We all know that the name of a product or service can have a significant impact on whether it succeeds. A good name can differentiate, position, communicate personality and more. Just think of Innocent, Agent Provocateur or Orange.
Many institutions were caught napping when the financial crisis struck in 2008, from regulators to ratings agencies and governments. More recently, they were once again snoozing when a string of sovereigns found themselves in difficulties and banks stopped lending to one another.
The finger of blame is often pointed in the direction of the regulators and the complexity of the instruments over whose creation they presided: credit default swaps, anyone? But should a portion of that blame be reserved for those responsible for the naming of financial instruments and terms?
Take sub-prime mortgage, for example. Had it been presented under the moniker, ‘a mortgage for broke people’ (or ‘junk mortgage’ for short), I can’t see that banks would have been fighting to snap them up. It would have been almost impossible for Fannie Mae and Freedie Mac to underwrite enormous amounts, using Americans’ money to supercharge the junk mortgage market. ‘Prime’ implied premium, ‘sub’ implied one level down from that i.e. quite good or at least average. Sub-prime naming, therefore, created an illusion of attractiveness and security that markets and consumers bought into, with dire consequences.
Exhibit two is quantitative easing. Let’s call it like it is: “pouring origin-less capital into the economy” (or “printing money” for short). Such a name would surely have made it more difficult for the Bank of England to argue that the British and American publics should wholeheartedly endorse it. The jury remains out as to the effectiveness of quantitative easing, but it certainly wouldn’t have been such an easy sell, had it not been named so opaquely.
I’ve unleashed our very own in-house Babel Fish to create a list of some of the most confusing financial terms, together with some helpful hints on their meanings. So in the hopes of dispelling any lingering confusion – and naturally, saving the world in the process – here are our top candidates for the name shame game:
- Dead cat bounce – a prediction, rather than a definition
- Double dip – sadly nothing to do with limbo dancing
- Executive compensation – excessive pay for the big bosses
- Golden parachute – bonus for failure
- Free banking – banking with a sting in the tail
Jokes aside, I believe that the names given to financial instruments and terms have a big impact on the world economy and the actions that are acceptable to governments, regulators, societies and individuals. We should all pay closer attention to the semantics and especially semiotics of these terms, before they cause global financial mayhem in the future.
Assuming the logic of the argument for a moment, then, shouldn’t the FSA, Securities Commission and other bodies be scrutinising how financial instruments are named? If they want to change the banking culture and make the financial world more transparent, as they claim, naming must surely fall under their remit. Setting rules and regulations is vital, yes – but so is an understanding of how the world of finance connects with people on the ground. From day to day, those connections will most likely come about through face-value naming.
For too long, mysticism and spin has been the mainstay of the global financial institutions and their branded products. The Campaign for Plain English has done a great job of driving simplicity of language in the high-street banks, particularly when it comes to benefits and T&Cs, but it’s time that the industry accepted the need for a new type of language across the board: one that removes the smoke and mirrors and pulls back the curtains to show the cogs whirring beneath. Let’s continue the good work started in the British high street branches and take it out across the world’s financial capitals – the best way to reconnect with a disgruntled and sceptical public may be to take responsibility for starting the conversation.