Introduction

Whichever way you cut it, regulation will loom large in CEOs’ agendas in 2011. But it’s important that dealing with regulation doesn’t crowd out other key initiatives: exploring new business opportunities; reconfiguring business for maximum returns; vitally important cultural issues, such as human-resource development; corporate governance; and social responsibility projects.

As any good management consultant will tell you, dealing with regulation should not provoke an add-on, quick-fix kind of response. Instead, the emphasis should be on re-engineering the business to take account of the regulation but, at the same time, gaining upside in terms of optimising processes, services and products.

It’s easier said than done, of course, which is why, in this third edition of How To Run A Bank, we have invited senior bankers and industry experts to look across the board, not only at the regulatory challenges, but at other major issues occupying the minds of directors and business heads.

The crisis has had at least one healthy effect – that of forcing bankers to go back to basics and to reconsider the entire business from the grassroots. “What should banks be for?” is the question the CEO designate of the UK’s Lloyds Banking Group, António Horta-Osório, sets out to answer. At a time when banking has attracted much opprobrium – and Lloyds was one of the banks that needed a bailout – it is worthwhile returning to the fundamentals.

So the authorities need to get regulation right, but bankers need to focus on a broader range of issues. Risk management failed in the crisis not due to a lack of black boxes but because the banks didn’t develop a healthy scepticism for models nor create a culture of always questioning the received wisdom.  

Risk culture, transparency, disclosure and corporate governance form a major part of this survey of banking best practice. Yes there still needs to be data, but it needs to be collected properly and used to full effect – the section on analytics examines this proposition.

Functioning processes and systems are vital and in How To Run A Bank we grapple with that ever-thorny issue of outsourcing, as well as with liquidity and collateral management, and the technical challenges of mobile and online payments.

But in all this, banks must never lose sight of growth opportunities and the sharing of global ideas. Changing customer needs are considered in the retail section; trade finance and supply-chain innovation in the corporate banking section, and we devote a whole chapter to one of the fastest-growing banking businesses: Islamic finance.

Guo Shuqing, chairman of China Construction Bank, plots a strategy for China’s big banks, setting the scene for our chapter on the BRICs featuring an article by the outgoing governor of the Banco Central do Brasil, Henrique Meirelles. With universal banking under attack in some geographies, Brian T Moynihan, president and CEO of Bank of America, defends the full-service model.  

Following the crisis, banks need to rebuild their models, recover their reputations and find new growth. Extending financial inclusion offers a way to achieve all three at once and Citigroup’s CEO Vikram Pandit examines how this should be “business as usual” for the bank of the future.

Only by bringing all these strands together can the banking industry finally gain plaudits for best management standards.

How to Run a Bank 2011  is your comprehensive guide, available for only £45 / €54 / $72  - an essential resource for senior management around the globe.

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