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Casting valuable experience aside is a risky business

OVER THE LAST FEW YEARS, from time to time, I would meet an acquaintance that I had known as an experienced banker, usually a former employee of the Royal Bank of Scotland or the Bank of Scotland, who had found themselves surplus to the requirements of the bank and who had been made redundant.

 

One of the relatively recent ‘clear-outs’ of experienced banking skills that affected me personally was the decision in 2007 by HBOS to disband the Emerging Business Unit of the Bank of Scotland. These dozen or so bankers were made redundant or redeployed despite the fact that they had specific expertise in providing banking services to young high-growth companies. 

 

You might think that a unit that specialised in capturing new ambitious companies as customers would be valued by the bank, as acquiring such companies later would cost a great deal more time and effort. But the executives who ran HBOS didn’t think so, and decided that the Bank of Scotland could use its resources more effectively elsewhere.

 

These days I sometimes wonder about these ex bankers, with their redundant specialist skills and experience. In many cases their life savings will have been tied up in shares of their former employer and will have been largely wiped out. 

 

Of course, HBOS was run by Andy Hornby, who was not a banker by training, but a successful retailer, headhunted from running Asda. It makes you wonder if banking skills were particularly valued at HBOS, and whether practical banking experience was appreciated.

 

I was thinking about all of this when I heard about the incredibly precise, gentle, lifesaving, emergency landing of a 50-ton airliner in the Hudson River next to New York City earlier this year. 

 

Captain ‘Sully’ Sullenberger, who landed the plane safely in a busy stretch of river, was a very experienced pilot indeed. A 57-year-old who had been with his airline for 30 years, before which he had been an award-winning fighter pilot, he also had extensive experience of flying gliders, which must have been very useful when he lost both engines in his Airbus and it turned into a very heavy and relatively unresponsive lump of metal. 

 

Sullenberger had earned two Masters Degrees, had served on the National Transportation Safety Board, and also served as a safety representative for the Air Line Pilots Association. In his spare time he even ran his own airline safety consulting business. Thank goodness that his airline, US Airways, continued to value his skills and experience and hadn’t dumped him a few years ago for a younger, cheaper, pilot.

 

I used to think that there were two industries that had to have very stringent standards of safety and prudent management: airlines and banking. Both industries are inherently very risky and unless run very carefully they can easily get into real trouble. This is why even low cost budget airlines have incredibly high standards of safety – their record is every bit as good as the full price carriers.

 

And I thought the same kind of rules applied to banks. We all know from classic films like It’s a Wonderful Life that banks fundamentally depend on maintaining the confidence of their customers, and in order to do so have strict rules about not taking extensive risks and of maintaining adequate reserves.

 

It’s a shame that bankers, in recent years, seem to have forgotten this. Or maybe, by dumping their experienced bankers and hiring aggressive risk-taking retailers, they thought that somehow they had changed into a different business. 

 

How wrong could they be?

 

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