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Bill Rhodes Says Bank Culture is the 'Key' to Conduct (Audio) · Bloomberg Intelligence

• 0:00
  Speaker 1: Let's get right to our first topic and first guest
• 0:03
  Speaker 1: of the day. As the CEO of Wells Fargo testifies
• 0:07
  Speaker 1: again before Congress, is the world continued to wonder about
• 0:11
  Speaker 1: the health and future of Deutsche Bank in Germany. We're
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  Speaker 1: going to bring in now Banker to the World, Bill Rhodes.
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  Speaker 1: That's the title of his worldwide bestseller, Bank into the World,
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  Speaker 1: Lessons from the front front lines of global finance. So Bill, uh,
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  Speaker 1: and of course as as Pim would be quick to
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  Speaker 1: point out, you know you were you were the senior
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  Speaker 1: chairman of City Group. You ran City Bank more than
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  Speaker 1: five decades. You know of what you speak. Uh, you're
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  Speaker 1: focused right now on something that seems so old fashioned,
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  Speaker 1: culture and conduct at big banks. Thank you, Kathleen. It's
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  Speaker 1: always great to be with the two of you on here.
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  Speaker 1: I co chaired a a group at the study of
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  Speaker 1: a group of thirty on culture and conduct, which was
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  Speaker 1: published in July two thousand, team which concentrated on need
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  Speaker 1: to have a positive, good culture, which takes into account UH,
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  Speaker 1: several things. First, which is number one is any financial
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  Speaker 1: institution and particularly bank, has to gain the trust and
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  Speaker 1: confidence of the public. If you lose that, you lose everything. UH.
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  Speaker 1: And we have all sorts of risks that banks have
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  Speaker 1: to put up with and deal with, market risk, operational risk,
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  Speaker 1: credit risk, But the most important is reputational risk, because
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  Speaker 1: once you lose your reputation, it's very difficult to get
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  Speaker 1: back and it's certainly damages an institution along with that. UH.
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  Speaker 1: A financial institution again, particularly a bank and a retail bank,
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  Speaker 1: has got to make sure it always puts UH the
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  Speaker 1: well being of its customers first. And if that's ever
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  Speaker 1: put into question, then the brand of the institution and
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  Speaker 1: the institution itself has real problems. And I think that's
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  Speaker 1: the challenge now for the man management and the board
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  Speaker 1: of Wells Fargo UM and things like embedding a culture
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  Speaker 1: within an institution UH is key, and not only to
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  Speaker 1: embed this culture there, but to monitor it on a
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  Speaker 1: regular basis and also to take action if if it's
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  Speaker 1: seen that people are not living up to that culture.
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  Speaker 1: We're gonna have much more with Bill Rhodes. He is
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  Speaker 1: banker to the world. He's going to give us his
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  Speaker 1: insight into Deutsche Bank. That's coming up. But Wells Fargo
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  Speaker 1: shares right now down just a little bit less than
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  Speaker 1: two percent down seventy seven cents forty four dollars fifty
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  Speaker 1: three cents for WFC. This is Bloomberg, this is taking stock.
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  Speaker 1: I'm pim Fox my co host Kathleen Hayes. The shares
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  Speaker 1: of Wells Fargo have dropped a little bit more than
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  Speaker 1: thirteen per cent since the beginning of September, and the
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  Speaker 1: shares now trade at forty four are forty eight. Our
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  Speaker 1: guest is Bill Rhodes. He is President and chief executive
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  Speaker 1: officer of William R. Rhodes Global Advisors. His book, which
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  Speaker 1: I believe is doing the rounds in Congress, is called
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  Speaker 1: Banker to the World Leadership Lessons from the front Lines
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  Speaker 1: of Global Finance, Bill Rhodes, Wells Fargo. Uh. Should they
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  Speaker 1: have read your book? Well, I think, uh, they would
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  Speaker 1: do well to read the report of the Group of
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  Speaker 1: thirty that came out in July two thousand fifteen, where
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  Speaker 1: we where we went into the subject at some depths
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  Speaker 1: of culture and conduct. In fact, the title of the
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  Speaker 1: of the study was culture and Conduct. And what's clear
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  Speaker 1: is in order to protect the brand and the reputation
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  Speaker 1: and reputation is everything in a financial institution. Uh, you
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  Speaker 1: must put your customer first. Gain the trust of the public. Uh.
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  Speaker 1: And then you must embed your culture I started to
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  Speaker 1: say earlier within the institution. You must monitor it on
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  Speaker 1: a regular basis, and when you see that uh it's
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  Speaker 1: not being complied with, then you must take action rapidly.
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  Speaker 1: And that action starts with compensation. But if that's not
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  Speaker 1: sufficient and the missing compensation clawbacks not only clawbackx uh
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  Speaker 1: you know, reducing the compensation of somebody as well as clawbacks.
