Speech at the Mansion House

Immigration is key to attract global talent

This is an abridged version of a speech given to a Mansion House packed to the rafters with 350 members of the International Bankers and their friends.

My year as Master (Chair) runs till October 2020. 

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Welcome all to the Annual Banquet of the WCIB and welcome to the Mansion House, the Heart of the City.

The Mansion House reminds me of the Villa Farnesina in Rome, built for Agostino Chigi, a banker who was treasurer to the Papal States in 1510 and a patron of great artists. He entertained his clients – Popes, Ambassadors, men of power – in such style that he was known as ‘the Magnificent’.  

I should hope we have entertained you in such style today, that you too will say the International Bankers are Magnificent!

At one banquet, in an extravagant gesture, the silver dishes were thrown into the Tiber River after use. I therefore ask you to pick up any silver left on your tables and we shall throw it into the Thames. Or perhaps not!

Rumour has it that il Magnifico’s servants had placed invisible nets in the river, and thus recovered the silver.

Banking, and financial services in general, is about covering your risk. As he did.

The City faces many risks. Today, I want to concentrate on one risk only. Arguably the most crucial one. The war for talent.

Mark Hoban, a former City Minister - who is present tonight - chairs the Financial Services Skills Taskforce, which published a damning report last month on the City’s talent recruitment and retention. I quote: “There is no doubt that the financial services sector is facing an existential skills crisis.”

The demand for talent already exceeds supply and this trend is set to become more acute. Additionally, “The lack of gender and ethnic diversity is both a social issue and a skills issue. Talent that the industry needs is not being utilised.”

This is the reason why Professor Grace Lordan from the London School of Economics – also here tonight - and I are co-founding The Inclusion Institute at the LSE. The Institute arose out of a report commissioned by the International Bankers. In partnership with City companies, the Institute will use behavioural science and data to lead to more diverse talent recruitment and retention, to dynamism and creativity, and to changing culture for future success.

Cognitive diversity is necessary to deliver better company returns in a transformed digital marketplace. How does this innovation happen? It is most likely to occur when you mix gender, generation, ethnicity, sexual orientation and nationality, on your boards and in your teams. And ensure they feel accepted, or included, and thus able to speak up.

The City is working hard on its D&I. Yet it is already a world leader in one form of diversity. Nationality. We have a wider mix and more nationalities in the City than in any other major financial centre. 40% - that is four zero – of City workers are foreign-born – and they are fully included.

What other country would have a Canadian leading its central bank, a Frenchman till recently leading its stock exchange, and an American woman, leading one of its main financial derivative companies, IG? Plus, at a much lower level, voting in another foreigner – me - as Master of the Worshipful Company of International Bankers. I am grateful!

But the City’s USP is under threat. The government’s recently announced, hard core policy on immigration is undermining the City’s search for talent. They should care, because we bring in over 10% of tax revenues.

We would not have the strongest Fintech sector in the world, without the Open Door, Open City policy of earlier governments. We wouldn’t be leaders in Green Finance without that Open Door, Open City policy. Note that the UK Green Bond market is already worth $44 billion. There is so much more that we in the City need to do to help finance the environmental transition for our planet’s survival.

For that, we need the best talent in the world.

There are at least three things wrong with the new system.

In the first place, an immigration policy that gives way too much importance to higher education, such as PhDs, cannot be right. Skills are of as much importance as a university degree in our disrupted world. The Russian founder of Revolut, a City-born start-up which was just given a valuation of $5.5 billion dollars, doesn’t have a PhD. Let alone the Richard Branson’s of this world. Or even the Mark Zuckerberg’s.

Secondly, an immigration policy that harks back to an era of central planning cannot be right. Five-year plans surely went out with Stalin?!. Yet a Tory government believes in the future it will be able to figure out where the skills shortages are in the economy and make short term changes to policy to fill them. That’s in a world where we don’t even know what many of the jobs of tomorrow will look like.

And finally, an immigration policy which will only allow large, well-capitalised firms to import foreign workers, is not right. The cost and bureaucracy of work permits is such that SMEs, start ups and the like won’t be able to afford them – and they are the accelerator in the economy.

Let my last quote be from Catherine McGuinness, the CEO of the City: “We need an immigration system that works for the whole of the financial services ecosystem. This includes those supporting industries which keep the City ticking and we look forward to engaging with the Government on this particular issue.”

