The credit crisis: online transparency not yet optimal

Nearly a year ago the first rumours about the credit crisis surfaced. In the meantime, banks and insurers had to write down some $ 380 billion. A good time to examine how the world’s largest banks and insurers use the internet – also in less favourable times – to inform their financial stakeholders.

The promises: timely, transparent and accurate financial information

Many banks and insurers solemnly promise to provide their financial stakeholders with timely, transparent and accurate information on their website. In recent years, numerous new communication tools have been created in the field of Investor Relations. Options include HTML annual reports, video webcasts with chat, mobile corporate websites and IR weblogs.
Jungle Rating put banks and insurers through a test: how transparently do they report about the credit crisis on their website.

Much online material on the ‘credit crisis’

A brief online search for credit crisis shows that a great deal is being said and written about the subject:

• A Google search for ‘kredietcrisis’ (credit crisis in Dutch) produced 414,000 hits (Google.nl)
• A Google search for ‘credit crisis’ produced 4,300,000 hits (Google.com)
• The term ‘credit crunch’ produced 7,911,000 hits (Google.com)

Het Financieele Dagblad has a credit crisis file on FD.nl, which includes:

• A chronological overview of the most importance events
• Explanations about the how and why of the crisis
• An overview with write-downs per financial institution
• Related news items

A good example of one of the many possibilities the internet offers: name a subject, compile all relevant information about the subject, provide explanations and context, and update whenever necessary.

What should you expect from banks and insurers?

What should you expect from affected banks and insurers? Perhaps it would be too much to expect them to completely bare their souls, but at least they should provide an accessible and up-to-date file like that of the FD. A file in which the worried stakeholders can quickly find all the necessary information about the crisis:

• Press releases as well as quarterly and annual figures
• Explanations and information about the size of the write-downs
• A report from the CEO / CFO with information about the causes of the crisis and how the company is dealing with it, now and in the future.

What do banks and insurers provide on the internet?

Citigroup ($ 42.9 billion):

• The subject of credit crisis is not dealt with directly on the home page, nor on the Investor Relations page. The home page contains news items and important subjects, among others something about Citigroup in Japan and the appointment of a new Chief Innovation Officer.
• The IR (Investor Relations) section contains a lot of ‘standard’ financial and share information. Information about the credit crisis is difficult to find. As a financially interested party, you have to read through press releases and reports to find specific information about the credit crisis.

UBS ($ 38.2 billion):

• UBS has a comprehensive website with a great deal of detailed information for investors. But it seems to be difficult to get quick access to the ‘essentials’ of the crisis.
• On the investors home page there is a direct link to the Q1 2008 results. In the accompanying press release, the Swiss bank makes clear mention of its losses and the write-downs as a consequence of the crisis.
• UBS recently conducted research into the causes of the crisis. After a brief search on www.ubs.com the research report (50 pages) can be found transparently on the pages about the General Shareholder Meeting.

Bear Stearns ($ 3.2 billion, taken over by JP Morgan Chase):

• As a result of the credit crisis, Bear Stearns was taken over by JP Morgan Chase. The share price dropped from $ 160 to considerably below $ 10 in a little more than a year.
• On its website, one could read until a few weeks ago (i.e. a long time after the crisis) the following introduction: ‘Eighty-three years of profitability, never an unprofitable year.’ I can imagine that for shareholders this is anything but a pleasant start of their search for information.

• Information about the crisis appears to be difficult to find.

HSBC ($ 19.5 billion): 

• On HSBC.com, it’s also anything but easy to search for relevant information about the credit crisis.
• There are news items and reports that deal with the subject, but visitors have to do some thorough searching.

Other affected financial institutions such as Merrill Lynch, IKB and RBS should also offer information about the crisis in a more accessible and transparent way.

Better use of internet in times of adversity

Internet offers excellent opportunities for providing up-to-date and transparent communication to financial target groups spread all over the world. Also with a view to the fact that financial target audiences very frequently use the internet to look up information. Just think of the nearly 8 million hits for the search term ‘credit crunch’ on Google. The banks and insurers, which in this case are the primary source of information, still shroud themselves too much in silence. In the year 2008, we should be able to expect companies to communicate more transparently about such an important subject. I’m curious to see who’ll be the first one to take the plunge.