The Grade II listed bank

The Grade II listed bank. Photo: kenny1,
Written by Chris Skinner

It’s difficult for the incumbent bank to kickstart its digital transformation when there’s so much red tape around, says Chris Skinner. Costly, too.

I got a laugh the other day when I referred to Grade II listed banks, but I was serious. For overseas readers, we have a system in Britain of listing heritage buildings. They have various grades that restrict what you can do with them. Grade I means you can’t really change the building at all, while Grade II is slightly more flexible, but probably wouldn’t allow you to add a sauna or swimming pool if it’s not in keeping with the period the house was built. I know this because I live in a Grade II listed building, which is why I refer to banks as Grade II listed banks, because they’re really hard to change.

In fact, to illustrate this point, I remember working for a large US system integrator who was asked by Her Madge (Elizabeth II, not the singer) to rewire her house. In fact, it was Buckingham Palace and Horse Guards Parade that needed to have internet access, so more than 10 kilometres of cabling was required. However, as the Palace is a national treasure, no drilling was allowed. It was quite a job, but the job got done, slowly, carefully and with a lot of thought.

This is similar to how I look at banks. They have so much legacy and heritage that their systems and structures should be Grade II listed. Nothing will change this bank without formal approval and a lot of thinking. The working committee will need sign-off from the subcommittee for banking change, who will need sign-off from the steering committee of the subcommittees, who will need authorisation from the COO, who cannot give authorisation without agreement of the management committee, which needs approval to even think about the change from the CEO in the first place. Boy, that’s going to take time.

Even when the approval is given, the working committees will need a cross-functional programme representing all aspects of the business to be affected by the change to come together to sign off on their bit of the change. It’s going to be really slow, folks. Oh, and it’s going to cost a lot as well. That’s why I find it amusing to see how proudly Grade II listed banks are announcing their digital transformation programmes:

The list goes on. In fact, you’re not really a big bank anymore unless you’re investing a few billion in digital transformation. But hang on a second. A billion. That’s like 1,000 million, isn’t it? So they’re actually investing a few thousand millions in refurbishing the Grade II listed bank, yet there’s lots of new digital startup banks that have managed to launch with just a few million. The largest funded new digital startup, Atom, has $300m and it’s up and running fine.

So the difference between a Grade II listed bank and a startup digital bank for digitisation is a factor of at least two-and-a-half times multiple.

OK, I’m being unfair, as the Grade II listed bank has to shut down buildings, lay off humans, build the new systems and transition across. I hear you, but hey just remember a billion is $1,000,000,0000 … I wonder what a new digital bank startup could do with $1,000,000,000 at the outset?

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– This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. Read more here. Photo: kenny1,

About the author

Chris Skinner

Chris Skinner is an independent commentator on the financial markets through the Finanser, and chair of the European networking forum the Financial Services Club, which he founded in 2004. He is an author of numerous books covering everything from European regulations in banking through to the credit crisis, to the future of banking.

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