I am not sure she meant that last line…

The City understands that this government has an obligation to those who voted it in, a number of whom believe that immigration – rather than globalisation and automation - is to blame for inequality and the precariousness of modern jobs. But Boris Johnson’s government has a duty to destroy myths about immigration and a duty to care for the City, let alone the whole economy. Our tax revenues and our inventiveness will help in financing a better future for all.

The City is a British jewel, a European jewel, and a world jewel – in fact, it is a public good and I would ask that you join with me, in any way you can, in pressing this government to change its policy, and return to an Open Door, Open City.  

How can the City recover its political capital?

The good news? The financial sector is no longer enemy number one. Its place has been taken by our fumbling politicians. The bad news? The City has not regained its political capital.

Post the financial crisis the City, meaning financial and professional services in the UK, lost the trust of the nation. A perfectly understandable and justifiable result, but one that must change because of the harm that is being done to our economy when the City has no advocates beyond its own members.

As the country grapples with Brexit, assembly lines of MPs appear on television defending the UK’s manufacturing base. Not one talks about the need to defend the City, despite it being responsible for over 13.5% of tax revenues – that’s a lot of hospitals, infrastructure and schools. It is also responsible for around 2.3m jobs – jobs that aren’t just in the Square Mile, or London and the South East, but also in Liverpool, Glasgow and Bournemouth.

A lot of work is going on to regain the trust of the population, but it doesn’t make the headlines. UK Finance and The City UK are coordinating their members (banks and other professional services companies) with politicians to deal with the issues that generally fill the inboxes of MPs, most notably fraud and the finances of small and medium-sized enterprises (SMEs).

The £4mTake 5 campaign against criminal money transfers, an initiative between financial services companies and the Home Office, has raised awareness of smooth-talking criminals asking for PINs and passwords. Meanwhile, a new ombudsman scheme, plus a complaints review and redress policy, will be in place by September this year to deal with dispute resolutions between the banks and SMEs. Less than a year ago, 22 banks were forced to publish the results of their customer service ratings on their branch walls.

Yet none of this represents a positive campaign to clarify the City’s national role and international role. Those who see press reports on mega-bonused bankers or financiers in court for rigging Libor need to see other images which are just as real. Kevin, the bank worker in Bournemouth, where financial services is the biggest employer.  Sue, the elderly lady in Somerset who relies on her pension. Lucas, the toddler whose parents have bought him a Junior ISA. And the hundreds of sports grounds and start- ups, coffee shops and corner stores, that rely on finance to survive and prosper.

The City’s human face should be shown in granular detail. It is never more in evidence than on September 24, City Giving Day, an annual event where businesses raise money for charitable causes. It began with tea and cakes in Guildhall Yard, the centre of City government, in 2015. Last year, 313 companies participated, from Bank of China’s renown market stalls selling home-made Chinese specialties to Tour de City, a team effort on static bikes where enthusiasm and buckets of sweat abound. Insurance brokers and lawyers in City Giving Day red t-shirts race around the streets on a treasure hunt. The initiative was so successful that it was taken up by Birmingham and is set to spread to other cities later this year.

The City’s creative energy and its ability to implement change should be celebrated. This isn’t only in Green Finance, or Fintech, where we are the world’s leader, or Social Impact investing.  A few years ago, Barclays posted a 5-minute video on its intranet in which an employee detailed their mental health struggles. The reaction in the bank was so positive in encouraging conversations around mental health and broadening the mental health offering that This is Me, as it was called, was taken up by the Lord Mayor’s Appeal and publicised. By the end of 2018 the initiative had reached over a million employees in over 500 organisations and was launched in the North West and Scotland.

What should also be showcased, not least at a time of national division, is the City’s nearly 2,000 years of history, from its Roman beginnings to its famed coffee houses, the precursors to markets like Lloyd’s of London, and the huge contribution immigrants like Sir Sigmund Warburg made to its success. The Lord Mayor’s Show dates back to the 16th century. It is still the longest and most grand annual civic parade. Yet it is barely marketed in London or the regions, let alone abroad. This is surely a wasted opportunity. 

Over the last two years the City has lost an estimated 75,000 jobs and a trillion in assets as companies seek to guarantee seamless access to the European Single Market by moving parts of their operations abroad. But it is still a European jewel. supplying half the debt and equity to EU business and over a trillion a year in direct lending. And its position as a global jewel -with difficult-to-replicate regulation, rule of law and a wide pool of talent – must be defended.

