Signium International

For those who work or have close contact with the financial world, it’s nothing new to read headlines like: "The financial world looking for work ... in any other sector" or "Bancaja Madrid to spend 1,200 million for early retirement to 4,000 employees.” For a while it’s been clear that the banking sector is witnessing its own catharsis. And in this process of purification "by force" many institutions have been obliged to begin a restructuring process that has meant the end, in a single stroke, almost half of the savings banks in Spain.  More specifically, we know that institutions and labor unions have reached agreements that involve letting-go some 13,000 employees across the sector. Cleansing measures which, according to the Bank of Spain, must occur in the next three months.

Savings Banks being faced with this delicate situation, different questions come to mind: what was done wrong in the past by Banking Executives so as to reach the terminal point where they are today? What will happen to those 13,000 bank executives who have been, are, or will be soon expelled from the system? And finally, what will the future hold for professionals that remain or those who aspire to work in the banking sector?

In response to the first question, beyond the obvious "excesses" of terms and lending which we have witnessed in recent years, I think one of the key concepts that failed, in general, was not knowing how to implement and carry out an appropriate risk management. In my opinion the system did not, at that time, have people to properly strengthen this management area. A mi modo de entender, ni las generaciones más jóvenes han recibido la suficiente formación sobre “gestión de riesgos” ni tampoco desde las Direcciones de banca se ha puesto el suficiente énfasis en estas cuestiones, por la principal razón de que jamás hasta ese momento se había vivido una recesión como la actual y no parecía prioritario. From my professional perspective the younger generations hadn’t received sufficient training on "risk management" nor had banking Directors put enough emphasis on these matters, for the simple reason that in their lives they never had experienced a recession like the present one and so it did not seem a priority.

As for the "exits," according to the plan agreed upon with labor unions, the majority lay-offs will occur through early retirement of employees over 55 years, but compensated lay-offs will happen as well. Con respecto a estas últimas, la mayor parte de los empleados que saldrán de las entidades acabarán recolocados en otros sectores y una parte de ellos, alrededor del 15% montarán un negocio con las indemnizaciones recibidas. Regarding the latter, the majority of these redundant professionals will eventually relocate in other sectors and some of them, about 15%, will start their own business with the severance received. Good luck to all.

Likewise, outgoing workers who change sectors, I believe will not do so for lack opportunities. In this sense, I agree with other professionals in headhunting and outplacement in that market opportunities exist and will continue to exist. However, it will be necessary to be active to take advantage of them. On the other hand, as seems logical, the permanent changes in the system have left their mark on the candidate profile needed by financial institutions, in addition to basic skills such as languages, willingness to travel, commercial skills and having degrees in fields other than customary ones (engineers, computer scientists, mathematicians) have gained prominence.

In short, I define the purification that the financial world is experiencing as a return to basics. Savings Banks are returning to their foundations (An appeal to wisdom lost), and in this sense I believe that what happens in the future will be positive. The financial sector is currently in a previous -and necessary- step towards taking off again and grow in one direction. In other words, the financial sector is sending down roots, and my wish for the future is that these new seeds grow healthy, bloom and shine for a long time.

The current economic recession is not only producing corporate winners and losers in the market as a result, among other reasons, of different management models previously followed, but also changes in the professional experiences and qualifications needed by corporate management. New professional profiles arise that are in increasing demand as this recession continues, and this very change should be one of the key factors that will, in the end, help contribute to the eventual upswing in the cycle.

So how are they changing from the profile valued during these last few years? Today, more than ever, organizations are looking for management with a strong capacity for leadership and negotiation that will help to restructure and reposition the company in its sector and different business lines, usually, although not exclusively, through acquisition, mergers or reduction. This also requires a higher level of specialty and concrete knowledge then in the past, in the area of costs as opposed to income. Clearly the motor that will power a company’s survival lies in rationalization and efficiency instead of expansion or constant pressure towards growth. Naturally no company asks its executives to ignore opportunities for Business growth that exist in the current context, but one must move ahead with the highest criteria of realism and caution. The irrefutable objective of maximization of fair and adequate profit must be attained today, more by controlling costs than maximizing income. Towards this end, executives need a very high capacity for change and integration in an economic environment radically different to that in which we have lived in the recent past.

The professionals that understand these changes and trends will emerge and adapt to the new sought after profiles in the market, for which they will most certainly have to make changes to their attitudes and mentalities molding them to closely fit with the business opportunities that arise. Among other things, this will mark a change in priorities and preferences giving more weight to factors such as institutional stability as well as in a company’s business model that will continue to favor professional development. Executives will also have to adapt to the emerging corporate winners, be who they may, understanding that in many cases these will not be the same corporate leaders as in years past.

Alfonso Rebuelta
Managing Partner
Bao Partners / Signium International

The current economic recession and the continued deterioration of the larger macroeconomic situation are playing havoc in a very significant and permanent way with the financial system, bringing many companies from varying sectors to bear critical situations. Not all of them will survive, and we are facing the continued corporate restructuring and market repositioning for those the strong ones, and a true battle for survival for those less so.

Yet all this also means opportunities, whether for investment as prices fall to new lows, or for mergers and acquisitions of both healthier companies and business models and thus able to lead this time of change. These companies are the “winners” of today. A common denominator between them has been a straight forward Management, without unnecessary complications or sophistications, and that have responded with policies of caution and efficiency. Curiously, and possibly with a somewhat pejorative intent, these companies have sometimes been branded in the past as conservative, insufficiently aggressive, or even outdated. However these same companies are the ones to emerge today with relatively robust business models or at least significantly less contaminated by the toxicity that plague many others. These others are the “losers” of today. Their future depends on their ability to transform or adapt as the case may be, which in all cases implies deep reaching processes of restructuring, sale or merger, or in the worst of cases, closure and liquidation.

The winners, with these aforementioned healthier business models, will be the ones to benefit from the opportunities that arise and will continue to do so for the foreseeable future. The benefits will be in terms of more business and new clients, with the corresponding rise in market share, and this of course comes in hand with a greater ability to attract the best professional talent. These companies will emerge stronger from the economic recession, and at the same time are already looking toward a new kind of professional profile that will help guide them in the complex rebuilding of the economic structure.

Alfonso Rebuelta
Managing Partner
Bao Partners / Signium International