By: Prof. Shlomo Maital

It is increasingly clear that both the United States (Wall St.) and Britain (London), two key financial centers, are fumbling the ball, in enacting new systems to regulate their banks and financial services providers. In both countries, the lobbyists, moneyed interests and scare tactics (‘over-regulate us and you’ll have to bail us out again’…) have emasculated planned stiff regulations.

That is why the experience of a small Central European country, Czech Republic, with 10 million people, is so interesting and so relevant. Last month I was in Prague, to speak at a workshop on innovative thinking. New York Times published a recent fine piece on Czech innovative thinking in banking*. Here is the crux: Czech banks went into crisis a decade ago (before the global meltdown). The authorities learned their lesson and prevented a replay in 2008.

“The industry is in good shape; the sector is stable and has not needed any assistance in the recent crisis,” said Jiri Busek, an analyst with the Czech Banking Association. “It’s quite a unique position in Europe, and we are grateful for it. We are stable, healthy and profitable.” The sector went through a banking crisis in the late 1990s. Several banks failed, one major bank had to be acquired by a competitor and larger state-owned banks were privatized after bad loans were cleaned from their balance sheets. “We had this recent experience, and thus risk management here is very conservative, Mr. Busek said.

The Czech National Bank is now mandated to supervise every player in the financial industry, whether investment brokers, insurance companies or banks. Yet, over all, the financial sector has kept growing: Year on year, lending was expanding at a 4.6 percent rate as of the end of March, up from 2.4 percent in 2012 and a low of 1.3 percent in 2009. “The sector is still attractive for newcomers,” Mr. Busek said. “After quite a few years of stagnation, several new banks opened in the last three years.

Listen to this account of an innovative new Czech Bank.

Jakub Petrina, marketing director and a designer of Air Bank, part of PPF Group, an international financial investment company based in Prague, said the designers looked at the question of why people did not like banks and set out to create something that would be liked.

“We went back to basics — listened to people and heard that bankers use complicated language, absurd fees, the terms and conditions are too long and complicated,” he said. “We realized it’s more complicated than it should be.” So Air Bank, which started in November 2011 and now has 125,000 customers, has a one-page price list and offers current and savings accounts with the same interest rate and no time restrictions or penalties related to withdrawals from the savings account. It provides simple personal loans, has a mobile app for iPhones and charges no fees for assistance — online, in a branch or by telephone.

The philosophy of the bank is “let’s be as human as possible. Sometimes a banker seems like a different species,” Mr. Petrina said. “In our branches, the banker and customer sit next to each other and share a computer screen working together in the customer’s account.” “ We are after the big dinosaur corporate banks who’ve forgotten they are here to provide a service,” said Mr. Petrina, “We’re not worried about the other new banks. We have different models and strategy. It helps that there are more ‘new crazy bankers’ out there — makes people seriously rethink about their current bank.”

Heard of any similar innovations on Wall St.? London’s City? No? Banker and client sit next to each other and share a common computer screen??? How simple is that! Hmmmm… Have Wall St. and City bankers simply gone back to the bad old days? Perhaps we should send them all to Prague for six weeks… at their own expense. Compulsory.

*Lessons Learned, Czech Banks Thrive, By Jacy Meyer. Global New York Times, May 21, 2013

This blog post was initially published in Prof. Shomo Maital’s TIMnovate Blog on May 22, 2013.