Wall Street's banking fleet is looking for new captains.
There appears to be a huge gap in knowledge and experience on Wall Street.
The last time American finance operated in an environment of high inflation and high interest rates, like the current economy, was almost 40 years ago. This means that most of today's executives, who came in during the era of easy money, are unfamiliar with the complexities of running a bank in today's environment.
As senior management at financial institutions begin to realize that interest rates are likely to be higher for a long time, they are struggling to find leaders with the skills to succeed in such an unpredictable environment. Some leaders decide they need to make radical, costly and often unpopular institutional changes to help them keep up with the times.
What's Happening: Citigroup's CEO announced a major restructuring last week designed to change the bank's leadership structure, improve accountability and boost the stock price (Citi shares are down about 11.6% over the past year).
She said the changes would not be popular with employees and would involve "very inconvenient" layoffs.
Citigroup is part of a broader trend of top-level reorganizations in the banking industry.
Wells Fargo's chief financial officer told Reuters last week that more layoffs were likely; The bank has already cut around 40,000 jobs since the end of 2020.
Truist recently announced a $750 million cost-cutting plan that includes layoffs and major changes to senior management.
And the CEO of Barclays CS told CNBC last week that he plans to cut hundreds of jobs at the bank, which he said is in line with a broader industry trend.
Late last year, Goldman Sachs also said it was planning a major reorganization, combining leadership in investment banking and trading.
It's not just managers who are feeling the heat. Chief executive officers are also being reshuffled.
Discover recently announced that its CEO was retiring, and Morgan Stanley announced that their CEO would retire this year.
Currently, banks have strong managers, but not many strong leaders, said a senior partner at West Monroe.
According to him, before the current increase in interest rates, banks had been operating with low and stable interest rates for almost two decades. It's a really friendly atmosphere.
“The sea is stormy now, and many people are not used to managing the situation in such an environment, but they are leading alone,” . “To increase accountability, CEOs want to reduce the number of layers of management and have a deeper view.”
This is new territory for most bankers, and bank management now recognizes that the environment has fundamentally changed.
"It really requires vision, clear strategic ambition and leadership to be able to muster the will to achieve this and not just run the bank the way it has been run for the last few years," he said. “There just aren’t many people who have gone through it.”
Where Have All the Bankers Gone: So what's a bank supposed to do when all its experienced executives are gone?
He said CEOs should focus on building a management team with fundamental communication skills. “I think the most successful leaders have a certain level of skill in dealing with uncertainty. And that’s the point.”
Large financial institutions have created many layers of management, which breeds indecisiveness and a lack of accountability, he said. Banks now understand that they need to provide greater transparency and eliminate bottlenecks.
It is likely that we will soon witness the emergence of new investment banks with updated management systems.
Based on materials from CNN.
The last time American finance operated in an environment of high inflation and high interest rates, like the current economy, was almost 40 years ago. This means that most of today's executives, who came in during the era of easy money, are unfamiliar with the complexities of running a bank in today's environment.
As senior management at financial institutions begin to realize that interest rates are likely to be higher for a long time, they are struggling to find leaders with the skills to succeed in such an unpredictable environment. Some leaders decide they need to make radical, costly and often unpopular institutional changes to help them keep up with the times.
What's Happening: Citigroup's CEO announced a major restructuring last week designed to change the bank's leadership structure, improve accountability and boost the stock price (Citi shares are down about 11.6% over the past year).
She said the changes would not be popular with employees and would involve "very inconvenient" layoffs.
Citigroup is part of a broader trend of top-level reorganizations in the banking industry.
Wells Fargo's chief financial officer told Reuters last week that more layoffs were likely; The bank has already cut around 40,000 jobs since the end of 2020.
Truist recently announced a $750 million cost-cutting plan that includes layoffs and major changes to senior management.
And the CEO of Barclays CS told CNBC last week that he plans to cut hundreds of jobs at the bank, which he said is in line with a broader industry trend.
Late last year, Goldman Sachs also said it was planning a major reorganization, combining leadership in investment banking and trading.
It's not just managers who are feeling the heat. Chief executive officers are also being reshuffled.
Discover recently announced that its CEO was retiring, and Morgan Stanley announced that their CEO would retire this year.
Currently, banks have strong managers, but not many strong leaders, said a senior partner at West Monroe.
According to him, before the current increase in interest rates, banks had been operating with low and stable interest rates for almost two decades. It's a really friendly atmosphere.
“The sea is stormy now, and many people are not used to managing the situation in such an environment, but they are leading alone,” . “To increase accountability, CEOs want to reduce the number of layers of management and have a deeper view.”
This is new territory for most bankers, and bank management now recognizes that the environment has fundamentally changed.
"It really requires vision, clear strategic ambition and leadership to be able to muster the will to achieve this and not just run the bank the way it has been run for the last few years," he said. “There just aren’t many people who have gone through it.”
Where Have All the Bankers Gone: So what's a bank supposed to do when all its experienced executives are gone?
He said CEOs should focus on building a management team with fundamental communication skills. “I think the most successful leaders have a certain level of skill in dealing with uncertainty. And that’s the point.”
Large financial institutions have created many layers of management, which breeds indecisiveness and a lack of accountability, he said. Banks now understand that they need to provide greater transparency and eliminate bottlenecks.
It is likely that we will soon witness the emergence of new investment banks with updated management systems.
Based on materials from CNN.