Four years after the financial crisis, banks have yet to regain the trust of their customers — and the new wave of industry scandals this year has only exacerbated the damage, Irene Dorner, the chief executive of HSBC USA, told an industry crowd on Tuesday evening. In a speech that was part rally and part reprimand, she warned her colleagues and competitors that banks need to change more than just their capital levels to fully recover from the crisis.
"Frankly, we've still got a lot more to do," she told a crowd of about 600 bankers, financial executives, lobbyists and other industry members. "The trust in the whole of our industry has plummeted. Trust is to be earned, and it takes years to create, and a matter of seconds to destroy."
Dorner did not exempt herself from her scolding, referring upfront to the "well-founded" criticism of HSBC's missteps, including the U.S. Senate investigation of its anti-money-laundering practices. But her company is only one of several big banks to face renewed crises this year.
The big-bank failures and bailouts of the financial crisis are largely in the past, and the populist anger of last year's Occupy Wall Street protests has quieted. But now the industry has been rocked by massive trading losses at JPMorgan Chase (JPM), a new spate of lawsuits over banks' subprime mortgage securities' businesses, and resurgent debate over the big banks' size and marriage of commercial and investment banking activities.
"Our standing hasn't recovered in step with better balance sheets, because it's not just about strong capital and safety and soundness," Dorner said. "What we are facing is scrutiny of our behavior, our decisions, our actions. People are asking us, 'What on earth are you thinking, or indeed were you thinking at all? Where did you leave your moral compass?' These are hard questions, fair questions, for HSBC and actually for the whole industry, and that's because this has been more than a series of unfortunate events."
In an interview after her speech, Dorner said that the industry has been slow to acknowledge the extent of the problems it needs to fix.
"It's probably taken us a while to understand the level of public discontent and anger against the banks, and you fail to understand that at your peril," she said.
"This will take a long time to rebuild," she added. "As long as one event happens to one bank, it in effect happens to all of us. So every slipup, every [fall on a] banana skin has the same impact on all of us that it does on the actual perpetrator, that's the concern. So until we're through all of these crises, I don't see the situation improving drastically."
Dorner, who ran HSBC's Malaysian operations before taking over its U.S. bank in 2010, was promoted to her current role a year ago. This year, American Banker magazine named her to the top of its annual list of The 25 Most Powerful Women in Banking.
The annual dinner for the honorees, sponsored by American Banker and parent company SourceMedia, celebrates the most influential women in a male-dominated industry. But in recent years the event has also turned into both a pep rally and a public soul-searching exercise for the bank CEOs and other top executives, male and female, who attend.
In her speech, Dorner called for banks to rethink their fundamental ways of doing business, and urged the industry to hire and promote more women as a way to change its culture and decision-making processes.
"If we are expecting change, more of what we are doing is not going to get us to where we need to be," she said. "The legacy of leaders is determined by their success at creating conditions where their organization, and everyone in it, and everyone served by it, can thrive in the long term. … We must make sure that how we achieve is as important as what we achieve."
Dorner emphasized that she regards the promotion of women and other groups that are under-represented in the upper echelons of banks as one of her responsibilities as a chief executive.
"Only by creating a meritocracy will our organizations be sustainable," she said. "Diverse teams bring innovation and different thinking and different solutions. And if we can get just some of this right, it will move us along the path to rebuilding trust."