Scandinavian Strategy Preparing for a Cash-Less Future

Annika Falkengren, the head of Swedish bank SEB, talks about the shift to digital banking, underpaid bank managers and the need for a female quota.
Annika Falkengren is one of the few woman in what is still a man's banking world.

Annika Falkengren has a very busy schedule. Before the interview with Handelsblatt, she attended a working dinner with representatives of German small and mid-sized businesses known as the Mittelstand. Afterwards she was off to the "European Banker of the Year" award ceremony in Frankfurt, which she won in 2013.

The Swedish bank that Ms. Falkengren leads, Skandinaviska Enskilda Banken or SEB, is one of the most profitable banks in Europe, and yet its executives earn less than their counterparts in other European countries. Ms. Falkengren reveals the secrets of success in Sweden's banking sector – and the broader banking world.


Handelsblatt: Ms. Falkengren, last year you were named European Banker of the Year. Normally, an award of that nature is followed by declining fortunes. How did you do?

Ms. Falkengren (laughing): Well, you do have to be very careful when it comes to that. I was fortunate to have another successful year with SEB. Perhaps it's because of our business model, which is more focused. For instance, we only want to grow in Scandinavia and Germany. Many at our bank think like entrepreneurs: We can’t stand high costs.

Is the crisis in Ukraine affecting business?

Not very dramatically yet. But the climate has become harsher in the Baltic countries.

You are a successful woman and one of the few female chief executives; there are only four others in Sweden's top 100 companies. Why aren't there more?

Everyone is trying to bring more women into leadership positions, in Sweden and Germany alike. A lot depends on mentoring individual talent, and the results vary widely. At SEB, about half of the people in lower hierarchy levels are women, and about 25 percent in top management, that is, on the executive board. We have what we call a grandfather principle. I mentor people at two management levels below me, to give women better professional opportunities. Another measure is that one in three candidates for a management position has to be a woman. It's an ongoing issue, and you have to keep working on it.

Is it still true that few women pursue top positions?

Perhaps, but in Sweden we have parental leave for both fathers and mothers, fathers also take six months' leave nowadays, which helps. The bank can do a lot, but work at home also has to be shared. And if you have two CEOs in the family, that's difficult.

How do you handle the division of labor?

I travel a lot, and fortunately children grow up more quickly today. I definitely try to be at home on weekends. Besides, I'm not away on business trips for more than five nights. I'm flexible. Sometimes I also take my 10-year-old daughter to school before going to work.

Would a quota help women?

Pressure is important. Otherwise, nothing happens. And we also need a corporate policy that emphasizes gender equality.

According to a study by the SNL consulting firm, you achieve the highest returns of 15 major European banks, but you have the lowest salary.

That has to do with corporate culture in Sweden, and it's also a widespread phenomenon among Nordic banks. The salary level of top bankers is among the most sensitive issues in society. For instance, we don't have bonuses. Nevertheless, we are underpaid in comparison to major businesses in industry and in the long term, that should change.

Are banks still under too much political pressure today?

Absolutely. We are not involved in the scandal over the LIBOR benchmark interest rate, and we haven’t received any government bailouts. But politically, the climate is cool; people don’t want top bank managers to get high salaries. This is partly tradition, but also, politicians tend to point the finger at banks even though we're not involved in any scandals or misconduct. Bankers have to be tough in Sweden.

Could learning from the Swedish model help us avoid scandals in the future?

First of all, we have a very strong owner at SEB, the Wallenberg family, which also chairs the supervisory board. The Wallenbergs have led the bank for 160 years, with highly traditional virtues and values. In addition, SEB takes a long-term view – also with small- and medium-sized companies in Germany. You have to feel comfortable with your strategic decisions, even if people don't always understand them right away. For instance, there was incomprehension when we withdrew from Ukraine in 2011. Today everyone says that was a good decision.

You stress the long term.

We live in a time when chief executives are quickly replaced. Hedge funds with short-term goals have a great deal of influence. That isn't good. I'm all for long-term strategies, especially in the banking business.

Let's get back to SEB. You have a 13-percent rate of return. The former head of Deutsche Bank, Josef Ackermann, once announced a return-on-equity target of 25 percent before taxes. Would that still be realistic today?

No. No bank can achieve 25 percent before taxes today. We aim for 15 percent in the long term, which ought to be achievable. We now have a core capital ratio of at least 16 percent and a 13.3-percent rate of return. In the past, that was enough to achieve the goals we set ourselves. But regulators will want to see even thicker capital cushions. We anticipate a capital ratio of 20 percent.

Digitization is changing the banking world and Sweden is more advanced in this respect.

It's become hype. Everyone is interested in the subject. In my opinion, we still face the same question: How do I do business with my customers? In Sweden, 98 percent of all customer contacts in the private customer business are digitized. In Sweden, a customer visits their bank branch once a year on average. So how do I keep being a customer's bank of choice when I hardly ever see them? One of the tools is our telephone banking service, which is available 24/7, even on Christmas Eve. The trend away from local branches will continue.

And where will it end?

The next generation will no longer go to bank branches, and won’t use cash, either.

But today, there aren't any uniform standards.

Not in Sweden; we've already agreed to a uniform payment system. Payment by mobile phone is popular. You can use your phone to tell your bank to transfer sums of money, often small amounts, for example €10 or €15 to buy lunch.

What about security?

I think we sometimes overlook customer needs because of security. It's more important that applications are easy and work quickly. New providers tend to think from the customer's perspective, and we banks can learn something from that. Amazon and Google work so easily and that’s the secret of their success.

What does this mean for the future of banking?

That we provide more analyses, for example. Today we can already tell the customer if he spent more on his pet last week than in the weeks before. We used to think that this was too personal, but customers are actually fine with it. We can analyze the data we have on how people pay and save and can give customers recommendations. You see a lot of recommendations on the Internet, but not as much from banks. That has to change.


Peter Köhler is Handelsblatt's leading banking correspondent in Frankfurt, and Robert Landgraf is deputy editor of the financial section of Handelsblatt. To contact the authors: [email protected], lan[email protected]