New Bank, Old Bank

In response to the financial crisis of 2008 many of the worst affected banks adopted a “Good Bank, Bad Bank” strategy. In this they hived off their most toxic assets into what was referred to as the Bad Bank, leaving the cream (most profitable?) of their business in an entity referred to as the Good Bank. With this the Bad Bank and the troubles related with it were essentially left to someone else to sort out, often a government and the taxpayers.

Why do I recap on this? Well, I think that we will soon see a variation that I call “New Bank, Old Bank”. The trigger for this is the difficulty many banks are having bringing their legacy systems, legacy products/activities, legacy data and indeed legacy clients up to the standards required to meet current and future regulations.

Legacy systems have long been cited as an issue for large and long established banks. They all operate complex sets of poorly understood systems, many of which are based on technologies dating back to the 1980’s (and before?) ie pre world-wide-web, pre mobile phones, etc. The effort to maintain and upgrade them has been enormous, but so is the effort required to consolidate and replace them. Now the new regulations are forcing many banks to make multiple changes to long neglected technology and not surprisingly it is often proving very difficult and sometimes nigh impossible.

Likewise new regulations are placing new obligations and operational standards on old products and activities. It is not uncommon to hear the complaint that “that was not the way this was made to work!” The additional cost related to compliance for these products will almost always have a detrimental impact on their profitability, making them far less attractive and in some cases unprofitable to maintain.

Data used to be the forgotten child of Banking operations with an attitude that “those that can do while those that can’t, do data management”. The trouble is that most of the new regulations strive for greater transparency and a degree of related reporting that is demanding data that has not been collected or stored before. Indeed many of the systems have inflexible data structures with poorly maintained data and significant inconsistencies between data stores. As a result few can have high confidence that what they are reporting or will report is completely accurate, something I expect regulators to pick up on.

Lastly, many banks are driven by market share and client base. They are hugely acquisitive of new business and very protective of old business. The problem is that many of the new regulations require extensive co-operation from those clients, old and new. Not all of those clients are inclined, intent or able let alone ready to do that. Large retail and globally diverse client groups prove the most demanding in this respect and it seems ironic that it is a truism that most client service/relationship teams I have worked with seem reluctant to actually talk to a client about anything and especially not the impact of these new regulations.

It is clearly not an easy task for a large established bank to make and keep itself fully compliant. In contrast new banks, like Metro Bank are starting from a clean base. Yes they are still rather small and may still make mistakes, but they have a better chance of success as they are not held back by the legacies I describe above.

So what? Well it seems logical to me that some of those banks will look to make the “New Bank, Old Bank” split. In this they will create a New Bank that utilises a lean set of well architected modern systems and technologies, undertakes only activities and provides products that fit with the new world and regulations and supports this with higher quality data on a smaller set of current clients that “get” the requirements of modern finance. This would then be their prime vehicle moving forward.

The rest will be left in an Old Bank, but what would become of this? Well it could be managed (and run down over time?) separately, maybe a bit like aspects of Lehman’s are still being managed. I suspect though that it is more likely to follow what happened in the insurance fund world, someone will see an opportunity and there will likely be consolidation of a number of Old Banks by a specialist service provider.

One of the benefits(?) is that it would reduce the size of some of the largest banks, reducing the “too big to fail” concerns, something many regulators and politicians would like to see,

I have spoken about this with a number of people and few have rejected the idea, but it is not without its problems.

One of the main ones is that the split will create an implicit admission that the Old Banks will be less compliant. This will not be an easy message for politicians, but may be the acceptable price. It may also prompt clients to review and update their own business models if they want to work with New Banks and benefit from the related protection.

There would also be huge issues in separating technology, controls, data and staff, but with the “Good Bank, Old Bank” splits we have seen that where there is a will there is a way.

Lastly, once the best and cleanest business is hived off into a New Bank, who will underwrite the risk of failure of the Old Bank? I am sure this is something the smart brains of the financial world can solve…..if they want to.

Though right now this split is optional, looking forward I suspect it will become a “must do” for many organisations if they are to survive without regulatory sanction.

I would be interested to hear the views of others?

Find the Right Consulting Engagement

Have you ever taken an engagement that appeared to be a good fit only to have it morph into something less, maybe a lot less satisfying? Well they do say hindsight is a wonderful thing and we can all look back on roles we would not take again, but surely it would be better to assess them beforehand and avoid the (mutual?) disappointment. After all, an unhappy client is unlikely to recommend you to others.

There is a simple review one can perform that will help weed out the less appropriate assignments. In this piece I will outline what that review is, but first in order to keep it simple, I will make some reasonable assumptions

1. The consultant is smart, a term refers to the many dimensions of intelligence rather than dress ie they can read, write, listen, analyse and generally communicate and interact with others in the top 10% of the working population. I won’t attempt to assess that here, just be honest with yourself and take on board all the feedback you receive.
2. The client wants “smart” else they would be taking on a standard temporary or contract resource. There is nothing more draining for a person than having their intelligence under-utilised over a sustained period of time.
3. The client has a good enough understanding of what they want to achieve through engaging the consultant. One would like to think this was a given, but experience shows that it is not always so. If they don’t have the necessary understanding, then your first task, if you want the role, is to help them build it.
4. We will not consider in this piece the readiness/receptiveness of the client’s organisation to your work and capabilities. These do need considering and will be the subject of a future piece, but not here and not now.

