Published by Jessica Weisman-Pitts
Posted on February 9, 2023
4 min readLast updated: February 2, 2026
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By Mac Thompson, President and founder of White Clay
A recent Federal Reserve survey shows banks are confident a recession is coming – the majority see a 40-80% chance of this happening in the next 12 months. As a result, some financial institutions are tightening their lending standards to preserve capital. However, one thing that the 2008 recession has taught us is that regardless of the state of the economy, banks should not pause their lending efforts. This is especially important as this recession will be much different than the previous one due to the increased supply of cash, rising inflation and interest rates, a strong labor market, and wage inflation. One way banks can prevent the same mistake from happening again is to reevaluate their pricing strategies, so they can continue to lend.
Accurate pricing starts with a clean data environment. Leveraging modern technology enables banks to combine, standardize, and curate disparate data to create a holistic view of customers’ banking relationships. Based on this information, banks can evaluate if a customer has a primary or secondary relationship with the institution, and then determine ways to deepen that relationship. Advanced intelligence reveals how clients impact liquidity and risk, consume capital, and provide revenue. This will show which clients are the most profitable, while providing insights for banks to create strategies that optimize and expand new relationships. With this new level of visibility, banks can find opportunities both large and small to provide better products and services, while making incremental improvements to boost shareholder return.
When relationships are priced properly, banks also have the clarity to build and execute their deposit strategy. For many banks, their deposit strategy will be new considering that interest rates on deposits have been low or non-existent over the last 14 years. The strategy should start with banks identifying where clients have deposits above their 3-6X monthly spending, which can only be determined with a clean data environment. Banks will then need to make sure their deposit strategy aligns with their assets and liability strategy. Once aligned, they can implement a disciplined deposit pricing process and tools, as well as educate teams to understand, execute, and communicate these changes internally and to clients.
Relationship pricing empowers banks to price loans more effectively. Unlike deposits, banks are much more familiar with pricing loans – but they’ll need to be more disciplined in the current economic environment. Before they decide to lend, banks must ensure the returns are worth the risk. Loans and lines of credit should be priced appropriately to cover the bank’s liquidity, capital, and risk costs, for the bank to deliver shareholder value. If banks take this approach, they can still use lending as an acquisition driver and gateway to further support their communities during a recession. Moreover, offering better lending experiences, while pricing loans accurately, provides banks with a valuable source of revenue.
As we head into a potential recession, banks must start prioritizing pricing strategies. They should take the time now to build a clean data environment themselves or invest in modern technologies that can do it all for them. A clean data environment, when enhanced with advanced intelligence such as relationship profitability and pricing, allows banks to proactively rise above the challenges ahead. Financial institutions able to price relationships successfully can effectively do the same with loans and deposits. An effective pricing strategy will help banks remain resilient during a potential recession while delivering value to both clients and shareholders.
About Author:
Mac Thompson is Founder and President at White Clay, which provides bankers with a single, accurate view of their data to optimize profitability and liquidity, protect shareholder value, and improve customer relationships
A recession is a significant decline in economic activity across the economy that lasts for an extended period, typically visible in real GDP, income, employment, manufacturing, and retail sales.
Relationship pricing is a strategy where banks price loans and deposits based on the overall relationship with the customer, considering factors like profitability and risk.
Lending standards are the criteria that banks use to determine the creditworthiness of borrowers, including factors like credit scores, income, and debt-to-income ratios.
Deposit strategy involves the methods and policies banks use to attract and manage customer deposits, ensuring they align with the bank's overall financial goals.
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