Whatever happens in the next few days in politics, the uncertainty is likely to continue over weeks and months. It is time for the City to stop hiding its lights under a bushel. With humility and humanity, and an acknowledgement of its wrongs, the City should use storytelling to regain its rightful place in the national narrative.

This article was published in the Daily Telegraph on Tuesday 30th April 2019.

Six Steps to Retaining Your Promising Female Executives

686 Lord Mayor Fiona Woolf advises

The City of London retains its ranking among the top two global world centres, but Asian centres are snapping at its heels. The City is only as good as the talented workforce that joins, grows and leads it. The fact that too many promising female executives drop out is a problem that must be addressed as part of the ongoing work to boost its international appeal.

Dame Fiona Woolf, 686th Lord Mayor, instituted the Power of Diversity programme in her 2013/14 term, a strategy followed by subsequent Lord Mayors. Here are her six practical steps to retaining women and supporting their rise.

1. Think of it as Talent Development

I ran a survey a while ago that delivered the unsurprising answer that the quality of supervision and personal development were the top factors that would keep people in a job. Next came the quality of work – everyone wants access to the top jobs. In people businesses (and most businesses claim that they are), success depends on recruiting, training and deploying the best talent so that it gets better all the time. When I ask how many of us have been trained in on-the-job talent development, very few hands go up. We should teach managers how to develop skills and create an environment where everyone learns from on-the-job experience. Regular “what went well, what went less well” conversations would be good. I am a fan of sharing individual development plans. Transparency about the way work is allocated will help to deal with unconscious bias, such as the assumption that a woman with a family will not want to get involved in a big deal, without asking her.

1. Identify and Motivate the Keepers of the Talent Pipeline

Many of the keepers of the executive talent pipeline are managers at mid-level who are busy doing the work, generating the income, looking for new business and trying to go home at night. They may not realise that they are responsible for talent development and that they will really benefit from it. There is a saying that you are only as strong as your weakest link. So it follows that these keepers of the talent pipeline need to be motivated to value and invest time in talent development. They need to be a part of a workplace culture that regards it as mainstream in the day job and do a little of it every day. The senior leadership can do a lot of messaging but also lead by example and be seen to monitor and celebrate promotions and vibrant teams. Understanding the costs to the business of losing and replacing someone is key. More positively, remember that the attractiveness of someone who is developing well to a client is a terrific marketing tool (and if they go and work for the client they will return as a client)!

1. What Gets Measured Gets Done

I have not come across many organisations that actually measure individual performance in talent development and reward it, but there are some. Diversity and inclusion is often a soft, but important value rather than a performance indicator. Income generation and new business acquisition as performance indicators are easier to measure and reward. We are now working with Business Schools and firms to find ways to monitor and reward talent management and development looking at the outcomes. An obvious example is to measure the number of people who leave a manager each year and to understand the reason through exit interviews. Another is the number of promotions and lateral transfers.

1. Senior Leadership Commitment to a Concerted Culture Change

In a survey that was part of what is now the continuing Power of Diversity programme, we discovered that 84% felt that their senior leadership were doing the right thing to create diversity and inclusion but only 27% felt under any pressure to do anything about it at their level. There are clearly many good initiatives like affinity networks, unconscious bias training, mentoring and sponsorship schemes but none of them will work unless they are embedded in a big change programme involving everyone. Think of it more like a campaign, led from the top but full of excitement in the big middle that then becomes the new normal!

1. Develop Support for all Rising Talent

My motto is “Get lucky and say “yes”!” because everyone these days wants women to succeed and we will be supported. We all need support when we take on something new (however senior we are) and we can be smarter at asking for it and giving it. It is not a sign of weakness. So often, we adopt the “sink or swim” approach, “dumping“ rather than helping, in the hope that people will figure it out for themselves. The same applies to returners after a career break. We should be seeing a growing market in “returner courses”. Mentoring meetings on a regular basis are good, but what about asking for someone to go to who can give you the background or a quick second opinion on what to do next?