So we come to a classic two-by-two matrix.

The axes in this matrix are “Leadership” and “Experience”.

To expand in these simple terms the leadership axis illustrates the degree of leadership (of the desired outcome) expected of the consultant by the client. At the right hand end the consultant is considered to be fully accountable for delivering the expected outcome/product and is expected to be fully “hands on” while at the left hand end the client retains full accountability and provides all the necessary leadership.

The experience axis is an indicator of specific and direct experience of having delivered an identical or very similar outcome before. It is not a comment on more generic skills and industry experience, but those specific to the engagement in question.

While there is inevitably a continuum of values along the two axes, we will divide each in two to simplify consideration. This gives us the ubiquitous four squares that deserve individual inspection.

Starting bottom left and working clockwise I have labelled the first “Resource”. This is where the client is looking at the consultant as living, intelligent body that can be directed by the client, but does not necessarily bring related experience to the work that will be assigned.

The next one is labelled “Advisory” and is where the client is looking for deep and proven experience/expertise that will inform and/or augment their own resources. They are not looking at the consultant to provide leadership in delivery of the final outcome.

The third is labelled “Repeated Change” and refers to delivering, with leadership and relevant experience and expertise, a change that is the same as or very similar to something they have done before. An example could be delivering the operating model for and the eventual outsourcing of a business function.

The last, and possibly the most exciting, is where a consultant’s intelligence and leadership skills are engaged to deliver a new change; new to the consultant, almost certainly new to the client and possibly new to the industry. The consultant is expected to skilfully navigate unknown waters, bringing others with them to deliver the desired outcome.

I hope you can see the value of this visualisation? Firstly consider where you as a consultant work best and/or want to work and identify that location on the matrix. If you don’t know yourself then it will not be surprising if you end up in the wrong roles. A couple of simple questions will help. Do you like leading or being led? Do you prefer to do and learn new things or repeat what you are familiar with?

Next consider what the client is asking of you and indeed what they need; not necessarily the same thing. If you plot these on the matrix you can start understanding (and possibly discussing with the client) the gap in expectations. As a rule of thumb the greater the gap, the more uncomfortable and possibly unsuccessful the engagement will be.

Does this resonate with you? Are you prepared to share any instances where you might have been mismatched and your account of that experience?

Natural Closure

My family has just visited New York City for the eighth time since 9/11. On each trip a visit to Ground Zero has been a "must do" activity. The destruction of the Twin Towers was a defining moment in American history and few adults today don't know where they were when the heard (or watched through TV) of their collapse. Fortunately I did not know anyone who died that day, but I do know people who did.

In 2002, our first visit the site was still, after a year of clearance, one of devastation. St Paul's Church was full of the cluttered reminders of the support given to the rescuers and the railing were still draped completely with all the tributes, memorials and faded hopes that followed the apocryphal event. It was incredibly emotional just to be there and when one read the pleas, poems and other pieces that were left, it was nigh impossible not to shed a tear.

Other the interceding years we have watched the railings be cleared, the pieces in the church become better organised and for new buildings to start rising. Each visit was emotional, yet we felt compelled to visit.

Last year the memorial garden had been opened, but not the museum. There were huge queues to get into the garden, but we then saw the well that marked the footprint of each tower. Around the wells are the names of all who died and in a nice touch they authorities place a white rose on each name on their birthday. The focus had moved from St Paul's and I had a fear that it might be becoming "commercial".

That said I am pleased to report that this year was different. There were no queues into the memorial garden. The museum was open and we did not have to wait long to gain entrance. Inside one has access to foundation area below the towers where the City has laid out a tasteful and respectful display or artefacts, memorabilia and personal tributes. It most certainly was not Disney does 9/11 that it might have become, but instead it felt a fitting memorial to those that died and a place that anyone could appreciate.

At the same time in St Paul's the remaining stands and items had largely been moved to allow the church to make more usual Christmas preparations - there was a rehearsal of a seasonal reading when we visited. It felt as if the church was now free to move on and I have to say that it felt right.

My wife and I discussed it at the end of our visit and we both felt that there was a closure there for us. We do not feel the compulsion to visit again, well at least not every time. I think that New York is healing. Something like 9/11 can never be forgotten, but neither should it lock a City and its people in a time lock.

I did not know John W Wright Jr , but I just want to wish him belated birthday wishes for the 14 December! I hope that his family and many thousand others are able to find the comfort and closure that we have.

A Better End

This weekend most if not all of my childhood train set will sell on eBay. As you can see it is unremarkable and will not raise much money, but I hope that either directly or indirectly it will continue to give someone pleasure.

