Banker Merry-Go-Round Is Same Tired Old Faces

Some time last year I had a revealing conversation with a director of a European bank about succession planning for the chief executive officer job. The board member let slip that the real reason a woman might be on the candidate list was because the company simply had to be seen ticking that box.

The director quickly tried to correct himself: He didn’t really mean it that way; there was of course a genuine effort to look outside the usual clique of banking executives. Sadly, the retraction wasn’t entirely convincing because the admission was hardly shocking.

Over the past couple of years European banks have suffered their usual dramas — from the spying scandal at Credit Suisse Group AG to the Barclays Plc boss’s ties to Jeffrey Epstein — proof that corporate governance deficiencies still prevail. It’s no surprise that governance and controls were the focus of the European Central Bank’s supervisory recommendations for lenders a year ago. A lack of well-crafted plans for replacing CEOs, including a diversity of candidates, is one important item on a pressing to-do list.

Granted, the problem isn’t entirely of the banks’ making. Any candidate would need to be familiar with the constantly changing regulatory demands that characterizes this industry, and there is clearly a dearth of experienced executives from different backgrounds. But banks will need fresh talent to help them rebound from the economic wreckage of the pandemic and survive the threat from new technology. Depressingly, this is nowhere to be seen.

Take the latest round of CEO reshuffles. Of the nine leading European banks that replaced their bosses in the past year, seven turned to either a male insider or a male banker from a local rival. One hired from outside the industry and the other picked a banking executive from another European country.

It’s too early to draw conclusions on how effective these hires will be. But some raise questions already. Ralph Hamers, in the top job at UBS Group AG since November, is facing a potentially long investigation over a money laundering scandal at his previous employer, ING Groep NV. The UBS chairman says Hamers will have learned from his experience.

Regardless of Hamers’s professional attributes the distraction is hardly desirable. Some investors questioned UBS’s hiring process at the time of the appointment, which seems reasonable.

Meanwhile, UniCredit SpA’s handling of Jean Pierre Mustier’s exit as CEO was hardly encouraging. After weeks of discussions the Italian bank’s board found only one internal candidate, according to media reports. That speaks to a failure to groom an internal bench. Only four of the 27 members of the bank’s executive management committee are female, and none of them is running a division.

The external candidates were all familiar faces, and the chosen one the most familiar of all: Andrea Orcel was an architect of UniCredit’s creation a few decades back. He also advised Banca Monte dei Paschi di Siena SpA in 2007 on a terribly timed takeover that helped seal its fall from grace. UniCredit is now in talks to take over Monte Paschi as part of the latter’s fourth Italian bailout. It’s hard to imagine an outsider CEO being enthused by the deal (Mustier wasn’t).  

Because banking is so heavily regulated, boards are constrained in hiring outsiders. ABN Amro Bank NV, which hired externally, chose an accountant. Attempts to bring in managers from abroad have also proved tricky because of language barriers. After the Frenchman Mustier, UniCredit wanted an Italian speaker, a limit on the pool of candidates.

As for gender diversity, there just aren’t enough senior women to promote or hire. Among financial services companies, women make up 20% of executive committees in the U.K. and France — on par with the global average — while the number drops to 15% in Germany and 13% in Italy, according to Oliver Wyman, a consultancy. Deutsche Bank AG’s management board features nine men and one woman. 

One of the lessons of the pandemic — that work doesn’t need to take place in an office —  should make it easier for women to climb the corporate ladder as flexibility becomes less of an excuse to impede female progression. Boards and CEOs must be held accountable for how they seize this opportunity.

The same goes for casting a wider net to recruit from outside the usual middle-management circles. Banks need to do a much better job of attracting mid-career talent from all kinds of backgrounds to give prospective leaders from outside the industry a decent chance of being ready for the top jobs.

Tapping the same old faces again and again might appear prudent but this is an industry that never seems to learn from its past mistakes. It’s time for meaningful change.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Elisa Martinuzzi is a Bloomberg Opinion columnist covering finance. She is a former managing editor for European finance at Bloomberg News.

©2021 Bloomberg L.P.

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