European banks are facing tough questions about succession planning and corporate governance as they scramble to find a new generation of chief executives amid the biggest shake-up of the industry’s top ranks since the financial crisis.

In the past three months alone, two-thirds of the largest 15 European listed banks have either switched the top job or started preparing to find a new chief executive.

The synchronised changeover presents challenges. Bank executives, board directors and external headhunters interviewed by the Financial Times all warned of a shallow pool of candidates to choose from and the difficulty that European banks will have attracting executives from the US, where the pay is significantly higher.

They also said that the next generation of leaders would need to have different qualities compared with the crisis managers appointed following the financial crash, or the subsequent crop of CEOs, who were hired in anticipation of a period of revenue growth that failed to materialise.

Ronit Ghose, banks analyst at Citi, recalls that the “class of 2015” — Standard Chartered’s Bill Winters; former Credit Suisse CEO Tidjane Thiam; Jes Staley at Barclays; and John Cryan, the ex-CEO of Deutsche Bank — “were all meant to be heroes”.

He added: “They were The Avengers coming in to save these companies, and how did that work out? We all got so excited, but it’s been a really difficult time. Look at what’s happened to them.”

The changing of the guard kicked off in November with the appointment of Alison Rose as chief executive of Royal Bank of Scotland. Earlier this month, Credit Suisse appointed a replacement for Mr Thiam, who was ousted after a spying scandal. Shortly after, UBS named Ralph Hamers, chief executive of Dutch bank ING, as its new leader, prompting the Amsterdam-based lender to start a search for his replacement.

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The merry-go-round will not stop there.

HSBC is still hunting for external candidates to lead the bank after UniCredit CEO Jean Pierre Mustier ruled himself out of the race at the weekend.

Barclays has fired the starting gun on the race to replace Mr Staley, who is preparing to retire from the bank next year. Lloyds is in the process of recruiting a new chairman, who is expected to kick off the search for a replacement for António Horta-Osório, chief executive since 2011.

Mr Winters at Standard Chartered has been bruised by an investor row over his pay package. Two colleagues said they expected him to leave the bank sooner rather than later, with one describing him as having “checked out”. StanChart denied that Mr Winters had any plans to resign. Andy Halford, the bank’s chief financial officer, said: “Anyone who thinks Bill has checked out clearly doesn’t work with him very closely.”

CEOs in waiting

Simon Cooper — The insider

Simon Cooper,  Standard CharteredChief Executive, Corporate, Commercial and Institutional Banking during the Bloomberg Equality Summit in Mumbai, India, on October 15, 2019.Bloomberg Equality fosters forward-looking conversations and spotlight influential business leaders who are paving the way for a more equal future. Photographer: Kanishka Sonthalia/Bloomberg
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The 52-year-old joined Standard Chartered in 2016, after it became clear he would not win the top job at HSBC. Colleagues describe him as “affable” and “down-to-earth”, and the corporate and institutional banking unit he runs was a standout performer in the third quarter. Mr Cooper is now seen as the leading internal candidate to replace Bill Winters, having pulled ahead of retail banking CEO Ben Hung. He has told friends he would be interested if there were a vacancy.

Stephen Hester — The boomerang CEO

Stephen Hester, CEO of Royal and Sun Alliance insurance, photographed in his office in the City.
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Keen huntsman Stephen Hester’s first run in charge of a major bank — leading RBS after its bailout during the financial crisis — ended after a series of disputes with the government and his chairman left him with a target on his own back. However, after six years in charge of insurer RSA, friends say he is open to a change and the tabloid bruising at RBS was not enough to put him off a return to the frontline of banking.

Vim Maru — The loyal lieutenant

Vim Maru

Indian-born Vim Maru has spent more than a decade as a lieutenant to António Horta-Osório, following his former boss to Lloyds in 2011 after several years together at Santander. As the head of retail banking at Britain’s largest retail bank, he will play a crucial role in the design of the bank’s next three-year strategy. Many insiders see him as a leading internal candidate to take over should Mr Horta-Osório leave before it is finished, as is widely expected.

Meanwhile Frédéric Oudéa, who has been in the job at Société Générale since 2008 and is the longest-serving of the group of 15, is not expected to extend his tenure when his contract expires in 2023.

