Through the financial crisis, it became clear that bank boards, executives, and regulators needed a new forum to address key challenges and risks, and to consider the industry’s future direction. The Bank Governance Leadership Network (BGLN) addresses key issues facing complex global banks.
The primary focus is the non-executive director, but the network also engages senior management, regulators, and other key stakeholders committed to outstanding governance and supervision in support of the mission to build strong, enduring, and trustworthy banking institutions.
The BGLN is organized and led by Tapestry Networks and supported by EY. It provides unique opportunities for candid dialogue among non-executive directors from leading global banks, bank executives, regulators, policy makers, and other stakeholders through private roundtable discussions, the annual Bank Directors Summit, and research work streams focused on critical issues for non-executive directors.
Recent network topics:
In October 2016, Tapestry Networks and EY hosted the Financial Services Leadership Summit, which brought together more than 80 financial sector leaders to discuss the extraordinary changes happening across the financial services landscape. Participants included directors and executives of the largest global banks, insurers, asset managers, regulators, fintech entrepreneurs, and other subject matter experts. ViewPoints synthesizes these and other discussions with participants in the Bank and Insurance Governance Leadership Networks over the second half of 2016. Technology is lowering the barriers to entry for emerging competitors and transforming the way incumbents do business, rapidly altering the competitive marketplace. At the same time, unprecedented macroeconomic and geopolitical conditions, driven by underlying structural changes, are creating a degree of uncertainty about the environment through which leaders must guide these institutions. Regulation will need to continue to evolve in response. A summit participant summarized, “Revolutions only get called with hindsight … We are in a period of accelerated evolution that will be called a revolution in financial services.”
Technology is reshaping the competitive and operating landscape for banks. They face competition from tech-enabled competitors with new models, and pressure to reduce costs and improve efficiency. As technology becomes increasingly central to all facets of bank strategy and operations - from compliance and data analysis to the customer interface - bank boards need a more holistic, strategic view of technology investment. Regulation meanwhile, is slowly adapting to the changing environment. Technology is reshaping the competitive and operating landscape for banks. They face competition from tech-enabled competitors with new models, and pressure to reduce costs and improve efficiency. As technology becomes increasingly central to all facets of bank strategy and operations - from compliance and data analysis to the customer interface - bank boards need a more holistic, strategic view of technology investment. Regulation, meanwhile, is slowly adapting to the changing environment.
Governance is now a cornerstone of supervision. As such, effective boards are important to supervisors, who have been raising expectations for boards and directors, accompanied by increasing calls for board and individual accountability.
Over the last several months, directors and supervisors shared perspectives on expectations for bank boards and directors, including roundtable discussions in New York and London. These discussions highlighted that while directors accept heightened expectations for engagement, including a significant time commitment relative to other corporate boards, there remain opportunities to improve clarity regarding the role of a bank board and realistic expectations for what it can accomplish.
All large banks continue to face political, regulatory, and market pressure. European banks face particularly daunting challenges. As Europe pushes for a banking union, the ECB’s role as a single regulator and supervisor for the Eurozone becomes an important player in the transformation of European banking. Having completed its first year, it wants to establish itself as a strong regulator and ensure the stability of the European banking system. At the same time, many European banks are faced with the need to fundamentally address their business models in the context of a broader policy debate about what banking structures will best support European economic growth.
At the seventh BGLN Summit, participants focused on how banks are adapting strategies, business models, and operations to a changing competitive landscape. Non-executive directors and senior executives from among the largest global banks were joined by regulators and other participants representing investor and other stakeholder perspectives for discussions on some of the challenges and opportunities for banks as they seek to improve returns and attract investment. This ViewPoints synthesizes themes emerging from the summit discussion including how regulation is driving changes to bank structures, the need to build more agile banks to attract investment, increasingly active investors and requests for board-shareholder engagement, and potential systemic risk stemming from reduced market liquidity.
Bank boards continue to face increasing accountability for ensuring banks are effectively overseeing risks. Yet, despite improvements in risk identification, participants in the BGLN question whether they are truly engaging in the right ways on the key risks that could bring down an individual bank or have a broader systemic impact. BGLN discussions over the last six months, including two meetings in June, focused on top and emerging risks and how boards and supervisors can improve oversight. This ViewPoints captures the essence of these discussions with individual sections focused on top risks including emerging sources of systemic risk, persistent conduct challenges, increasing strategic risk intensified by possible disruption, and the growing cyber threat.
Persistent misconduct caused commentators, bank leaders, and regulators to question whether something is fundamentally wrong with the culture of banks and banking. BGLN discussions over the last six months, including two meetings in March, focused on how bank boards, management, and supervisors can address cultural issues within their institutions and across the industry. This is a long-term, multifaceted challenge that will require changes to hiring, accountability, incentives, governance, and business models.
Bank Governance Leadership Network
Group Chairman, HSBC