The Banking Executive Magazine - October 2023

A Note to the Future A regulatory regime based on the quantum of rules, not necessarily on their logic and value, a regulatory regime without any form of real in- ternal or external accountability, a regulatory regime with no economic outlook flourishing in a culture of fear and intimidation is a double- edged sword. It generates an atmos- phere of bureaucratic compliance not understanding, of obedience not initiative, of token dialogue not real consultation, and this is adverse to healthy growth and even to the real- isation of its key goal of systemic risk containment, as proven by the very recent US regional banks’ collapse and by the demise of Credit Suisse which triggered immediate fears of a global systemic banking crisis. CLARITY OF VISION My point is a challenge to regional banks’ vision and governance. Sim- ply put, vision is clarity on the future nature of the business and its ex- pected results. This is the core foun- dational responsibility of the Board and management team. Hiring exter- nal consultants to advise on strategic options or to hold hands for their im- plementation is usually the first step towards underperformance if not outright failure. It practically signals the inability or unwillingness of the Board and management team to pre- pare, sanction, own and implement a coherent plan based on a rational assessment of available alternatives of which they are the most familiar in terms of potential challenges and opportunities. Without clarity of vi- sion and ownership at all levels of the organisation, full staff engage- ment, coordinated initiatives and op- timised results become random occurrences. Governance at the Board level cas- cading into all levels of the organisa- tion is the other critical missing link. A board failing to require, own and pursue the needed actions to max- imise its shareholders’ value in terms of risk, liquidity, capital, data and technology policies and initiatives, will not realise the potentialities of any business. A management team not actively engaged in the formula- tion, modification and execution of these decisions, and objectively held accountable for their proper delivery, will not optimize results in a sus- tained manner nor will be capable of effectively interacting with their staff and other stakeholders. Data and technology are today’s great enablers. Their importance cannot be overstated. Investing in these capabilities is however a nec- essary but not sufficient condition for creating competitive advantages. These investments must be under- taken in the context of a full enter- prise-wide transformation plan and not as a series of disjointed initiatives with no clear goals and without suf- ficient ownership by their final Owner-Users outside the data and technology departments. The human transformation at the Board, manage- ment and staff levels is the indispen- sable sufficiency factor needed to reap a full harvest through real or- ganisational transformation. These key future requirements cannot be achieved without enlightened vision and defined governance. If proper ownership and delivery of vision and governance can be achieved or at least materially im- proved, regional banks will be posi- tioned to significantly grow within and outside their home markets in a prudent and profitable manner, to leverage and monetise the major op- portunities afforded by data and technology in a defined and targeted fashion and to chart their future courses of action with enhanced clarity, accountability, sustainability and scope for profitable innovation. Regional banks have long been los- ing global market share on all fronts despite their nominal growth and the sustained surge of mineral wealth over decades. This counter intuitive outcome can perhaps be altered if some of the root causes described above are addressed. If understood and implemented, these notes can hopefully be a start- ing point to a better future. the BANKING EXECUTIVE 40 ISSUE 178 OCTOBER 2023