MINDING OUR LANGUAGE

Pride in banking

From Chartered Banker Magazine

June 16, 2009

As the key players - industry, regulators, governments and parliaments - analyse what went wrong in global banking and where changes need to be made, we should not neglect one of the essentials of all human activity: language.

The industry (and I don't confine this to banks) needs to explain what it does, and why, clearly and in layman's terms. It needs to consider whether it prioritises the critical facts and figures correctly.

The bubble that created ever more complex and risky financial products and innovations also created runaway growth in jargon and unnecessarily complicated terminology. That is partly because all groups, when they are in a (seemingly) comfortable bubble, tend to exclude others by their use of language.

In financial services, as activity became increasingly global and frenetic, perhaps it suited us to claim possession of special knowledge, cloaked in special language, to justify fees and charges to customers as well as to reinforce our own sense of our wisdom and significance.

While everyone is making money, nobody pays too much attention. But when the precise meaning behind the words suddenly becomes of crucial significance, the language is found wanting.

This is not just a nicety. If we use some terms not understood by all parties that misunderstanding is multiplied across transactions and conversations. The original meaning becomes lost, but the product is out there, with ever more people committing to something they don't completely understand.

And it got so baroque and out of hand that some very senior people have had to admit that they even they did not understand the meaning behind the words being used. ‘Collateralised debt obligation' is just one example, albeit the most celebrated (see, I am doing it here - using a nice-sounding word when I really mean ‘infamous'). Of course, critics might say that hiding meaning was precisely the purpose of some of the strangulated terminology. But whether it came about by accident or design, it needs to change.

So as we move to fix things, we need the right linguistic tools. And we need to guard constantly against the undermining of meaning in our communications by self-referential language understood only by insiders. That requires discipline and a tough-minded approach to asking the question, constantly and repeatedly, ‘what do you mean?'

Among consenting adults, of course, there is room for the rarefied and esoteric. But it needs to be confined to that space and only let out with a minder who can keep an eye on whether everyone who needs to understand it is doing so.

This should start with the basics. Why say ‘mortgage', when we mean ‘a loan to buy a house'? Why say ‘subprime' when we mean ‘high risk'? Why say ‘equity' when we mean ‘shares' or ‘shareholdings'? We need a new lexicon, where the meaning is clear from the words and we are not required to look in the Investopedia.

We don't have that lexicon on our shelf, ready to hand out. There is much to debate and consider. But our industry needs to be better understood and this is vital to achieving that.

We have lost the trust of customers, investors, shareholders and governments and those that elect them. Changing the way we do business, and the relationship between the three big players - industry, regulators and government - is critical. But so is communication. Some have already recognised this, but there is a long way to go. Clarity of language, and a relentless effort to promote understanding rather than allow it to be diminished, must be part of the new approach.

View other news from June 2009