Back to the future

High profile cases have cast a dark shadow on financial institutions in recent months. But there is a light at the end of the tunnel. FST’s Matt Buttell spoke to three CIOs at some of Europe’s most influential banks about looking ahead.

“In the old days, a strong network of branch offices was the backbone for banking,” says Stephan Schneider, Head of IT and CIO for the SEB AG in Germany. As Schneider is quick to point out, new technologies and infrastructures surrounding the internet, mobile technologies and customer service devices allow banks to overcome distances and time lags. In the last ten years, technology in the financial sector has witnessed a revolution in allowing people to be increasingly more connected and increasingly more mobile. “Banks can simulate closeness in space and time to the customer,” he says. Schneider started out, after an apprenticeship as a banker, working as a consultant in the financial services area. He has been Head of IT and CIO since early 2003 where he is responsible for development, maintenance and operations, as well as IT-architecture, planning and portfolio management. As a secondary function, Schneider is the manager for international IT regulation, governance and business support. “In SEB we don’t want to be always be ‘bleeding’ edge, but early adapters on proven and business relevant technologies,” he says. “With infrastructure, we try to maintain unification and consolidation as much as possible. For applications in non-competitive areas and commodities, we opt for standard software as much as possible. In competitive areas we do focus on development.”

At UniCredit Bulbank, the CIO Andreas Schoberwalter thinks the same way. “IT has to take the role as a leader. The quality of service does not stop at the cash desk, it continues to guide the client while he is going home over his mobile banking and mostly ends in the late evening with his banking on the sofa,” says Schoberwalter. Of course, the challenge is not just to introduce pieces of infrastructure, but also to develop a business model for market research, events and campaign management, advisory sales and sales control processes. “IT is much more a management challenge than a technical problem nowadays,” echoes Schneider.

Managing technology

“The CIO role starts with focus on people and organizational development,” Schneider says. “The internal organization and the staff members both in IT as well as on the business side must be empowered and trained. With a growing understanding and with successful steps, an organization needs to realize the advantages of technology as well as the synchronization between processes and technology.” Schneider is adamant that IT is a top management matter, especially within a bank, where information is a raw material. “In this context the most important communication task for a CIO is to bridge between the different business views and try to manage the most appropriate and suitable compromises between cost, benefit and risk in a portfolio of IT services,” he says.

On one hand, while a leading role in industry cannot be understood if there is no managerial responsibility, without an understanding for technology, companies would lose out completely. “Innovation can only be driven if you understand where the road leads to,” Schoberwalter says. “You are working with people, you are working for people and you would be very wrong if you believed only in your technical knowledge.” Schoberwalter has been in the banking business for 20 years, in a variety of different leading roles over this time. “It’s impressive how the speed and professionalism of technology has increased over the last few years. There’s nearly no time to rest in 24 hours – otherwise you lose the momentum of the market,” he comments. At UniCredit Bulbank, Schoberwalter defines his role as being in charge of guaranteeing the permanent support of business productivity by offering solutions to be one step ahead of competitors. “Fortunately I am in the position to have learned the banking business from all perspectives, both the active and the passive side, from the central point of view and also on the selling side.”

Franck Sidon, CIO at Jefferies International, has a similar outlook. “Understanding technology is obviously crucial for anyone working in technology,” he says. “But most importantly understand what the business is all about if you want to be able to combine the two and achieve significant results.” Sidon is also aware that for any CIO, good management skills are critical nowadays.“As much as I’d like to say that I spend a lot of time on technology issues, I know it’s not true. I spend a lot of time on risk analysis, compliance, budgeting, and KPI monitoring,” he comments. Sidon thinks he has an unusual background for a technology person. “I’ve had very different roles in the past, both in the front office and the back office,” he says. Sidon started as a Swaps trader about 20 years ago, and has combined roles such as financial controller and head of operations over those years. At Jefferies International, the international arm of Jeffries Corporation, Sidon’s role is to manage front and back office systems for all international locations.

“Our company has transformed itself quite a lot in the last few years, from a regional broker into a midsize investment bank,” he says. “We’ve expanded a lot on the investment banking side but also on the electronic trading side of things, which obviously has a direct impact on how we manage technology,” says Sidon. The development of technology in recent years is clearly instrumental. “From a technology standpoint, the advent, especially for us, but also for the industry in general, of things like electronic trading and algorithms, has really transformed the way we actually deal with the technology.”

