VIEWPOINT: Bank Leadership Needs Detailed Review
Fitzgerald, Patrick, American Banker
Byline: Patrick Fitzgerald
The G-20 countries are marching forward on high-profile issues such as banker pay, appropriate financial safeguards and disincentives for excessive risk taking. These are, however, relatively low-lying fruits.
The Holy Grail for some is the prospect of capitalizing on the worst financial crisis since the Great Depression to achieve historic changes such as supranational regulation, systemic risk mitigation and long-term changes in the consumption and savings habits of nation states.
Lest we jump ahead to the concept of macro-prudential supervision, let us observe the turf war that has broken out in the U.S. among the Federal Reserve, Treasury Department, OCC and FDIC (OTS intentionally omitted) over which entity is best equipped to protect consumers, govern systemically important financial companies and ensure financial stability.
Against this backdrop it is difficult to believe that the U.S. will subordinate its authority to world body oversight, regulations and restrictions. While we do live in a globalized economy, one should not therefore conclude that the rule of sovereign self-interest is weakened. Politics and economics are inextricably linked and the politics and economics that really matter are those at the country level.
In the U.S. the political willpower does not exist to significantly alter the current global alignment. Global equity markets are ascending in synchronization and high-profile government officials and economists are declaring the recession over. The window for change is closing while the business-as-usual mantra re-emerges.
Instead of a top-down prescription for the global financial malaise, a more practical approach may be to downstream and focus reforms and accountability at the firm level. Many financial institutions are retrenching, repositioning and recalibrating, frequently with executive leadership teams unchanged. A thorough analysis of bank leadership needs to be undertaken by regulators, boards and shareholders to review the steering of a bank into and out of the crisis.
Is the current management team best equipped to lead the bank? Will the current top brass, to paraphrase Chuck Prince, the former chief executive of Citibank, get up and dance as soon as the music starts playing again? Strong leadership and executive accountability are the needed antidotes. And let us hope that the leaders of financial firms can learn from past mistakes.
With the staggering financial losses produced by so many financial companies over the past two years, it is surprising we have not seen more turnover in the executive management suites. …