Banking on a Gentleman’s Agreement

The culture associated with Wholesale Banking (“get the deal,” Type A personalities) vs. Retail Banking (stable, relationship-based)  is common in North America. The former is well-illustrated in the character of Gordon Gekko in Oliver Stone’s movie Wall Street, summarized in his mantra of “greed is good;” The latter is your friendly banking advisor at your local CIBC branch where you go to have a chat about the mortgage, financing your kid’s college education, because, as their slogan says, “It’s worth a talk.” What struck me as interesting was the way in which this latter culture comes to dominate not just the retail segment of the market but also the wholesale segment in some other countries, such as for instance, Japan.

In the past 4 years before I came to Rotman I consulted to Shinsei Bank, helping their Japanese staff improve communication with their foreign managers. By way of background, Shinsei Bank was the former Long-Term Credit Bank (LTCB), which was formed in post-war Japan to finance the development of Japan’s industry and infrastructure that had been destroyed during the war. It was the most prestigious financial institution in the country, and its employees came from the elite universities of Japan. Following the crisis resulting from the burst of the bubble economy, LTCB had a huge amount of bad debt, which led to its bankruptcy and subsequent acquisition by an American Venture Fund (Ripplewood Holdings). The bank was reorganized, and one significant difference was that most of the top management came either from Wall Street or from other countries which share a similar ethos insofar at the Wholesale Banking culture was concerned. My job was to coach Japanese mid-level managers who had grown with the bank, suddenly having to not only effectively communicate with their foreign bosses, but who would also have to understand and wholeheartedly follow the ethos of their bosses.

That experience gave me some insights into how investment banking works in Japan. It is very much based on old-boy networks, relationships between individuals, relationships between institutions, and yet more of those relationships. The only way that it resembles Canada’s banks is in the retail sector where as we discussed today, the big Canadian banks have a “gentleman’s agreement.” The choice of words is not accidental, because it presupposes a social and cultural code of behaviour in which an unseemly fascination with wealth was so ruinous to one’s individual, family and professional reputation, that most CEOs would not have adopted the approach to pushing mergers for personal gain. The biggest challenge I faced working for Shinsei Bank is in finding a way to translate across that chasm: the chasm that separates the Wholesale Banker from the Retail banker in Canada. I have to admit that in all honesty, I was not very successful in effecting that translation, but it raised some questions that have shaped my MBA studies about the deeply-held values, and the reasoning processes that operate at such a sub-conscious level in the minds of people. It constantly amazes me how little control we have over those deeper thought processes which play such a significant role in the decisions and actions of those people we call employees, whether entry-level analyst or CEO. How does one distinguish one disposition from the other? That’s easy: by their actions shall you know them.

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