When I have mentioned to friends and family that I am selling my train set the near universal opinion is that I shouldn't be doing it, but rather keeping it for any as yet undelivered grandchildren. I have also been asked why now?

Well it has been on my mind for a while and last weekend I actually set some time aside to post it on eBay. This followed a round of decluttering earlier in the year and the realisation that this train set has moved in its box between lofts and within lofts for over 40 years. I cannot recall the last time I set it up and have no expectation that I ever will again.

I asked our local model train society if they had any interest and the answer was "No". I always had the backstop to Freecycle it, but decided to try eBay first. As you can see there is now interest in most of the pieces, something that warms my heart.

As I mentioned it is an unremarkable set, but most of it still has its original boxes, albeit well handled For some reason I was particularly proud of the operating Royal Mail coach. This harks back to the 1960's and reminds me of the film "The Great Train Robbery". It is a clever piece that will deliver one mail bag while collecting another from its trackside depot(?). Until yesterday it did not look as if it would sell, but now I know it will go and live on.

This toy, sophisticated for its time, but simple by today's standards brought me joy as a young boy and I hope that through this sale it will bring pleasure to others for a while to come.

Sometimes it is just time to let go of items from your past. I will always have the memories and hopefully my train set can create new memories for others. That must be a good thing?

I titled this post "a better end", but maybe it should have been called "a new beginning", both for the train set and in a small way for me as the responsibility for caring ( yes, it felt like that) for this set lifts from my shoulders.

Update: All but the transformer and a single goods truck now have good homes. I hope that one way or another they bring enjoyment to another set of people.

Simple Concepts Can Be So Effective

Last evening I visited the Tower of London to see The Poppies. This art installation is gradually filling the moat around the Tower with 888,246 ceramic poppies, one for each British military fatality of the First World War. Running from 5 August to the 11 November the installation commemorates 100 years from the first full day of British engagement up to armistice day. It is almost complete now and very impressive.

I arrived in time for the daily redition of The Last Post. To hear that sound floating across a crowd standing below a view that mixed old and new was extremely poignant.

If you have not see this and have a chance then I commend it. Such a simple concept, executed expertly that results in a unique and moving monument, albeit temporary.

When Something Catches Your Eye.......

......but you can't explain why.

This is an old bill board that I have repeatedly walked by on my way to and from work. I don't know why, but once I noticed it I found I looked for it each journey. Why does that happen?

It is not pretty. It is not intentional. It is not valued or cared for.

Instead it is the product of neglect and the effect of the weather after much layered use. The tattered edges give a clear indication that there have been many posters placed there over time, but nothing new for some while.

There is a sense of inside out about it all. The wireless icon appear to be sunken in, maybe behind the board, but in truth must have been on one of the later postings.

Likewise the use of an ancient technique of bill posting to advertise the modern communication channel of WiFI seems ironic.

Yesterday I decided to photograph it and post it here as a way of capturing what I saw and felt even if I cannot explain it.

Does anyone else see it as interesting or is it just my messed up mind that was attracted to it?

RWC 2015 - the run up

This is the first of what are likely to be number of rugby related posts as we start the run up to the Rugby World Cup 2015 (RWC 2015).

I am an unashamed and longstanding (long suffering?) England fan. I very nearly made it to Sydney in 2003, but was between contracts at the time and could not afford the only available route via Vladivostok.

In 2007 I made it to Paris and watched the match on the big screens under the Eiffel Tower.

So this weekend we saw England take on New Zealand in New Zealand. I was up at 8am to watch and left encouraged if not happy.

For most of my life it has appeared that even if New Zealand only fielded seven under-15 players England would still contrive a way to lose. This time though an understrength England pushed New Zealand very close only losing in the last few minutes.

Much was said that this was New Zealand's first match and they always start slow, but in the end they can only play as much as the opposition allow and England did not allow them very much.

I think the England pack shaded it with huge performances from Parling, Morgan and Rodber, not forgetting the front row. Tuilagi looked good and Eastman shows promise. Brown had something of an off day for him and Sharples still worries me. I know he has pace, but he does not work hard enough.

For example when Tuilagi made his breaks where was the man (or men) on his shoulder for any off load? There wasn't. Surely Sharples should have been. Ashton at his best is certainly there so I for one am hoping for something different next week.

Much was made, with justification of Stuart Lancaster's selection choices, particularly his faith in Freddie Burns. Burns certainly had a good game, but I do wonder what Cipriani would have done. He came on and his first move was to make a like break, albeit against some tireder players. He then kicked his first penalty. I know I said Sharples worries me, but I would like to see a little spark of flair at fly half and would like to see what Cipriani can do when he starts.

The All Blacks were rather quiet and subdued at the end. McCaw had a rather anonymous game as player and captain.

I think this augers well for next week, but then as an England fan we have said this before. Farrell, Lawes, Twelvetrees, Ashton, Care, Hartley, Vuniploa and others are back in the mix. It should make for a potent match squad.