Elizabeth (Libby) Chambers is Operating Partner at Searchlight Capital Partners, and sits on the boards at Wise, TSB Bank, Vanquis Banking Group, and Evelyn Partners. Here, she shares her thoughts on the similarities and differences between UK and USA regulatory regimes, and explains the centrality of open dialogue to a well-functioning board.
The products we offer are very similar, as they fundamentally stem from the same consumer and business needs. But in the wake of recent bank failures and concerns about governance, it’s worth noting that the relative ‘weights’ of the supervisory model in the UK and USA are different, with some of these stemming from the way the financial crisis was experienced in the two countries and how much damage the sector is perceived to have engendered (and to whom and why). In the USA, ten years on from the financial crisis, banks successfully argued that their regulatory burdens were too great — and changes to Dodd-Frank were legislated in 2018. This meant that those under $50b in assets would be exempted from more rigorous stress testing, which then translated into a lighter and less resource-intensive supervisory model and less scrutiny of risks.
It’s important to note the difference in the scale of regulators’ tasks in each jurisdiction — the USA has over 16,000 banks and credit unions, without including investment and insurance firms. With that in mind, there should be some pragmatism from the regulators, but we’ve also just learned the cost of that pragmatism in the form of failed institutions and needing to step in to protect all depositors to avoid contagion. The pendulum always swings back, no? In order to support the economics of more universal depositor protection (the precedent that’s just been set with SVB and Signature) I suspect that Fed and FDIC and OCC supervisory resourcing and tougher review thresholds will need to be restored.
Another important difference is the role played by politics in shaping the regulatory climate in the UK and the USA. The USA’s Consumer Financial Protection Bureau (CFPB) is most analogous to the UK’s FCA (in terms of its brief to protect consumers), and in the USA every time the Presidency or Congress changes hands a large swathe of the leadership of the CFPB is probably going to be replaced and its budget challenged. So it’s incredibly difficult for the CFPB to have a sustained legislative agenda around a topic (e.g. borrowing rate caps, sales practices, or product mechanics that aren’t transparent) in the same way that the FCA can. So, not only is the USA’s financial system operating at a scale that is hard to supervise, the regulatory landscape is more vulnerable to shifting political winds. Additionally, there is a veritable ‘soup’ of parties that fight over jurisdiction at the state and national level, which introduces complexity around ‘who makes the rule’ that was particularly visible in the recent meltdown of FTX. In the UK it’s much clearer who’s in charge, what the rules are, and who is going to be examining your compliance on a regular basis.
“Not only is the USA’s financial system operating at a scale that it is hard to supervise, the regulatory landscape is more vulnerable to shifting political winds.”
Firstly, get the right people in the business; to attract the best talent today you’ve got to ensure that your purpose is absolutely clear as this is an increasingly important factor in bringing in the best. Then, find out from them what tools they need to do their job. Management is often reluctant to say that something will cost more or take longer, but giving them space to discuss risks and resourcing gaps sets the stage for robust prioritization discussions – and important choices - which is really what corporate strategy should be about. Finally, let them breathe and be sure the board is focused on the right questions — in my experience, this translates into questions around removing the blockers — which are often gaps in resources and lack of prioritisation.
On another note, I think it’s vital that if you find yourself in a contentious dynamic — whether it’s a difficult M&A situation or you’re on the other side of contractual debates with a commercial partner — that you explicitly spend time trying to understand the other side’s perspective. Not only does this enhance your own ability to anticipate what could happen next, it gives you an opportunity to resolve the situation to everyone’s benefit. More often than not dynamics like this come down to some sort of miscommunication — it’s absolutely vital that we invest the time to understand the position of those we disagree with, as only then can you work towards a solution that truly works and lasts.
I like to have at least one lengthy debate with well-framed questions and insightful analysis that looks to solve a genuine problem or issue that’s blocking us from achieving what we want to. The board should not be taking up valuable time telling each other war stories and anecdotes from their own careers, but rather allowing management to speak and present without too much interrupting. The management team will have thought incredibly deeply about the issue and will have considered the questions — so we should give them a chance to share the work they’ve done, after which the board has the opportunity to ask questions and probe managements’ thinking and assumptions. I’ve noticed that often, it takes a great chair to ensure there is enough oxygen in the room for executives to do that. And when that happens, we make better decisions together.
“The board should not be taking up valuable time telling each other war stories and anecdotes from their own careers, but rather allowing management to speak and present without too much interrupting.”
Another thing that defines a good meeting is when the CEO and CFO feel truly comfortable to speak off the page, and to ask questions or seek help. Give them a chance to share their own key concerns that are keeping them awake at night and ask the board for input that may be helpful or concerns they may have.
Key to ensuring all of this is a culture of open dialogue on the board — it should be a welcoming and friendly place where people feel comfortable and candid. Thinking back to some of the intense challenges I’ve faced with boards in the UK and USA, this open dialogue is critical — and it needs to always be present. Once the precedent and tone of open dialogue have been set, this very quickly becomes just the way that the board works and the way it approaches problems. It allows you to develop the intellectual and interpersonal muscle that the board needs when it does have to face up to a serious crisis.
First and foremost, I think about whether I can provide a different perspective and complementary skillset to the people already around the table. As I’ve had experience working in global companies with global operations, as well as leading strategy transformation and brand efforts, I try to think specifically about how this will be beneficial for the organisation. Really, it all comes back again to thinking about the meetings themselves — am I going to bring experience that complements the debate and helps stimulate discussion? Am I going to bring in a different perspective and relevant expertise?
“It all comes back again to thinking about the meetings themselves — am I going to bring experience that complements the debate and helps stimulate discussion?”
Another thing I look out for is whether the organisation has its customers at its core, with a credible purpose and evident passion for making a positive difference. I also love to see a rich heritage of doing just that in the company — that heritage aspect attracted me to both Provident (now Vanquis) and TSB.
Anyone who knows me will be well aware I’m a huge newspaper reader, and when I’m travelling between the UK and USA I’ll usually have a bag stuffed full of old copies to catch up on current affairs. By my bedside table, I only ever keep a novel, and as I’m planning a trip to Cyprus and Turkey with my husband, I’m reading books by a wonderful author called Elif Shafak, who writes about this part of the world.