The double-edge sword of scouting top notch bankers

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Getting senior bankers has become difficult in the fast growing banking industry where there is a come up in the massive number of new banks. Further, the National Bank of Ethiopia (NBE) says unhealthy remuneration development is observed in the banking industry.
Human capital development experts and professionals in the banking industry said that the banking sector is struggling to hold up the seasoned experienced staff at the senior level including the directorial position, while the new entrants are experiencing trouble in grabbing experienced experts at the medium level to key managerial posts.
Experts like Gemechu Waktoal, Professor at Addis Ababa University and Founder of The i-Capital Africa Institute that is engaged on consulting companies like banks on the development of human capital besides its different activities, says the challenge is expected since there is weakness in producing skilled labour. Furthermore, he expressed there is lack of attention for developing succession plan internally at the banks in addition to other external factors.
According to the sector experts, on the external side besides limitation of producing qualified and competitive experts, the NBE’s strict requirement at the senior management when hiring has presented a challenge.
Head hunting and filling the required staff for the new entrants and fighting to hold bankers at the established banks has become one of the discussed issues at the sector arena. Capital has got different information from sources that show the value of bank experts spiking in relation to factor of grabbing or losing the financial firms from one to the other.
The banking sector has become one of the leading fields that pay huge sums as salary besides providing different incentives.
For instance, recently one of the bank presidents has secured a double promotion in his salary as a result of Board of Director fearing to loss him in addition to his value as seen from the stakeholders who appreciate his achievements.
Similarly, senior bankers in different banks are getting different incentives like providing tens of millions of birr loan scheme and giving bank shares besides an attractive and extraordinary salary increment.
“The recent scheme of providing different encouragement initiatives by banks for their employees might vary from position to position but most of the beneficiaries are those who worked for many years at the given bank and that are engaged on the activities from a director level,” one of a senior bankers at one of the long established bank told Capital.
On the other hand the new entrants are in trouble when it comes to acquiring experts in different positions including chief executive officer or president, which is required in order to get a license for operation from NBE.
Experts said for these up and coming new banks one of the burden and major cost is salary because they have to pay a competitive sum to attract skilled labour, who shall come from well established financial firms.
Frezer Ayalew, Banking Supervision Directorate Director at NBE, agreed on the tendency tof unhealthy development in staff benefits. “Recently, there has been an unhealthy remuneration development in the banking industry, but one needs to ask is it really related with lack of skilled labour in the industry,” he expressed.
A bank expert who manages a key position at one of the oldest private banks assured that the latest move by bank owners and boards is directly related with the shortage of skilled and qualified professionals as per the standard of NBE. He added that losing staff even at the branch or lower level might have effect for any given bank.
He said that operational banks should hold their staffs especially those who have key roles in the banking activity because the damage is not only related with losing a staff but also in relation to the day to day activity at the centre and even at the branches.
“Owners of are not only afraid of losing staff but also their clients and proficiency since a staff would not leave a bank alone,” he explained.
“Stalling and implementing others strategies and drawing vulnerability from company business secrets when you get the chance is unfair,” Gemechu stated arguing that such moves are against professionalism and ethics.
“So it creates a lose win situation in the business besides labour movement from one place to another,” he added.
He added that it is practical that within very few years, experts shall move up to four banks, which shows how much the sector is at huge risk.
Gemechu with his insight said that based on the experience that the sector has been through; access to qualified experts would be eroded. He said banks did not work on skill development and most of them do not have succession plan and are not focused on producing and qualifying new leaders, “Due to that of course the pool will be dry which leads to push factors.”
“I know there are about two strong banks working on supersession planning but most of them are not with it and some of them do not even understand the issue of working human capital development,” he explained the reason for the scarcity of qualified leaders besides the strong rule of NBE.
He said that because of the requirement, new banks are supposed to hire experienced bankers as per the NBE directive. “Just how many of them have been under operational preparedness for their lower level staffs as they open their doors? They are simply awaiting the licenses and then engage on taking others from existing established banks.”
He said that the NBE directive, which for instance requires presidents to have at least 12 year of experience out of which 5 year should be spent at a vice president level in the banking industry. This requirement limits the scope for the human capital search thus new banks focus on acquiring top notch bankers from other banks reeling them in with attractive benefits; of course this is of great benefit to the experts because of demand of expertise.
According to the leader of The i-Capital Africa Institute, a consulting firm that delivers intellectual capital development packages; when the source is becomes dry, the sector shall look into other alternatives to fill the gap. “There might be use of experts from abroad as per NBE criteria, while it is embarrassing for a country with concerns of high graduates with high unemployment rate.”
“When banks are unable to fill the gap from the local pool of talent they will seek to import professionals,” another expert on the banking industry, who demands anonymity said explaining that those who come from abroad may not have similar expertise and bank practice that is found with Ethiopia.
He also underlined that the regulatory body, NBE, itself may not have a capacity to control the expats that have huge experience in the dynamic sector. “The banking sector in Ethiopia is very traditional, while those who come from abroad have huge exposure on the global market that would be difficult for NBE to manage them,” he added.
Future
Experts in the sector insist the central bank to relax its directive. “I understand the motive of NBE which is considerate of trust and experience which is set as a criterion but similarly the realty should also look into talents alongside length of experience,” Gemechu said.
He recommended internal and external solutions to mitigate the challenge that will be applied as soon as possible.
“The regulatory body should consider the dynamism on the sector, and banks on their part to apply multilayer intervention,” he added.
Frezer said that NBE does not have a plan to change the directive that it amended in 2019 under the directive number SBB/70/2019.
The directive stated senior executive officers mainly referring to vice presidents indicated that they have a minimum of 10 years of experience in the banking, of which, 4 years as department manager and other senior executive if directly reporting for the board of directors to have 8 year experience and three years on managerial position.
“Currently, there are 18 banks in business the new comers shall get vice presidents with NBE requirements from them,” he added otherwise there will be no change regarding relaxing the directive,” the Banking Supervision Directorate Director told Capital.
According to The i-Capital Africa Institute leader, internally the board of directors of a bank should work on talent and succession strategy mainly on key roles like what they do today on profit escalation.
“They have to also establish and hire qualified experts on capacity building department,” Gemechu said.
“The banking sector, which is knowledge based industry, shows dynamism from time to time on different conditions like on fin-tech, COVID 19 leads new approaches and others. Due to that the knowledge expansion is required with different approaches which focused on specialized certifications,” he added.
He reminded that NBE has enforced banks to allocate two percent of their revenue for skill development but that should be properly revisited by the regulatory for its effectiveness.
Gemechu said the Ethiopian Bankers Association should take its role on the area.
Frezer reminded that NBE is working to revamp and massively engage on knowledge development at its facility located at Akaki.
“Of course the financial sector is strictly regulated but I am afraid that it would affect the industry’s health that may leads to crisis,” an expert said.