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Banks Must Do 'A Lot More' to Repair Image: HSBC's Dorner

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Battered from within and without, the banking industry must work much harder and wait much longer to restore its reputation, one of the country's most senior bankers said Tuesday.

Four years after the financial crisis, banks have yet to regain the trust of their customers — and the new wave of industry scandals this year has only exacerbated the damage, Irene Dorner, the chief executive of HSBC USA, told an industry crowd on Tuesday evening. In a speech that was part rally and part reprimand, she warned her colleagues and competitors that banks need to change more than just their capital levels to fully recover from the crisis.

"Frankly, we've still got a lot more to do," she told a crowd of about 600 bankers, financial executives, lobbyists and other industry members. "The trust in the whole of our industry has plummeted. Trust is to be earned, and it takes years to create, and a matter of seconds to destroy."

Dorner did not exempt herself from her scolding, referring upfront to the "well-founded" criticism of HSBC's missteps, including the U.S. Senate investigation of its anti-money-laundering practices. But her company is only one of several big banks to face renewed crises this year.

The big-bank failures and bailouts of the financial crisis are largely in the past, and the populist anger of last year's Occupy Wall Street protests has quieted. But now the industry has been rocked by massive trading losses at JPMorgan Chase (JPM), a new spate of lawsuits over banks' subprime mortgage securities' businesses, and resurgent debate over the big banks' size and marriage of commercial and investment banking activities.

"Our standing hasn't recovered in step with better balance sheets, because it's not just about strong capital and safety and soundness," Dorner said. "What we are facing is scrutiny of our behavior, our decisions, our actions. People are asking us, 'What on earth are you thinking, or indeed were you thinking at all? Where did you leave your moral compass?' These are hard questions, fair questions, for HSBC and actually for the whole industry, and that's because this has been more than a series of unfortunate events."

In an interview after her speech, Dorner said that the industry has been slow to acknowledge the extent of the problems it needs to fix.

"It's probably taken us a while to understand the level of public discontent and anger against the banks, and you fail to understand that at your peril," she said.

"This will take a long time to rebuild," she added. "As long as one event happens to one bank, it in effect happens to all of us. So every slipup, every [fall on a] banana skin has the same impact on all of us that it does on the actual perpetrator, that's the concern. So until we're through all of these crises, I don't see the situation improving drastically."

Dorner, who ran HSBC's Malaysian operations before taking over its U.S. bank in 2010, was promoted to her current role a year ago. This year, American Banker magazine named her to the top of its annual list of The 25 Most Powerful Women in Banking.

The annual dinner for the honorees, sponsored by American Banker and parent company SourceMedia, celebrates the most influential women in a male-dominated industry. But in recent years the event has also turned into both a pep rally and a public soul-searching exercise for the bank CEOs and other top executives, male and female, who attend.

In her speech, Dorner called for banks to rethink their fundamental ways of doing business, and urged the industry to hire and promote more women as a way to change its culture and decision-making processes.

"If we are expecting change, more of what we are doing is not going to get us to where we need to be," she said. "The legacy of leaders is determined by their success at creating conditions where their organization, and everyone in it, and everyone served by it, can thrive in the long term. … We must make sure that how we achieve is as important as what we achieve."

Dorner emphasized that she regards the promotion of women and other groups that are under-represented in the upper echelons of banks as one of her responsibilities as a chief executive.

"Only by creating a meritocracy will our organizations be sustainable," she said. "Diverse teams bring innovation and different thinking and different solutions. And if we can get just some of this right, it will move us along the path to rebuilding trust."

Dorner urged women who have risen in the banking industry and those on the way up to "push back on that status quo and just don't accept the old rules. Speak up about what you want. Believe and encourage others to do the same and lead by example…Do not pretend to be role model if your success was based on mastering the old rules. And for goodness sake, do not be a queen bee and pull that ladder up behind you."

Dorner was one of several speakers at the event, which also honored retired Capital One (COF) president Lynn Carter and former Office of the Comptroller of the Currency chief counsel Julie Williams. Guests crowded into the ballroom of the Waldorf Astoria in Manhattan, and many banks, including RBS Citizens and Zions Bancorporation (ZION), filled out multiple tables of executives, turning the evening into a team celebration.

Another undercurrent in the room went unmentioned on stage. That morning, news broke that Citigroup CEO Vikram Pandit had abruptly resigned, surprising both his employees and most of the industry. Bankers and other industry members at the event gossiped about Pandit's resignation over cocktails and in between dinner courses, with some questioning how the bank had handled the unusually sudden leadership changeover.

Several top Citi (NYSE: C) executives attended the dinner, including honorees Julie Monaco and Deborah McWhinney. Another Citi executive at the event expressed enthusiasm and support for new CEO Michael Corbat, but a colleague was more hesitant.

The abrupt leadership change is "destabilizing," especially after Pandit spent years reshaping the bank and developing a strategy to move past the financial crisis, the executive said.

A Citigroup spokesman declined to comment.

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Comments (5)
Problem is that the Too Big To Behave Banks appear to be addressing this problem as a PR issue, not a systemic issue. Until big banks understand that they are driving depositors away with nuisance fees, fewer services and arrogance, their reputations will continue to deteriorate.
Posted by jim_wells | Thursday, October 18 2012 at 7:25AM ET
I don't care about the image of the financial sector. The irrefutable fact is that the sector is dominated by avid joyful lawbreakers. Fix that, and the image problem fixes itself.
Posted by masaccio | Thursday, October 18 2012 at 9:31AM ET
There are over 7000 banks in this country that have done nothing but stay true to funduamental banking principles, including sound credit practices and true customer and community responsiveness, throughout this economic crisis. There have been a handful of bad actors, bank and non-bank that have provided fodder for the media, regulators and congressmen to paint all of us as the reasons for the crisis, often to deflect their own culpability. I have eanred and maintain the trust of my customers, It is core to my strategy as a community bank and this is true of banks large and small throughout this country. I am tired of being asked to apologize for being committed to helping customers and communities. I hope they booed her off the stage. HSBC lecturing the banking indsutry on restoring trust? Are you kidding me?
Posted by d hile | Thursday, October 18 2012 at 10:43AM ET
@ d hile - thanks for pointing that out the irony of lawsuit-plagued HSBC opining on bank image. What disturbs me about the image issue is the lack of outrage against the Too Big To Behave Banks from the thousands of honest banks that played no role in precipitating the subprime mortgage frenzy that resulted in the global financial crisis. The continuing misdeeds of HSBC and its peers taint the rest of the industry, yet it is rare that good bankers speak out to denounce these Banksters.
Posted by jim_wells | Thursday, October 18 2012 at 4:14PM ET
This is ironic coming from Irene Dorner. When I asked her bank to close my account in May, they neglected to do so until July. Although they apologized, every charge on my account since I told them to close it is apparently my responsibility. They are allowing these charges to "help my credit rating". It is shameful that Irene Dorner believes she and her bank can make better financial decisions for their customers than they can. When asked if they had HSBC as a bank, her "executive customer relations" team member in Buffalo actually laughed. Irene Dorner said she felt as if she was floating off the ground when American Banker named her the "most powerful woman in banking". Of course she did. All she cares about is her own financial well-being, certainly not those of her customers.
Posted by jpantages | Sunday, November 04 2012 at 9:44AM ET
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