sarah bloom raskin : reflections on reputation and its consequences speech by ms sarah bloom raskin, member of the board of governors of the federal reserve system, at the 2013 banking outlook conference, federal reserve bank of atlanta, atlanta, georgia, 28 february 2013. * * * good afternoon. i want to thank the federal reserve bank of atlanta for inviting me to join you for today ’ s 2013 banking outlook discussion. there are a number of interesting and very relevant topics on your agenda, most of which are rightly focused on the financial and regulatory environment. i would like to share some thoughts this afternoon on a broader topic, however, that may be due for a refreshed look : the relevance of a bank ’ s reputation. let ’ s start in an elementary way in constructing a concept of reputation : we know that reputation is not entirely a moral trait. we understand that there is a distinction between character and reputation. when we say that someone shows good character, we are usually referring to something at the core of their being or personality. on the other hand, when we refer to a person ’ s reputation, we recognize that reputation is our perception of the person, that it is externally derived and not necessarily intrinsic to that individual. in other words, we understand that a person may not have complete control over the perception that has been created. reputation, through no fault of one ’ s own, can be tarnished. in the same way, one ’ s reputation can be golden, even though nothing was done to earn it. but like the notion of character, reputation can be earned and it can be a type of stored value for when challenges to one ’ s own reputation come later. now let ’ s bring this distinction into the context of banks : many bankers have a sterling character, and they operate financial institutions with sterling reputations that reflect that basic character. at the same time, there are bankers who, regardless of their personal character, manage financial institutions with reputations that have been tarnished. their banks ’ reputations could have been tarnished by almost anything, but likely most tarnish is attributable to the subprime mortgage meltdown and the ensuing financial crisis that cost the economy trillions of dollars ; left millions of americans bankrupted, jobless, underemployed, or homeless ; triggered massive litigation ; and shook the confidence of our nation to the core. many of the darkest manifestations of the financial crisis have finally begun to diminish

reasons for these impediments to inclusion. when we examine barriers that individual consumers face in becoming financially included, we uncover trustworthiness and reputation. a federal reserve analysis of the most recent survey of consumer finances suggests that the primary reason individuals do not have a transaction account is a simple dislike of dealing with financial institutions. 10 if that dislike emanates from the reputation of the particular bank, or the reputation of the banking industry as a whole, policymakers and financial institutions will not be able to enhance financial inclusion without addressing the reputational context. reputation and innovation i ’ d like to imagine how the public ’ s sense of well - being might be enhanced by their interactions with financial institutions. if we paid attention to the experiences of consumers as they interact with various segments of the financial marketplace, what could we learn? if we see rigidities or imperfections in that interactive experience, what innovation might we imagine that would not only reduce reputational risk but create something new and potentially advantageous? technological innovation was the subject of a recent award ceremony in san francisco. the winners were companies with names like soundcloud, github, makerbot, techmeme, and snapchat, all of which presumably do amazing things, although i don ’ t understand exactly what. 11 but, evidently, the real buzz at the ceremony was over something much more mundane that i for one have no problem understanding. that buzz was around a pedestrian item – a new and improved coffee cup lid. 12 this lid, called foamaroma, reportedly provides exactly the right set of openings to maximize aroma and recyclability, while minimizing the effects of coffee spurting out too fast. the point here is that the innovator noticed something simple that others had not : many coffee shop employees don ’ t drink their coffee from cups with plastic lids like their customers do, so there was a market need that had not been recognized and then addressed. here i am not just talking about the mixed miracle of mobile banking and mobile payments or being able to take a picture of a check with a smart phone and it appearing in my checking account. that ’ s a topic that is amazing in its own right and worthy of a separate speech. i am talking about encouraging banks to pay attention to the banking experiences of their customers and finding process improvements or service elements that may lead to something seemingly mundane but valuable nonetheless. see federal deposit insurance corporation ( 2012 ), 2011 fdic national survey of unbank