Present and correct

A bank has to be organized customer-wise in the ‘sales bank’ and function-wise in the ‘production bank’ and has to run with proper information logistics in the ‘portfolio and steering bank.’ The challenge lies in the integration of these principles, along the banking processes and optimization of a cost-benefit-relation. “It is one task of a CIO to run the discussions with the business units to make them aware of the possible advantages of the use of technology,” says Schneider. “IT management has two roles: deliverer of possible cost savings and enabler of business value.” IT is a communication challenge as well; IT managers have to translate their complex issues into a language understood by the business and intern they must learn to understand the business as well.

Mobility and wealth management remain two of the main challenges for the banking sector. “We have to make sure that innovation and development happens not only for its own sake, but for the advantage of our customers and positive economical development,” says Schoberwalter. By understanding the role and taking it on as a responsibility, then there is a greater understanding of the business. “The financial sector wins if it divides its profit with the market as the bank has to share its success with his customer,” says Schoberwalter.

With the industry going through a difficult time at the moment, there is a certain degree of pressure on how the market will respond. “I’m not really convinced that the solution is necessarily in regulation, and I guess this is true not just for IT,” says Sidon. “If history is any guide, it usually doesn’t improve things much; it just adds an extra layer of bureaucracy without necessarily making the environment any safer.” The level of scrutiny that regulators want to put on the financial services is changing and despite regulations, there is a question of confidence in technology within the financial market. Yet for Sidon, technology and confidence are not necessarily linked. “Technology is becoming more and more an essential component of everything we do, not just in finance, though finance is no exception, but as computers allow you to do things faster, better, more efficiently, it allows us to do things we could not have done in the past,” he says. “A lot of our business today is driven by complex instruments. If it were not for technology and computers, those would not even exist.”

Nonetheless, Sidon is keen to maintain that not all problems are caused by technology. “Increasingly complex technology is just a given. It’s here to stay and we’ll have to learn to live with it, whether we like it or not. We have no choice.”

Forward thinking

Schoberwalter comments that while quality service is the certainly the base of success in financial businesses, IT has to be the translator between clients and banks to realise a view of the business from both sides. “The business view must be seen as a trustful transmitter, innovator and communicator to establish a long lasting relationship,” he says. “From my point of view, the market reacts with increased cautiousness and review of the current activities and processes,” he says in light of recent troubles. “The banks with consistent prudent risk policies and management as opposed to the more aggressive players are better positioned to endure times of market turmoil.”

Technology is an enabler and it has allowed firms and people to react faster, to be more mobile than in the past. Competition has increased, not just between private firms but also between regulators. “Even a regulator has to compete with another regulator if he wants to attract successful businesses, if he wants to attract revenue,” says Sidon. “Technology makes everything closer. If the concept of distance is removed, so are a lot of the barriers that we had in the past,” he says. “There’s a lot of new competition where it previously would not have been possible, and wealth management is taking advantage of that.” Sidon notes that not just banks but also regulators need to be aware of ever-increasing competition enabled by technology. “If you overtax or over-regulate, you are at risk of being arbitraged by another jurisdiction,” he says. Elsewhere, somebody will be providing a better service, and people will go there.

A modern, up-to-date bank should never stop working and an active communication with customers will permanently support the exchange between client needs and the services the bank offers. “Increased regulatory framework in itself in not a panacea in my opinion,” Schoberwalter echoes. Quite simply, to secure safe transactions between a bank’s clients and partners, technology must continue to be innovative.

Andreas Schoberwalter, CIO UniCredit Bulbank

As leader on the banking market in terms of net profit and shareholders equity, Bulbank is actively penetrating the individual and household-banking sector. The Bank continues to expand its position on the credit market keeping the high quality of the assets.

Stephan Schneider, CIO SEB AG

Based in Frankfurt, SEB AG engages in a range of services including commercial and personal lending, savings accounts, installment credit, mortgage lending, electronic and telephone banking, VISA credit card services, financing of foreign trade, international payments.

Franck Sidon, CIO Jefferies International

As a global, full service investment bank and institutional security firm, operating in more than 25 offices in six countries, spanning three continents, Jefferies International provides world-class investment banking, sales & trading, research and asset management.