• Chris Skinner, Chairman at The Financial Services Club


• 24.10.2016 08:45 am
Digital Bank

A final comment on leadership for digital transformation.  I was in a conversation with a bank yesterday when, half way through, the senior chap there said “look Chris, we’re a 300-year-old institution, things change but not that fast”.

300 years old.

Wow.

They were actually established in the 1600s.

That was just after the Great Fire of London (1666), shortly afer the Englsih Civil War (1642-1651), when William of Orange was on the throne and America was a British colony.

Wow.

The bank is steeped in history and has archives tracing the formation of the British Empire.  It has records of global expansionism, the loss of the Empire, the Victorian luminaries, the great Industrial Age, the explosion of World Wars and the rise of the  internet age.

It has seen three centuries of change and survived them all.

Over the years. It has acquired, been acquired, merged, expanded and contracted.  It has innovated and added to its core operations.  Its products and services have broadened and deepened, and it has grown in capital and profitability.  It is a bedrock and a backbone of British society and its economy.

Great …

… but.

Just because you’ve been around a while, does not make you immune to change.  The fact that the bank has survived 300 years just shows how it has adapted to change.  It has grown into a behemoth but, like most large beasts, it makes it slow to move and difficult to change.  Equally, the older you get the less you like to see your cheese move, so responding to imminent threats are hard.

It is also easy to make mistakes.  Just look at the oldest surviving bank in the world, Monte Paschi di Siena.  This is the oldest surviving bank in the world, established in 1472, and is the third largest commercial and retail bank by total assets in Italy.

A proud heritage dating back to Pope Sixtus IV.  In 1472, Norway gave back the Shetland and Orkney Isles to Scotland, after failing to make their downpayment on time and  Leonardo da Vinci was just 20 years old and recognised as an important artist for the first time.

That is a seriously old bank.

From the Financial Times this week:

Monte Paschi di Siena (MPS) “has suffered a precipitous decline in the past decade. A costly acquisition by the Siena-based lender on the cusp of the financial crisis was compounded by derivatives fraud, mismanagement and Italy’s economic stagnation.

It comes as a plan agreed by JPMorgan chief executive Jamie Dimon with reformist prime minister Matteo Renzi before the summer is under review. Investors have baulked at stumping up €5bn in new capital for a bank with a market capitalisation of only €500m, say senior bankers involved in the talks. It has already burnt through the €8bn it raised over the past two years.

Mr Renzi hopes to avoid losses being imposed on the thousands of retail investors that own MPS bonds under EU bank rescue rules ahead of a crucial referendum over constitutional reform on December 4 that analysts think could cost him his job …

MPS’s travails have become a bellwether of the problems of Italy’s €4tn banking system which is weighed down by €360bn of soured loans, €200bn of which are classed as gross non-performing loans. Italy’s bank shares have lost a fifth of their value this year. MPS stock is down 85 per cent.

A failure to recapitalise MPS would have systemic consequences, say senior bankers.”

Oh dear.  But that was caused by bad investments and poor risk management, not a lack of response to digital change.

9 June 2012

The worst banking meltdown to date hit millions of customers of RBS, NatWest and Ulster Bank, locking them out of their accounts for days, and in the case of Ulster Bank customers, for weeks.

The meltdown hit not only customers of the three brands owned by RBS Group, but also people who were expecting salary payments from businesses that held accounts with the bank and other transfers between banks. RBS was later fined £50m by regulators, but the episode is understood to have cost the bank more than £100m.

27 March 2013

Less than a year later, NatWest’s systems fall over again, leaving millions of customers temporarily unable to withdraw cash or make transactions.

2 December 2013

A technological banking glitch on one of the busiest online shopping days of the year left millions of shoppers unable to pay for transactions using their credit or debit cards. The bank? You might have guessed by now: it was RBS Group.

6 December 2013

This time it wasn’t actually RBS’s fault, as the bank came under cyber attack, which, just four days after the earlier one, prevented some customers accessing their accounts.

26 January 2014 

Lloyds and TSB become the latest high-street banks to experience a technological meltdown, which led to many people being unable to withdraw money or use their cards. Lloyds said the problem was affecting debit cards and its internet banking service but not credit cards, while TSB said some customers were unable to use debit cards or withdraw money from ATMs.

17 June 2015

RBS suffers yet another IT fiasco after admitting it could take days for customers to receive 600,000 payments that failed to enter accounts overnight.

28 August 2015

HSBC joins the ranks of IT failures, with many business customers unable to pay salaries to staff or make payments to suppliers – as the bank holiday weekend looms.

16 March 2016

A printer error tipped off Bangladesh’s central bank to one of the biggest cyber heists in recent history when thieves tried to divert $1 billion from the SWIFT network.

26 May 2016

Investigators are examining possible computer breaches at as many as 12 banks linked to Swift’s global payments network that have irregularities similar to those in the theft from the Bangladesh central bank.

11 October 2016

Symantec has found evidence that the Odinaff group has mounted attacks on SWIFT users, using malware to hide customers’ own records of SWIFT messages relating to fraudulent transactions. The tools used are designed to monitor customers’ local message logs for keywords relating to certain transactions. They will then move these logs out of customers’ local SWIFT software environment.

This article originally appeared on thefinanser.com