Swedbank: building on good governance

Last year Swedbank climbed the IR Magazine Euro Top 100 rankings, going from 41st position to 14th place and winning the award for best IR by a CEO in the large-cap category.

The bank was also a runner-up for the best corporate governance gong. Gregori Karamouzis, the former Citigroup investment banker who joined the bank in 2010 and heads up its IR program, explains just what the Swedish banking giant has been doing right since the financial crisis.

Leading with your values

Thinking about what sets Stockholm-headquartered Swedbank apart when it comes to corporate governance, Karamouzis says he can sum it up in a single word: transparency.

Gregori Karamouzis, Swedbank
‘The more open you are, the better you can become at meeting expectations’

‘The current management and board have, since the financial crisis, embarked on this transparency philosophy,’ he says. ‘And it really is a philosophy, not only a governance structure. Of course, the whole financial industry has realized that this is the only way forward and a lot of the regulatory initiatives we’ve seen lately – and are continuing to see – are about transparency.’ So this push for more openness isn’t unique to Swedbank, Karamouzis adds, though the bank has been proactive in changing its culture.

The bank has been trying to instill this philosophy of openness for six or seven years now, and Karamouzis says the majority of employees really feel this is ‘part of what Swedbank is now’. Ultimately, this has happened because it’s such an important matter for the board and senior management. ‘Top-down is sometimes not the best or most appropriate way to go but you need to lead with your values and that starts with senior management – otherwise staff won’t follow,’ Karamouzis explains. ‘Our CEO and senior management in general have been instrumental in this effort.’

The financial community also appreciates the access it has to senior management at Swedbank, he continues. Fund managers can meet directly with both the CFO and the CEO and ‘external stakeholders feel there are no ridged policies that put a distance between management and the operational part of the business.’

The benefits of openness

There are a number of benefits that grow out of a more transparent approach [openness is one of Swedbank’s three ‘core values’ alongside being ‘simple’ and ‘caring’]. ‘We have been frank and open about difficult things and that’s how we’ve built our long-term relationships,’ says Karamouzis.

It’s also about managing expectations. ‘The more transparent and open you are about things, the better you can become at actually meeting the expectations of your stakeholders,’ he explains. ‘And that goes across all stakeholders: shareholders, staff, media, customers, and so on. That differentiates us because, maybe as a result of the crisis, we did an analysis and we set this philosophy, this governance structure, in place.’

Developing trusting relationships also means Swedbank receives better feedback from investors. The bank collects feedback from other stakeholders, too: each year it collects information from staff and conducts an annual survey of more than 40,000 customers. As head of IR, however, Karamouzis’ real flock is the investment community.

As well as asking questions in meetings, he says that because ‘we know many of the investors very well, they offer honest and open feedback as to whether they think a particular decision was correct, whether a move or action has been a positive or negative one. We also gauge sentiment on actions and decisions we haven’t yet made.’

In addition to helping the bank make decisions and assess sentiment from the Street, transparency translates into patience. Noting that mistakes will be made from time to time, Karamouzis says if you have the right relationships in place, ‘even if everything is not top-notch, you’re given room and time to correct things.’

Power to the people

For Karamouzis, there are two things propelling corporate governance in the banking sector today: regulation and the customer. ‘The regulatory aspect is driving governing structures and puts certain minimum requirements in place,’ he explains. ‘Then of course there’s how the business develops and evolves and how our customers choose to interact with us.’

And it seems that for Karamouzis, the impact of changing customer behavior cannot be understated. Again it comes down to transparency, not just from within the bank but also via various regulatory changes that have brought greater choice to the consumer.

‘[The situation today] is not even comparable to how it was a few years ago – today consumers can compare all providers and make decisions on the internet,’ says Karamouzis. One of the impacts of this is that brands are becoming even more important, he adds, with opportunities to ‘communicate your values and what you stand for through digital channels’ as customers make decisions remotely.

With its high level of internet access – in 2012, Sweden had 94 percent internet penetration – that also translates into greater mobile banking penetration, Karamouzis says Sweden and the Swedish banking market are a bit more advanced than others and perhaps had to adapt earlier. One way the bank has been doing this is by moving the decision-making power closer to customers’ day-to-day contacts.

‘The fact that we can make quicker decisions close to the customer differentiates us,’ says Karamouzis. ‘But that didn’t happen overnight. We have educated and provided staff with the right skills and competencies.’ To make sure the policies and the frameworks that are in place are being followed, this move has increased not the direct control but the monitoring and following-up processes on the risk side of the organization, he explains.

All these changes challenge Swedbank to adapt or risk losing business. ‘Our conviction is that the power has moved – or is moving rapidly – to the consumer’s corner, away from decisions that have been made behind closed doors in bank boardrooms,’ Karamouzis concludes.

Please contact David Barrett via email or at +44 20 7749 9175 to take out a professional subscription to IR Magazine, which includes the IR Magazine Investor Perception Study – Europe 2015, or to pre-order your copy and find out how well Swedbank has done in this year’s Euro Top 100 rankings.