Banks pay price for hiring regulators as leaders

A parallel universe style of hiring often occurs in troubled banks looking for new leaders from outside, especially when no one from inside can lead them. Their boards suddenly realise management succession is only possible if you have credible managers able to succeed.

The appointment of two regulator-friendly leaders for Standard Chartered and Royal Bank of Scotland was widely praised by mainstream financial media, probably because they believe today's banks can only be run by people blessed by regulators. It is an effective push of the organisational reset button, but it could turn out to be its own costly misconception.

Bill Winters is arguably an unconventional hire for a mostly retail bank like Standard Chartered. Before the global financial crisis, he was a trader for JP Morgan's derivatives group that aggressively marketed credit derivatives in Europe. Pre-2008, its client pitches included slogans such as "Mortgage-backed securities are low-risk investments". He was part of the greedy, "push it to the limit one more time" banking culture that he disavowed after entering public service.

After a stint at Britain's Independent Commission on Banking and a partnership at an alternative investment fund, he may have recanted his view of banking's past transgressions.

Is an appointment at a regulator the banking world's version of expatiation and redemption - a virtual morality car wash for late-career senior bankers looking to reposition themselves for their last chance at a chief executive post? Until a crop of bankers who began their career after the crisis become senior enough to qualify for top positions, banks will be heavily influenced by government appointees.

Standard Chartered wields a strong brand name providing wholesale and retail banking for some of the world's fastest-growing emerging economies. So perplexing decisions such as ordering a withdrawal from private banking and then a re-entry two years later seemed illogical. Wealth management was a logical and complementary service. Most asset managers with Winters' rocket science/derivatives background would normally find retail banking about as intellectually stimulating as watching daytime soap operas. But maybe he is the new kind of leader needed to straighten out the bank's drifting strategy.