The commercial bank executive of tomorrow will look a lot like a quick-thinking technology executive or a nimble start-up CEO.
Banks are starting to seek new traits from commercial-banking leaders who were historically coveted for relationship-building skills and an ability to navigate compliance issues.
While those characteristics are still important, the new commercial banker also needs to be a business leader who is well-versed in strategy, analytics, organizational leadership and customer experience. As a result, being a “super relationship manager” (RM) is no longer the main prerequisite to assuming leadership of the commercial bank.
The shift is a logical outcome of the pressures of today’s market in which the post-crisis world is characterized by challenging macroeconomics, increased complexity and intensifying non-bank competition. Credit expertise and experience as an RM are still considered to be important, but so is the ability to grow and manage a business.
Banks need new leadership skills from commercial bankers who must be able to assess market opportunities, as well as develop and oversee the execution of different strategies. They must embrace innovation amid the need to create distinctive propositions for high-value customers.
Today’s commercial bankers also need skills to transform workforces and cultures so that they pursue advancements in technology, including the move toward digital offerings.
It’s not the first time that banks have shifted commercial-banker strategies to keep up with changes in the industry.
In the 1980s, college graduates seeking a career in banking wanted a position in a leading bank’s RM training program because it was considered to be a path toward career advancement. In those days, lending money — and the authority to extend the bank’s capital — was a great responsibility to be extended to a bank employee. A well-rounded RM had to have the analytical chops to uncover and mitigate risk, while also displaying a strong EQ in developing rapport with senior decision-makers — both internally and within client organizations.
Commercial banking changed in the 1990s with the repeal of Glass Steagall via the Graham-Leach-Bliley Act (GLBA) and the swelling of the soon-to-burst dot com bubble. The role of the RM was overshadowed by the cachet of the investment banker as institutions were permitted to pursue both lines of business. These highly-compensated deal makers may have lacked the empathy of a good RM, but made up for it in aggressiveness and financial engineering skills.
The financial crisis further transformed the RM role by completing the segregation of underwriting from selling and relationship management, as well as formalizing processes around customer management and lending activities. While an RM was still expected to know how to identify risks and structure a deal, deep technical expertise was delegated to a credit center of competency.
Additionally, compliance requirements became not only a bigger part of the job, but also a constraint in meeting the needs of clients in a timely, flexible manner. The job of RM became narrower in functional breadth, while simultaneously more complex due to regulation and intensive cross-functional coordination. Accordingly, advancing to the head of the commercial bank increasingly emphasized the ability to ensure compliance through appropriate management processes and to collaborate effectively.
While conducting an informal review of promotions to the head of commercial banking during the current decade, Novantas found that banks are indeed already seeking new skills for the job.
Among some notable examples:
- A top 10 large regional bank turned to the bank CFO, a deeply analytical business leader, to assume the role of Commercial Bank head. This individual led a significant expansion of the bank’s Wholesale Banking business while enhancing the financial discipline and focus of the unit.
- A “Big 5” Canadian bank recently turned to a strategic business leader to head their commercial banking segment. This individual honed business skills through a career in consulting, followed by successful stints in retail distribution, digital banking, and payments.
- A top 10 large regional bank selected a business leader with a background in risk and product management to head its commercial bank.
Although they came from different backgrounds, there is a recurring theme: they all demonstrated an ability to interpret the market environment, focus resources on opportunities and oversee disciplined execution of effective strategies. Moving forward, Novantas expects more banks to search for these critical skills.
Managing Director, Chicago