counted in regulatory capital calculations, something is greatly awry. Yet, that is what we saw in the years before the recession. That is all being unwound now – and it will continue to be the front-burner issue for global banking. What is the new standard for Tier 1 capital ratio? Which assets can be counted toward that capital ratio? Where can banks find that capital? What is the demand for bank equity? These are just some of the questions in play in 2010. And we’ll investigate, analyze and submit the proposed answers.

Risk Management

When you talk about bank risk management in 2010, you must talk about data and financial modeling. No banker wants to go back to a time when risk analytics are anything but automated. And yet, it was the flaws within financial modeling that led to easy underwriting and demented asset pricing. If bankers are going to avoid the crisis of 2008-2009, they’ll have to continue to improve their data capture, management and analysis. We’ll focus our attention on this effort. This is where the innovation will take place in banking – which is why BankInnovation.net will expend effort to monitor it.

Product and Brand Innovation

The paltry approval ratings for the financial services industry today can only be reversed through product and brand innovation. That is, unless bankers want to again underwrite loans with the exactitude of drunken sailors – and I doubt that will happen soon. So creativity is needed to rebuild trust and positive experience for consumers. New products will be needed that properly balance risk with consumer needs. Brand renovation is required to restore consumers’ core beliefs in banking. We saw a healthy burst of such activity in the second half of 2009, and we expect much more of the same in 2010. Again, we’ll focus on these efforts.

Taken as a whole, BankInnovation.net is the place where bankers who care about the future of their institutions and industry can come and share their knowledge and find solutions to their thorniest challenges. A renewed sense of hope can return to banking. We plan to help it flourish.