Rapidly rising prices and debts bring the difference into stark relief. Handelsbanken chooses to grow at a sustainable pace instead of focusing on volume.
This involves less risk, and lays a stable foundation for the next big test – the economic crisis of the 1990s.
Going our own way in a deregulated market
The later part of the 1970s and through the 1980s are marked by high inflation, rapidly changing prices and ever tougher competition. When the credit market is deregulated, many operators are tempted to through increased volume, but Handelsbanken chooses a different path. Each piece of business, each transaction, must be based on its own merits, and decisions must be made where the knowledge is found – at the branch, close to the customer.
This approach calls for enormous discipline. Large margins are used in collateral assessments, repayment capacity is put front and centre, and follow-up is made much more thorough. Among other things, this means that the Bank sometimes declines to get involved in business deals that may look attractive in the short term. But over time, this results in lower risk and greater resilience.
Resistance ahead of the next test
While this is happening, the Bank’s governance is also modernised. The branches keep their mandates, but there are substantial improvements made to follow-up and risk control. The combination of local accountability and a clear framework allows for both speed and security in decisions.
As the decade draws to a close, the differences are obvious. Those operators that previously chased increased volume are now vulnerable, while a more self-restrained line has given the Bank financial leeway ahead of the economic hardships of the 1990s.
