UK high street bank Lloyds Bank is reducing the size of its risk management department, citing its role as a “blocker” to the bank’s “strategic transformation.”
The Financial Times reported that a memo sent last month by chief risk officer Stephen Shelley detailed plans to revamp the risk department. In the memo, it was noted that two-thirds of the bank’s executives feel that risk management is hindering progress.
“We know people are frustrated by time-consuming processes and ingrained ways of working that impede our ability to be competitive and leave us lagging behind our peers,” the memo stated.
The perception of risk management as an obstacle to innovation and profitability has been a longstanding issue within the sector. This was displayed during the 2008 financial crisis when banks continued to invest in sub-prime lending despite warnings from risk managers.
In response, the risk management field has worked to convey that effective risk management can drive revenue by enabling banks to make informed decisions based on more accurate modeling and understanding of exposures.
However, Shelley’s memo indicated that less than half of the Lloyds workforce believes that “intelligent risk-taking is encouraged.”
In a statement to the Financial Times, the bank announced that the reorganization would result in 45 “role reductions” after accounting for the creation of new roles. The bank also mentioned plans for “upskilling” in certain areas.
The Financial Times also cited a source familiar with the restructuring, suggesting that around 175 permanent roles may be eliminated, with 150 of those in the risk division. Nevertheless, the bank intends to create 130 new positions focused on specialized risk and technical expertise.
This decision was met with criticism from the independent trade union BTU, which represents Lloyds’ employees. General secretary Mark Brown remarked that the bank was “throwing the baby out with the bathwater,” especially as it currently faces a regulatory investigation into potential mis-selling of car loans and has set aside £450 million for possible fines.