With European banks facing a long period of negative or low interest rates, which will reduce the amount they make from lending, boards are looking for executives who can cut costs and introduce automation to make way for further redundancies.

Several directors also said they wanted to find more modest, understated CEOs, following a string of scandals that had little to do with strategy.

Santander aborted its attempt to recruit former UBS dealmaker Andrea Orcel as CEO over disputes over pay — which has resulted in a €100m lawsuit. Other scandals include the spying affair at Credit Suisse, the row over executive pay at Standard Chartered, and the opening of a regulatory investigation into the relationship between Barclays’ CEO and Jeffrey Esptein, the deceased paedophile financier.

“We have had enough drama,” said one director at a large European bank.

Mike Rake, who was a director of Barclays from 2008 to 2015, said: “After all the turmoil, boards now want lower-profile people — still leaders, but [not] flamboyant. They want their CEOs to avoid unnecessary high-profile social attention. They have to have the right public profile without being too dull and boring.”

Citi’s Mr Ghose said that journalists and analysts sometimes overstate the importance of the CEO, arguing that a bank’s performance was determined by three factors: macroeconomics, the market and management. “We tend to have a ‘great man’ view of leadership. While a good CEO can help differentiate between peers, returns are driven more by macro and market.”

CEOs in waiting

Andrea Orcel — The dealmaker

Andrea Orcel, investment bank president of UBS Group AG, speaks during a Bloomberg Television interview in London, United Kingdom, on Friday, March 31, 2017. Orcel, said banks considering moving employees from London because of the U.K.'s exit from the European Union need to pay more attention to where people want to live and what cities offer the best pool of talent. Photographer: Simon Dawson/Bloomberg
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The fiery Italian — formerly the head of UBS’s investment bank and a rainmaker at Merrill Lynch — had the top job at Santander snatched from him last year. He fell out with Santander boss Ana Botín over his €50m “golden hello” and his desire to take some of her limelight. While currently engaged in a €100m lawsuit against the Spanish bank, Mr Orcel has told friends he would give up all his deferred pay if the right job came along.

António Horta-Osório — The veteran

Antonio Horta-Osorio, chief executive officer of Lloyds Banking Group Plc, gestures as he speaks during the the Institute of Directors (IoD) Annual Convention 2015 at the Royal Albert Hall in London, U.K. on Tuesday, Oct. 6, 2015. The Institute of Directors will say on Tuesday that a EU referendum in 2017 risks becoming "a chance to whack the political elite" after almost seven years of Tory rule, instead of a vote on the issues. Photographer: Luke MacGregor/Bloomberg
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Mr Horta-Osório has turned Lloyds into the steadiest performer of the UK banks, but he is not expected to stay in the long-term. Although the Portuguese executive would struggle to leave before a new chairman has settled in, colleagues believe he will do at least one more big job. Mr Horta-Osório insists “there is still work to do” at Lloyds, but while he is likely to outline its three-year plan next February, few expect him to see it to completion.

Christian Meissner — The globetrotter

Christian Meissner, head of global corporate and investment banking at Bank of America Corp., speaks during a Bloomberg Television interview in New York, U.S., on Tuesday, May 27, 2014. Meissner spoke about the bank's involvement in sports-franchise transactions, corporate mergers and acquisitions, and the outlook for investment banking. Photographer: Scott Eells/Bloomberg
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Despite leaving Bank of America in 2018 under a cloud amid declining performance and a dispute over its dwindling ambition, Mr Meissner has since been linked to senior roles at UBS and Deutsche Bank. The Austrian-born Goldman Sachs and Lehman Brothers alumnus brings investment-banking nous from stints on both sides of the Atlantic, but has never run a diversified global banking business before.

Mr Hamers typifies the new breed of chief executive. His appointment as CEO of UBS this month surprised investors, given that he has relatively little experience of wealth management or investment banking — UBS’s two main businesses. But the Swiss lender’s board were impressed by his ability to reduce operating expenses at ING, in large part by digitising the bank.

Mr Hamers’ low-key style was also a factor. Although he presided over a money-laundering scandal, sparred with Dutch politicians over executive pay, and criticised central bankers for negative rates, he has not made the unforced personal errors that have hurt some rival CEOs.

