A new direction: the banking industry looks back and ahead.

• Author: Harahldsen, Tom

The health of financial institutions is in many ways a reflection of the health of the global economy. The Great Recession kicked the legs out from under the financial industry, and banks are finding they have to re-assess their core principles and functions. To be sure, the industry faces ongoing threats and challenges, but the banks that survived the recession are coming out the other side stronger, leaner and ready to compete in the new economy.

Full Circle

In many ways, banking is returning to its roots, with a renewed focus on businesses.

"The purpose of banks 40 years ago was to lend money to businesses, not individuals. That is where we're at again today in many ways," says W. David Hemingway, executive vice president and chief investment officer for Salt Lake City-based Zions Bancorporation.

Zions Bank is a regional powerhouse that encompasses eight different banking groups in nine Western states. Hemingway says the growing popularity of credit unions is creating an existential crisis for banks. With credit unions benefitting from the tax advantages they receive as nonprofit institutions (and without stockholders), they can offer better rates on loans to individuals.

So banks are once again dealing mainly with businesses.

"Eighty percent of Zions' loans are to non-individuals," Hemingway says, "and 55 percent of our deposits come from non-individuals. In Utah, which has very liberal state regulations for credit unions, 50 percent of the state's residents belong to a credit union, and 39 percent of all Utahns' deposits are into credit. unions. So over the last 30 years, many banks like ours have been forced to focus more of our efforts on business clients."

Other challenges--like access to capital--are forcing banks of all sizes to refocus on business services.

Axel Weber, chairman of UBS and president of Deutsche Bundesbank, the central bank for the Republic of Germany, agrees that even as a global player, the focus of his institutions has shifted away from individuals and toward business and industry. "It's all about capital--you need it to be successful," he says.

"I Trust You"

Both banks face another shared challenge--the internet. While older customers still enjoy banking at brick-and-mortar branches, younger generations do much of their banking and investing online.

"So while Zions has to maintain our branch system for our long-time customers, we also have to update our technology systems for the younger generation of customers...