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  Speaker 1: And the other thing which is I think, uh most
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  Speaker 1: important here is at the end of the day, if
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  Speaker 1: that's not sufficient, then dismissal has to be right on
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  Speaker 1: the table there because if this is not then the
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  Speaker 1: tendency oftentimes of of staff employees is did not take
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  Speaker 1: it seriously. But the truth is this needs to start
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  Speaker 1: at the top. The tone at the top is really
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  Speaker 1: what's key for culture in any financial institute, Susan. And
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  Speaker 1: that means the board and the CEO, through middle management
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  Speaker 1: right down to the teller, because those at the lower
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  Speaker 1: levels look to the top and if they do not
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  Speaker 1: see this being actively uh worked on, utilized, propagated, then
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  Speaker 1: you can't expect them to do what they should be doing.
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  Speaker 1: And so I think this is this is key UH.
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  Speaker 1: And we've seen case after case where there's been problems
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  Speaker 1: in financial institutions over the last decade that this has
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  Speaker 1: come up UH in UH you know, in whatever inquiry
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  Speaker 1: is UH is being made UH. And they are all types,
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  Speaker 1: as I said earlier, of risk management, UH, different types
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  Speaker 1: of it. But the most important, UH is reputational risk
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  Speaker 1: your brand. And I think that's where UH Wells needs
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  Speaker 1: and will be working on going forward. And the last
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  Speaker 1: thing I would say is you must have a very
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  Speaker 1: strong compliance function. UH. Compliance function is supposed to be
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  Speaker 1: looking to see that your culture is being adhered to
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  Speaker 1: UH from the very top to the bottom. And UH
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  Speaker 1: the person in charge of compliance should have a direct
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  Speaker 1: line to the CEO and to the board independently, so
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  Speaker 1: that if he or she sees that something is being
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  Speaker 1: done wrong, UH, it's surfaced very rapidly. The other thing,
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  Speaker 1: UH that I think is is very very important is
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  Speaker 1: you must have an active whistle blowing program that is
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  Speaker 1: taken very seriously by management. So if somebody at whatever
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  Speaker 1: level sees something being done wrong, they will mention it
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  Speaker 1: and feel free not to be taken advantages of if
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  Speaker 1: they do mention it. And and that is really for
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  Speaker 1: the protection of the institution, and an institution with a
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  Speaker 1: positive culture UH is not only important for all the
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  Speaker 1: reasons I said, but also it's important for your bottom
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  Speaker 1: line because if you have a positive culture that's adhered to,
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  Speaker 1: customers believe in you, and we'll want to do business
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  Speaker 1: with you, and it will reflect on your bottom line.
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  Speaker 1: Just have time for one more question, Bill, and I
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  Speaker 1: want to just bring in Deutsche Bank, because the scene
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  Speaker 1: the scenes of more all of the story with with
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  Speaker 1: Deutscha is that it has a lot to do with
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  Speaker 1: European banks never really being be forced to recapitalize and
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  Speaker 1: no no coherent central authority in in UH the your area. Well,
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  Speaker 1: as I've mentioned for several years on this program, the
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  Speaker 1: European banks were very slow UH to raise capital UH
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  Speaker 1: cut cost UH and to get rid of areas on
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  Speaker 1: their their businesses which were not core part of of
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  Speaker 1: their businesses, and to write off bad loans. UH. Here
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  Speaker 1: in the United States, the financial institutions, the banks started
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  Speaker 1: to do that in two thousand nine before the end
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  Speaker 1: or at the time and the end of the Great Recession,
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  Speaker 1: and UH this was not done in Europe, and the
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  Speaker 1: regulators in Europe Uh, frankly fumbled a ball here, and
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  Speaker 1: it was only with the implementation of the regulatory side
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  Speaker 1: of the Banking Union several years ago that you've got
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  Speaker 1: strict regulatory oversight. And so I think one of the
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  Speaker 1: problems that you've seen in countries like Portugal, uh, Italy
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  Speaker 1: very much now in the case of Germany, Deutsche Commerce, etcetera,
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  Speaker 1: is that they're being forced to take these actions very
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  Speaker 1: very rapidly. And UH, it's important that this be done
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  Speaker 1: as rationally as possible because some of the institutions that
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  Speaker 1: we're talking about our major institutions in the world financial markets,
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  Speaker 1: and they are key. All right, Bill Rhodes, thank you
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  Speaker 1: so much. Remember this is a man with more than
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  Speaker 1: five decades leading top leadership positions at City Bank, at
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  Speaker 1: City Group, and he's a banker to the world. That's
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  Speaker 1: the title of his book, Lessons from the front Lines
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  Speaker 1: of Global Finance. We thank Bill Rhods for joining us today.
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  Speaker 1: I'm Kathleen Hayes along with Pim Fox, and this is
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  Speaker 1: Bloomberg