How can PrecisionLender help a bank build on its surprising source of relationship profitability? Find out here
Banks have chief executive officers, chief financial officers, chief investment officers, chief loan officers, chief information officers, chief marketing officers, and chief risk officers. But for some reason, there’s no chief pricing officer.
There really should be.
In Chapter 1, we laid out our arguments for why pricing may be the most important function that happens in a bank on a daily basis, the biggest indicator that you’re building relationships that will fuel the bank’s success. Yet in most banks, no one person really “owns” the pricing process.
Pricing is inherently a difficult task. It’s a delicate balance between controlling volume, risk, and profitability. That in itself would be problematic, but then there’s the matter of managing pricing across multiple parts of the balance sheet. And in banks, multiple parts of the balance sheet means crossing departments.
Pricing should be the front-end filter, where you can determine how many deals you get, at what level of risk, and for how much profit. It’s the one place where you can dial in those growth/risk/profit levels to match the bank’s high-level strategy.
Pricing is the one tactic we can really control, but banks rarely have any one person in charge of it. Instead, each of the various departments – lending, credit, deposits, etc. – has its own seat at the pricing table and each may have conflicting goals that aren’t in sync with the overall institutional strategy.
This is an excerpt from the book, "Earn It"