1. Recruit and Promote on the Basis of Intellectual Capacity and Transferable Skills, not just Experience

Is it a stereotype that, unlike men, women are reluctant to apply for jobs and promotion unless they tick all the boxes? Some people do recruit and promote square pegs to square holes based on all the “previous experience” boxes. I have always hired on the basis of intellectual capacity, motivation and transferable skills. I was seldom able to find people with directly relevant experience and turn them into international electricity lawyers, so an excited engineer working in South Africa who spoke Russian was a good answer! I was not taking much risk in hiring or promoting bright people with transferable skills, nor did I have to invest excessive time in supporting them. They learned very quickly, brought new ideas and make a great contribution. Women can do this too and we should not worry about moving from a square hole to a round one!

The Tale of a Whale

The precariousness of JP Morgan Chase

The New York tourist sitting next to me with the map of London spread out on his lap asked where he could find the London Whale. Seriously. Unlike the London Eye, I told him, the London Whale was a human being, albeit a metaphorical landmark.

The London-based JP Morgan Chase trader’s nickname derived from his large positions in the credit market, which in the summer of 2012 resulted in the bank declaring a $5.8bn loss. It subsequently faced major fines from both the UK and US regulators for, among other things, its lax supervision and for not “adequately updating” its audit committee on the findings of an internal review, in the words of the Securities and Investment Board (SEC). The bank agreed to around $20 billion in legal settlements in 2013, almost equal to a typical year’s profit, for a range of misdemeanours.

Bereft of its gobbledygook, SEC’s phrase can be translated as “deceitful behaviour.” In other words, culture.

A recent survey highlighted that two thirds of global banks agree that a big part of the financial crisis was due to culture but only one third of banks thought there was anything wrong with their culture (my italics).

Transforming an institution’s culture is a lengthy journey, rather like chasing Moby Dick, the symbolism-laden whale in Nathaniel Hawthorne’s classic book of that name. As well as obvious factors like overhauling compensation, banks need to exercise integrity through sound judgement and rewarding decision-makers who have the guts to say no.

A very sensible suggestion on culture put forward in the Salz Review (an assessment of what went wrong at Barclays Bank pre and post the financial crisis ) was for bankers to spend two years on secondment to the financial regulator and vice versa. It appears to have sunk without a trace, despite the fact that there is a model for how to do it in the Takeover Panel, the UK’s M&A regulator, which regularly hosts top bankers and lawyers who then return to their firms.

Box-ticking is not the way forward. Unfortunately, though, the plethora of rules spewing forth from different regulators, like water from a whale’s blowhole, makes it overwhelmingly necessary. How else can universal banks active in a number of countries deal with the US’s Volcker Rule, the UK’s Vickers, the EU’s Liikanen, let alone Basel III, which appears to already be disintegrating? In fact, each country seems to be setting its own rules and banks are retreating home, capital in tow.

To add insult to injury, no sooner have banks complied with a rule that the regulator changes it. The Basel Committee admitted this autumn that perhaps securitisations per se were not “bad.” Without saying it in so many words, the implication was that forcing banks in 2009 to post higher capital requirements against them – as though all securitisations were similar to sub-prime mortgages – was wrong. The Committee is set to review the issue sometimes in 2014.

Meanwhile, the absurdity of zero or very low capital requirements on holding sovereign debt has steered banks to load up on it. This may be very useful for over-indebted governments, but as Jens Weidmann, President of the Bundesbank noted late last year, “the current regulation’s assumption that government bonds are risk-free has been dismissed by current experience.”

In truth, it doesn’t take familiarity with the last few years to realise that ‘risk-free government bonds’ has always been an oxymoron. In the best of cases their value has been damaged by inflation or currency devaluation; at the worst it has been destroyed by restructuring or default.

Moby Dick evaded his pursuers, but most of the crew of the Pequod, the whaling ship, met their death because they dared not stand up to Captain Ahab and his lack of judgment.

JP Morgan Chase’s Chairman cum President cum CEO Jamie Dimon – yes, truly three titles – admitted a few weeks ago that some investigations into the bank were just beginning, which does not bode well for 2014 results.

In May Mr Dimon fought off a shareholder revolt that would have seen him lose his position as chairman by letting it be known he would walk from the bank if this happened. The blackmail worked. He kept his triumvirate of titles and continues to lead the largest bank in the US.

This is a sell notice. It has the same whiff of omnipotence that marks the reigns of presidents who succeed in changing constitutions to allow them yet another, and another, and another term in office.

The Pequod had a problem of culture. We shall see how the tale unfolds for some of the banks, not least JP Morgan Chase. But the omens are not good: absolute power really does corrupt absolutely.*

*This column originally appeared in The Dialogue Review, an academic journal.