The year just gone was a tetchy one, defined for many by quarrelling politicians and two surprise votes in the UK and the US. The votes temporarily put the frighteners on the stock markets and put many CFOs on a semi-permanent red alert, which is not the ideal condition for business. Few sectors were immune from the turbulence, including financial services, which variously had fines, hacks, investigations and new regulation to navigate as well.
But Brexit and the Donald Trump victory may even bode well for some financial behemoths. Just as Bank of England regulations will make UK banks hold enough money to absorb losses without help from the taxpayer, so the new president could ease US restrictions on how much capital lenders have to hold. The message from the financial services sector was therefore largely business as usual, albeit through gritted teeth.
Neeta Atkar, TSB’s former chief risk officer (CRO) and now non-executive director and chair of the Risk Committee at the British Business Bank (BBB) has a unique perspective on this. Half of her career was public-sector oriented at the Bank of England and the Financial Services Authority, the second half was in high street banking and risk management (at Royal & Sun Alliance, Abbey National, Lloyds and TSB), and now she’s at the BBB – a public sector body that builds commercial partnerships (currently 90) with financiers (banks, leasing companies, venture capital funds and web-based platforms) to provide more diverse avenues of funding for the UK’s smaller businesses.
“The general feeling is, absolutely, we’ll get on and make the country as successful as it can be outside Europe,” confirms Atkar. “We’re keen to do what we’ve always done with our partners. If we can do more of it, great,” she says. That means reminding (reassuring) the UK’s SMEs that alternative means of funding will continue to be available whether institutions such as the European Investment Fund continue to operate in Britain or not. As the BBB’s Keith Morgan said at the end of 2016, rather than let Brexit stunt ambition: “In the current environment, we encourage all small businesses to think broadly about the finance options available to fund future investment and growth.” This was a fact reiterated in the BBB’s popular Business Finance Guide, produced in conjunction with ICAEW.
As a relative newcomer to the BBB, Atkar needs a few more months under her belt to truly know whether the organisation is independent and fleet-footed enough to achieve its goals and accelerate the alternative finance sector. But from what she’s seen so far, she thinks the bank is groundbreaking. “It’s been hugely successful in just two years and I think it has a lot more potential. It executes its responsibilities within the public sector framework – it would be naïve to think there aren’t interactions with the government all the time – but the board is clear about its responsibilities within those parameters.”
In October, the IoD’s James Sproule told The Telegraph: “Time will tell if BBB is doing the right thing. My inclination is that it carries more dangers or problems than it solves. I don’t think there’s as big a market failure as many people suspect. When banks won’t lend, it’s often because underlying credit is not that good. I remain to be convinced.”
As chair of the Risk Committee, I wonder if all those partners and the potential risks associated with them make her twitchy? She confirms that partners pose risks, but they’re put into context. The degree of tension, the risk, has to sit alongside the bank’s responsibility to provide a diverse system of funding.
She explains: “I’m interested in understanding what the risks are to the bank’s ability to meet its four stated objectives, which are to provide funding, to diversify funding, to provide better information (which is why we collaborate with ICAEW), and to use taxpayers’ money wisely.
“I look at diversification: are we over-concentrated, are we going outside of the norm? The more diversification the better but clearly you want to be using taxpayers’ money wisely. Like any bank, you look at the underlying quality of the people you’re working with,” she says. She seems confident.
The bank has certainly bolstered its own board with quality personnel. Atkar says four chartered accountants bring “the financial acumen” required for an organisation that has a “relatively complex balance sheet” combined with a “business acumen that is second to none”. And as well as Atkar’s broad experience across the public and private sector, she has also been a justice of the peace for the last 18 years. She draws upon all of it to either help inform her decisions today, or aid her understanding of what’s at play.
“You’ve got to be able to make the decision and exercise good judgement in difficult situations,” she explains. “The magistracy work is judgement – you don’t necessarily know whether the two people in front of you are telling the truth. The swiftness of the decision-making in the court room, where you can’t set up a committee and talk about it for six weeks, sometimes helps in corporate life.”
She was compelled to use all her stamina, judgement and technical nous after the financial crisis of 2008. Atkar joined the retail arm of Lloyds TSB in 2007 as operational risk director, just before the crash and shortly before it became Lloyds Banking Group. Her role changed dramatically, and in ways she could never have imagined, in January 2009.
