The long wait for a banker who is statesmanlike

The recently appointed chief of Deutsche Bank says he would willingly work hard even if he happened to be paid less. John Cryan went on to question the entire banking bonus culture. The pronouncement was not only refreshing, it was statesmanlike.

Statesmanship among banking leaders has been absent since the crisis. This is curious. Crises normally bring forth a talent or two that tower above the rest. By this I do not mean richer, louder or street smart. I mean statesmanlike. So what qualities constitute statesmanship and who comes closest?

The dictionary defines statesmen as respected people known to be skilful, wise and willing to put the public good ahead of personal or other immediate interests. Their integrity is unquestioned. Courage to stand out in the crowd is required. They are individuals who, by words and deeds, set an example and have a lasting and positive impact.

Since the financial crisis, I have waited in vain for a banking leader to rise above the fray, acknowledge the industry’s failings and shape the reform agenda in a way that ranked the public good ahead of private gain. Naive, I know. But it is precisely because statesmanship is so rare that history venerates statesmen.

There are candidates, of course. Jamie Dimon got off to a great start in the immediate aftermath of the meltdown. He not only steered JPMorgan Chase successfully through the turmoil but he also freely acknowledged a number of mistakes that had been made along the way. The US Congress loved him; President Barack Obama sought his counsel. Indeed, for a while Mr Dimon was the uncrowned king of global finance. The title of “financial statesman of our time” was his for the taking. Alas, rather than champion the necessary reforms, he fought them. And by 2013 the firm he led was at the centre of revelations of scandal after scandal.

Sir Win Bischoff makes the short list. Here is a banker of the old school whose wisdom, integrity and competence is widely acknowledged. And when the UK government called on him to take the helm at Lloyds, soon after the lender accepted a state bailout in 2008, he did not hesitate. He turned the institution around and set it on course for a return to listed ownership. Taxpayers should be grateful. Regrettably, he has steered shy of the debate over how to reform the finance industry — which is a pity, given his common sense and stature.

Bill Winters ranks high. At JPMorgan it was he who helped Mr Dimon dodge the worst of the credit crash. After leaving JPMorgan in 2009, where he had been London-based co-head of investment banking, he served on the UK’s Independent Commission on Banking. It was this commission that proposed a certain degree of separation between retail and investment banking in the form of “ringfencing”. It also recommended a lower limit on banking leverage than that dictated at the time by international agreements.

The commission has had an impact. Its recommendations have been adopted. One reason for this may be that the commissioners were acutely conscious of the influence of the banking lobby on government and therefore the limits to which government would embrace limits on banks. Indeed, they appear to have pitched their proposals accordingly. We will see whether the resulting measures prove effective in protecting the banks and the economy.

Meanwhile, Mr Winters has taken the helm at Standard Chartered, the UK-listed lender focused on emerging markets. The clean-up task there is formidable. He has the skill and leadership qualities to succeed. I hope he remains a voice in the reform debate.

John McFarlane has the chance, should he wish to seize it. He took the chair at Barclays at the start of this year, ousted the chief executive, assumed executive powers on an interim basis and successfully recruited a high-profile successor — all before the Christmas lights went up on London’s Oxford Street. If experience, decisiveness and clarity of objective were the only criteria, McFarlane would head the list.

Statesmanship, however, must necessarily involve more than management skill. As chair of Barclays Mr McFarlane’s challenge is to restore his bank’s reputation and secure its future. To stand out as a statesman he will have to help do the same for banking more generally. He has the platform.

Which brings us back to Deutsche’s Mr Cryan. The chief executive is part of a new breed of competent, no-nonsense executives who understand how to run a business. They know that risk and reward must be linked; that senior staff must be held accountable, and that their institutions must have sufficient loss-absorbing capital to take the hits when things go wrong, as they inevitably will. Why not insist that their peers in the industry take the same approach and visibly support regulators in this quest?

The writer is a senior fellow at Better Markets and former member of the Financial Policy Committee of the Bank of England

Letter in response to this article:

Statesmanlike regulators needed as well as bankers / From Prof Cornelius Hurley