Bank director training
Strategic Advisor to financial institutions
Former Group Chief Risk Officer, Royal Bank of Scotland.
Peter Nathanial, co-director of the International Directors Banking Programme (IDBP) explains how bank board members can benefit from a programme that addresses their unique challenges.
Please introduce yourself and describe your career path up to now.
I grew up in Australia and have worked in the banking industry since 1990. I gained experience in Switzerland, Moscow, New York and the UK, among other places, working with institutions such as Citigroup and the Royal Bank of Scotland, where I was Group Chief Risk Officer. Today, I’m an active independent non-executive director. I also act as an advisor to heads of state, central banks and financial institutions on governance, risk management, restructuring and policy.
In 2015, I joined forces with Professor Ludo Van der Heyden, founding Academic Director of the INSEAD Corporate Governance Centre (ICGC). Our aim was to develop and offer the IDBP to bank board directors, banking supervisors and other individuals dealing directly with bank boards – in executive, non-executive and independent capacities.
What’s happening in the banking sector today?
The banking sector is still reeling from the shock of the 2008–9 global financial crisis (GFC). It saw many banks go out of business, while others needed rescuing by governments and taxpayers. In the wake of all that, many banks are still hobbling along trying to reinvent themselves.
The current economic climate isn’t helping. In Europe, many economies are finding it challenging to show strong signs of sustainable growth, which is adversely affecting asset repricing. In other parts of the world, they’re struggling to address distribution of wealth and income distortions. Both situations have led to popular dissatisfaction and a fractious political environment – which is taking direct aim at political leaders and, in turn, banks.
However, I think it’s important to remember that the GFC didn’t itself cause these sorts of problems in the banking sector – it simply exposed them. Many of the issues are the result of banking practices that go back years, and so the vulnerabilities were already there.
What’s more, the events that led up to the GFC are remarkably similar to those that preceded other, earlier financial crises. Can it really be possible that each time there is a crisis, no one understood the risks? Looking back, we know that is not true. Many people in different financial institutions, as well as others, were raising concerns. So now, a key issue that banks must face (and it’s one that IDBP addresses) is how do we ensure that we make better decisions?
How is this affecting bank boards, specifically? What challenges do bank board members, directors and senior executives dealing with boards now face?
In the wake of the GFC, regulatory demands on bank boards and their directors have increased and are often at odds with each other.
Additionally, the rules governing banks have become increasingly complex, far-reaching and demanding. At the same time, enforcing these rules has become a major priority for both policy makers and banking supervisors.
A far wider range of stakeholders now demand a hearing from bank boards, including some that traditionally played more back-seat roles – environmental and community groups, for instance. This, combined with the fact that these stakeholders all have different goals and agendas, means that boards need better ways of responding to the various pressures and sets of demands.
How is the IDBP designed to address these challenges?
Most policy makers, regulators, banks and shareholders agree that lapses in governance were what led to increased vulnerability and, in some cases, acute crisis in the banking sector in 2008. The consensus tends to be that better governance can begin to address many of the concerns raised with individual banks, as well as macro-prudential and systemic concerns.
So, this programme begins with its first module focusing on bank boards – their members and stakeholders – and an analysis of the real-world issues they are now confronted with and typically face.
The second module focuses on the collective decision-making processes of boards – the politics, if you will. What are the hidden behavioural biases that might affect decision-making here? What about transparency? How should boards best respond to the pressures of heightened scrutiny from stakeholders?
The third module offers approaches to improve how directors view things. It looks at each individual’s character traits, how they conduct themselves, how they interact with others, and ultimately how they can contribute to better board decision-making.
This all comes together in setting strategy, establishing risk and controls, and managing stakeholders for boards, through the prism of banking and its unique characteristics that needs to balance an array of rules and regulations, public interest and the community, as well as shareholder returns.
Does the programme continue to have an impact once participants return to work?
We emphasise experiential learning over the three modules. We combine teaching sessions, open discussion among participants and board simulations based on actual events to provide participants with insights and tools that they can apply in their own situations.
Each participant also puts together an ‘action plan’ which is specific to their own set of responsibilities and situation. So overall, there is a really strong focus on group work, interaction, real-world situations and successful implementation.
If you could single out one key takeaway that the programme delivers, what would it be?
One thing I always tell participants is that board members are there to be wise, rather than smart. It’s not always the job of the board to have a solution to a problem. Rather, it’s about how you think through it, correctly analyse the implications of what has occurred by effectively framing the issue, and then determining how to put corrective measures in place. Developing the capabilities to do that is a vital tool for boards as they seek to deliver a “no-surprises” culture and reassure their stakeholders.
Can you explain why you think INSEAD is well qualified to develop such a programme?
INSEAD is a leader in executive education. And through the INSEAD Corporate Governance Centre, the School has always played an important role in supporting the challenges and opportunities faced by board directors. The executive education Governance offering includes programmes such as the International Directors Programme, Leading from the Chair, Value Creation for Owners and Directors, and Advanced Strategy for Directors, to name but a few.
With the International Directors Banking Programme, INSEAD builds on that dominance in the leadership and board director education space. Its deep background knowledge and level of expertise makes it particularly well placed to deliver a programme that addresses the unique characteristics of bank boards and their needs.
Finally, what makes IDBP unique?
IDBP addresses the specific needs of leaders in the banking sector by bringing together private sector directors, banking supervisors, policy makers, academics and others.
To give you an example, it’s usually very hard to get a regulator in the same room as a bank without a lot of formality and even suspicion. On this programme, members from both kinds of institution have the opportunity to interact and understand each other in ways that can be highly rewarding – eye-opening, even – for both parties.
That kind of collaborative approach makes for a particularly rich and open learning environment that’s simply not available anywhere else.