“Once the decision had been made by Lloyds to buy HBOS, the CRO of the group asked me to step up to do a group level role, so I became group director for operational risk and financial crime,” she says. “From 2009 to 2011 it was effectively firefighting. But we’d also bought this massive bank that on the outside looked a bit like us, but of course on the inside was nothing like us, so we were weathering the financial storm but also trying to execute a three-year programme to integrate. And then of course, state aid was put in place.”
How did she cope? You just carry on, she says. “My portion of that story is one of many. I’m sure lots of people who have worked in the City for the last 20 to 30 years would say you carry on fighting the next battle whether you’re ready, or have the energy for it, or not.”
She chuckles when we discuss the personality traits of a risk officer. She is not, she swears, spiritless. In fact her colleagues would describe her as a risk-taker in her personal life. “A really good, functional risk officer is prepared to take well-thought-through risk/reward trade-offs,” explains Atkar. “My real experience is at TSB as CRO. Fundamentally, for example, banks take risks because they lend money to people and they know they’re not always going to get it back.
"That’s the risk. So you price the risk – the rate on the loan will be a particular rate because you factor in not getting it back. You can’t start life in a risk function saying you won’t take any risks because that means there is no business. You’ve got to be confident, to understand where, and when, and how to take the risks you’ve got to take. Sometimes you just need the courage of your own convictions,” she says. “You have to make the decision and you have to live by that decision.”
That must be hard when the risks mutate almost monthly, and you’ve got the regulators breathing down your neck. If a risk committee has to think about anything from reputational, operational or business risk through to credit risk and market risk, I wonder, does one take priority over the other? And has the increased regulation and scrutiny of financial services made the job less appealing? “The credit risks banks faced were a massive issue in 2007/08 and some people would say, as a result, banks better understand the credit risks they’re taking.
"As we move into a world where we rely more on technology, it’s possible the dominant risk becomes operational risk. As a CRO, I’m interested in all of the risk types. If any one of those goes wrong, the outcome could be damaging to our reputation. It’s just about the speed at which some of them play out. An operational risk can manifest itself immediately; a credit risk, such as a mortgage, might take a lot longer. It doesn’t mean one is more important than another,” says Atkar.
As for the regulators, and specifically their attempts to improve individual accountability in the banking sector, Atkar believes “it’s putting people off taking senior roles, and that’s a shame”. She continues: “My personal view is, I behave and am accountable, and understand the importance of my accountabilities, absent any regulation. Someone puts me in a role, whether it’s a statutory role on a board or a management role, and I will do the best I can to execute those roles. I don’t need a regulator telling me how to behave.
"I like to think I behave in the right way. Clearly the regulators’ view is they had to do that to land the message. What I’ve learned is that it’s very much about tone from the top. You can put in as much regulation as you want but if the CEO and management team are not completely aligned, and understand their accountabilities, then nothing will change further down.”
Atkar feels she has left TSB at the right time, with the bank in a good place, and she’s proud of her legacy. “The most challenging and the most enjoyable part of my career has been building TSB and the journey we went on to find a buyer for it; the experience of listing the entity on the stock exchange and then, quite soon after, being approached by a new parent and delisting.
We achieved something wonderful,” she says. “It’s no surprise that she decided to take a different turn in her career. As ever, timing was everything. “The BBB plays very nicely into my experience – what I know about banking, what I know about risk management, and the public sector world – it’s perfect, actually.” And if it’s slightly less onerous, and gives her the chance to be a little less “executive”, that’s fine. Atkar is at a point where she is comfortable admitting it’s OK to take a step back.
“Sometimes there comes a point when you say, do you know what, I know I need a bit of a break. I’m taking three months off at the start of this year because the danger is I’ll lurch directly into another role without drawing breath. There is more of an acceptance today that you’re allowed to do that. Millennials already question why you need to work consistently; they want to do more interesting things with their lives. It’s a tide that’s turning,” she notes, sagely. And she’s happy to be riding it.
Career in a nutshell
2016 British Business Bank
2007 Lloyds TSB Bank/Lloyds Banking Group
2004 Royal & Sun Alliance
2002 Abbey National
2000 Arthur Andersen
1998 Financial Services Authority
1997 Justice of the Peace
1988 Bank of England