A sea­son for bank­ing CEOs to head for the exit

The Pak Banker - - OPINION - Pa­trick Jenk­ins

Ditch­ing chief ex­ec­u­tives has be­come a pop­u­lar sport again in fi­nance - al­most re­gain­ing the high point of 2008-9 when banks seemed to lose bosses as fast as they shed mar­ket value.

This time, the ac­tion has been in Europe, more than in the US, with re­cent han­dovers of power at Credit Suisse, Deutsche Bank, Stan­dard Char­tered and Bar­clays. Seven years of post-cri­sis sta­bil­i­sa­tion and reg­u­la­tory pres­sure have taken a tougher toll on Euro­pean bank bosses than on their US coun­ter­parts, where fi­nan­cial re­cov­ery has been speed­ier. There has even been a reg­u­la­tory change at the top, with Martin Wheat­ley ousted from the UK's Fi­nan­cial Con­duct Au­thor­ity (FCA). The cir­cum­stances of the de­par­tures vary a lot. But there is enough com­mon ground - es­pe­cially in Bri­tain - to draw a hand­ful of broader con­clu­sions.

De­fen­es­tra­tion is in: Look at the state­ments an­nounc­ing Antony Jenk­ins' exit from Bar­clays and Wheat­ley's from the FCA and it is pretty clear they were sacked. The Bar­clays an­nounce­ment is bru­tally di­rect.

You could see this as a re­fresh­ing change - there was no men­tion of the de­part­ing bosses want­ing to "spend time with their fam­ily" or "pur­sue other op­por­tu­ni­ties". They were told to go be­cause they were no longer deemed the right peo­ple for the job.

But the un­var­nished style has not caught on ev­ery­where. The con­trast be­tween the Bar­clays an­nounce­ment and the dig­ni­fied res­ig­na­tion of An­shu Jain at ri­val Deutsche Bank was strik­ing. Friends of Jenk­ins were peeved on his be­half that, hav­ing over­seen a far stronger share price de­vel­op­ment than the other AJ and with no per­sonal grief from reg­u­la­tors, he was the one who was harshly treated, while Jain en­joyed a gush­ing epi­taph from Deutsche Bank chair­man Paul Ach­leit­ner.

Friends mat­ter: It is a les­son that the last Bar­clays chief ex­ec­u­tive taught us. The charis­matic Bob Diamond might have been a pop­u­lar fig­ure within the bank but, by the time he was ejected by the Bank of Eng­land, he had es­tranged a panoply of other stake­hold­ers - politi­cians, in­vestors, the media and reg­u­la­tors.

Jenk­ins was gen­er­ally liked by politi­cians and reg­u­la­tors, and tol­er­ated by in­vestors and the media. But he built no bridges in­ter­nally, re­fus­ing to set foot in­side Bar­clays' in­vest­ment bank and in­fu­ri­at­ing non-ex­ec­u­tives with what they saw as a de­fen­sive, stand­off­ish at­ti­tude. Wheat­ley suf­fered a sim­i­lar fate for sim­i­lar rea­sons. Fi­nanciers have long com­plained that the FCA boss was ex­tract­ing in­creas­ingly large fines. But they have com­plained louder still about his man­ner of reg­u­lat­ing. "He wasn't con­struc­tive or trans­par­ent. He al­ways as­sumed ev­ery­one was cheat­ing," says one City boss.

Politi­cians are not anti-fi­nance any more: Eight years af­ter the out­break of the fi­nan­cial cri­sis, the po­lit­i­cal mood to­wards the fi­nan­cial ser­vices in­dus­try has soft­ened. Just look at the Fi­nan­cial Sta­bil­ity Board's re­treat from reg­u­lat­ing as­set man­agers as sys­tem­i­cally im­por­tant fi­nan­cial in­sti­tu­tions, fol­low­ing pres­sure from US groups.

The change of tone seems stark­est in the UK, where Os­borne's land­mark Man­sion House speech in June talked of a "new set­tle­ment for fi­nan­cial ser­vices". The chan­cel­lor rather un­der­mined that rhetoric when he an­nounced a new 8 per cent su­per­tax for the bank­ing sec­tor a few weeks later. But the phased re­duc­tion of the con­tro­ver­sial bank levy was a boost. It was de­signed to re­duce the bur­den on the likes of StanChart and HSBC and per­suade them not to shift head­quar­ters out of the UK. The re­moval of Wheat­ley at the FCA was the big­gest sig­nal yet that the gov­ern­ment is mov­ing away from at­tack-dog reg­u­la­tion.

Hir­ing im­pres­sive new CEOs will be harder: De­spite the soft­en­ing tone from pol­i­cy­mak­ers, new leg­isla­tive pow­ers are still work­ing their way into force. The UK's Se­nior Man­agers Regime (SMR) looms over ex­ec­u­tives and non-ex­ecs alike.

For Bar­clays, which is on the hunt for a chief ex­ec­u­tive, the SMR will be just one worry. More off-putting may be the man­ner in which the old CEO was fired. "It was rude and un­nec­es­sary," says a ri­val, adding that John McFar­lane's man­ner would de­ter the best re­place­ment can­di­dates.

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