Bank Chief Wanted. Club Members Need Not Apply
(Bloomberg Opinion) -- Spare a thought for Sweden's oldest bank. If Wells Fargo & Co. struggles to hire a new chief executive officer from outside the usual circles in a country with a population 33 times the size, what hope does Swedbank AB have?
Yet that's exactly what it needs to do. Not least because concerns are mounting that the country’s regulators may have been too close to the banks they oversee. The top regulator has stepped back from the money laundering probe of Swedbank because of an existing friendship with a board member.
Swedbank CEO Birgitte Bonnesen, a Dane who previously oversaw the lender’s Baltic businesses, was ousted at the end of March, to be followed by the chairman on Friday, amid a crisis of confidence. The bank’s botched response to allegations that the unit the CEO had once run handled tens of billions of dollars of dirty money triggered a crisis of confidence among investors.
The lender’s largest shareholders – some of whom have their own personal ties to the bank’s regulators – now plan to replace a large part of the board at the next shareholder meeting. They are seeking to hire a new chairman externally, Dagens Industri newspaper reported last week.
If investors really want to put the scandal behind them, they should to be bold, break with local ties and seek someone from outside the country – even if it means going beyond the Nordic borders and jettisoning the familiarity of a shared (or similar) language.
My colleagues’ account of the deep interconnection between companies, regulators and politics in Sweden makes for instructive reading. Erik Thedeen, director general of the Financial Services Authority, was a state secretary at the finance ministry when Swedbank board member Peter Norman was financial markets minister. In 2015, Jens Henriksson, now the head of Swedbank’s second-biggest shareholder, hired Thedeen as CEO of a pension fund he then chaired. Both have worked with Magnus Billing, the current head of the bank’s third-largest shareholder, Alecta. Henriksson was among the shareholders who proposed appointing Norman to Swedbank’s board in 2016.
To be sure, speaking a common language still plays an important role in business relationships in Europe. Not long before being replaced, Brady Dougan, the former Credit Suisse Group AG CEO, said he regretted not having learned German. Anshu Jain, the former co-CEO of Deutsche Bank AG, drew criticism for not speaking the language. While both banks needed radical retooling, it didn’t help that the top executives were missing a key means of connecting with investors, customers and regulators.
But even in an industry as complex as banking it is possible for relative newcomers to make a success of it. Dougan’s replacement at Credit Suisse, Tidjane Thiam, is not only foreign to Switzerland, he came from the insurance world. In Italy, UniCredit SpA turned to Frenchman Jean Pierre Mustier to overhaul the bank (even if he had done a stint at the firm earlier in his career.)
One could argue both firms have a way to go before they deliver returns investors can be happy with, but both Thiam and Mustier have benefited from their outsider status when it came to taking tough decisions about their companies.
The Swedish Shareholders’ Association told Bloomberg News that Swedbank needs to choose a CEO and chairman from outside. Wells Fargo's largest shareholder, Warren Buffett, said the U.S. bank should avoid hiring from the familiar hunting ground of Wall Street to avoid criticism from Washington.
Danske Bank A/S, which has also been embroiled in its own money laundering scandal, is also in the market for a CEO. Both firms should take note. It's time to cast the net wider.
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.
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