Little surprise, then, that Mr Hamers was in high demand. HSBC also approached him about becoming its next chief executive, according to two people briefed on the talks, which was a factor in UBS’s decision to speed up his appointment.

The high level of interest in Mr Hamers also underscores another problem for banks: a paucity of potential candidates exacerbated by the number of jobs that need to be filled.

European bank boards would like to be able to fish for talent in the US, which has the deepest pool of expertise, especially in investment banking. But the pay differential often proves insurmountable. In the UK, for instance, chief executives at the five largest listed banks earned about £24m in aggregate in 2018. In contrast, the CEO of Citi, who is among the lowest paid of the large US banks, alone earned $24m (£21.8m).

A further complicating factor is that a large chunk of their pay is usually awarded in the form of deferred stock. This tends to be forfeited if they resign to work for a rival, meaning that banks have to pay a chunky “buyout” to convince them to leave their current employer. Such payments, known as “golden hellos”, are unpopular with European investors and politicians.

CEOs in waiting

John Flint — The comeback kid

John Flint, chief executive officer of HSBC Holdings Plc, attends the Hong Kong Asian Financial Forum (AFF) in Hong Kong, China, on Monday, Jan. 14, 2019. The AFF runs through to Jan. 15. Photographer: Anthony Kwan/Bloomberg
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Mr Flint was just 51 years old when he was ousted as chief executive of HSBC in August after only 18 months in the job, following a boardroom bust-up with its chairman Mark Tucker. While his reputation has been damaged by his dramatic exit from HSBC — where he had a three-decade career — he remains one of the most experienced bankers in the UK. Mr Flint’s friends say he will look for new opportunities once he finishes his gardening leave later this year.

Alison Brittain — The prodigal daughter

Alison Brittain, group retail director of Lloyds Banking Group Plc, poses for a photograph outside a newly rebranded branch of TSB in London, U.K., on Monday, Sept. 9, 2013. Lloyds Banking Group Plc, Britain's biggest mortgage lender, today revived the two-century-old TSB name by rebranding 631 branches it's being forced to sell by European regulators. Photographer: Matthew Lloyd/Bloomberg*** Local Caption *** Alison Brittain
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Ms Brittain was once considered heir apparent at Lloyds Bank, but swore to friends that she’d never return to banking after she became chief executive of hotels-to-coffee conglomerate Whitbread in 2016. Still, as Lloyds’ ex-head of retail, she is one of only a few women with experience at the top levels of European banking, and has now run a FTSE 100 company too. RBS tried to tempt her back to banking when it was searching for a new chief last year.

Richard Gnodde — The budget buster

Richard Gnodde of Goldman Sachs International.
© Charlie Bibby/FT

Mr Gnodde has worked at Goldman Sachs since 1987 and is its top European executive. He is seen by headhunters as a strong candidate to lead a European bank, especially one with a big investment banking presence like Barclays. But he also exemplifies the problem of luring highly paid US bank executives. Mr Gnodde earned $19m in 2018, much of it in the form of locked-up shares. He would probably have to forfeit most of that deferred pay if he joined a European lender.

“The public scrutiny on remuneration . . . leads to less is more,” said John McFarlane, the former chair of Barclays and TheCityUK, a lobby group. “Material differences in the capacity of organisations to pay . . . make it difficult to attract candidates from the US and Canada in particular”.

A headhunter working on a live CEO search for a European bank said they were also “finding it incredibly difficult to attract interest from the US, because the remuneration rules are so different and there is less investor pressure on pay”.

They added: “It is very hard to pull a US executive from an existing role at a [pay] rate that is going to be OK for the European investor community.”

A director at a UK bank that is searching for a CEO said international candidates were also put off by Britain’s Senior Managers and Certification Regime, which holds financial executives liable for failings on their watch. “In the US and Asia, you get paid more with less risk, so it’s very difficult to get people to come [to the UK],” he said.

Mr McFarlane added that while UK bank boards had a “sincere desire to employ the best in the world”, often they had to settle for “the best . . . available”.

This article has been amended since original publication to correct the respective bank labels on the mobile version of the chart

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