The Human Capital Specialists

April 2017

Challenger Banks:

Where and how are they sourcing

essential talent in risk and compliance?

A market study by Peter Johnson

The Human Capital Specialists | www.leathwaite.com

Challenger Banks: Sourcing talent within Risk and Compliance

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Market study findings

Challenger banks are not just riding the current economic storm, they are ploughing their own

path by outperforming the Big 5 Banks in all the key categories: successful public offerings, agile

cost bases, superior customer service and higher earnings per share; all of which are driving the

popularity and growth of their products.

There has been much reported on the impact challengers are having within the banking sector, however, an area that

has not been explored in detail is when, and from where, they are sourcing the talent they need in critical senior roles

within risk and compliance.

We have analysed the risk and compliance functions at a group of 26 challenger banks, which can broadly be broken

down into three groups: large challengers such as Clydesdale, TSB and Virgin Money; smaller challengers such as

Aldermore, Metro and Shawbrook; and digital challengers such as Atom, Monzo and Monzo. Our findings are

detailed within this report:

Experiencing a lack of

internal talent

• A very low number of firms have promoted

internally to fill Chief Risk Officer and Head of

Compliance roles. Only 12% of Chief Risk Officer

and 8% of Head of Compliance positions have

been awarded to internal candidates.

• The UK regulators continue to take a keen interest

in proposed appointments to guarantee

candidates will have the technical and influencing

ability to ensure financial and conduct

responsibilities are met.

• It is to be expected that early stage start-ups will

need to hire from the external market but it is the

clear trend across all challenger banks, regardless

of size.

• This is in stark contrast to the Big 5 Banks where

there is a strong bench of more senior individuals,

often very well known to the regulator, who are

ready to step up into senior leadership roles.

• Of the small percentage of internal promotions to

fill Chief Risk Officer and Head of Compliance

roles, the vast majority have taken place at the

larger challenger banks. This is due to their larger

teams and more senior individuals from which to

pick.

Harnessing the benefits of

executive interim solutions

• Many start-ups and growing challenger banks

have executive interims/contractors in senior

roles, allowing them to keep a low fixed cost

base during periods of growth.

• Their ability to do this has been aided by a

marked rise in the number of high calibre senior

risk and compliance professionals choosing a

career of short term contracts, rather than

permanent roles.

• Whereas in the past firms may have relied on

secondees from Big 4 or boutique

consultancies, more are now looking to

independent executive interims, who provide a

more economical solution.

• Often executive interims will have broader

experience gained from a range of

organisations and may have operated at a more

senior level than their peers at other

organisations who are in permanent roles.

Specialists in change, they can help firms set up,

build out and embed a strong risk and

compliance function.

As with the broader risk and compliance market, only a small proportion of heads of risk and compliance at

challenger banks are gender diverse. Of the 26 challenger banks analysed for this paper, 23% of compliance heads

were female and 15% of risk heads.

This is something a number of firms are actively looking to address, through hiring senior female talent and running

internal mentoring and talent development programmes aimed at ensuring gender diversity at more junior levels is

replicated at a senior level.

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The Human Capital Specialists | www.leathwaite.com 1 2

• A significant number of challenger bank Chief

Risk Officers (35%) have been hired from the

big five retail banks or Nationwide.

• This is particularly the case with the larger

challenger banks who can both afford to hire

strong talent from larger firms and also require

someone with experience of working within a

larger, more complex environment, often with

experience of higher levels of scrutiny from the

regulator.

• 19% of challenger banks have hired their Chief

Risk Officers from other challenger banks, with

smaller firms able to offer good opportunities

for individuals to take on a broader role for

deputies and other senior risk officers within

larger challengers.

• 8% of firms have hired from Big 4 or boutique

consultancies, often when they have previously

been seconded to the firm.

• Challenger bank Heads of Compliance hires

tend be from more disparate sources.

• As with Chief Risk Officers, a number of firms

(15%) have hired Heads of Compliance from the

Big 5 Banks or Nationwide. Again, this is often

the larger challengers.

• A much smaller proportion have hired from

other challenger banks (8%) and a larger

number (15%) have hired from consultancies or

executive interims taking on a permanent role.

This has happened at a number of start-up and

early stage firms.

• A significant number (27%) have also been

hired from other parts of financial services such

as insurance. Firms have been more flexible in

hiring Heads of Compliance valuing operating

style, calibre and influencing skills above

technical product knowledge and direct

experience in the sector.

In summary, with an abundance of firms clearly at different stages of their lifecycle, challenger

banks are looking to a range of sources to secure the talent that best suits the needs of their

business. It is clear that the growth in the sector at early stage firms and larger challengers, will

continue to drive hiring of both executive interim and permanent talent.

Most start-ups and early stage challengers are hiring their Chief Risk Officer six months to a year

before launch and then build out a team below them.

A typical structure for start-ups and smaller challenger banks is to hire three senior individuals to report to the Chief

Risk Officer; one covering financial risk (credit and market), another operational risk and the third covering

compliance, conduct and financial crime.

Financial crime is a key focus for all challenger banks. Many larger challengers have recently restructured, built out

their functions and hired new Heads of Financial Crime. For firms that don’t have a dedicated Head of Financial

Crime, it is the responsibility of either the Head of Compliance or the Head of Operational Risk.

For start-ups and early stage challenger banks, hiring expertise in this area is addressed very early on in the firm’s

development, with at least one start-up hiring someone to cover financial crime before hiring a dedicated Head of

Compliance.

Where are firms hiring Heads of

Compliance from?

Where are firms hiring

Chief Risk Officers from?

Market study findings

Challenger Banks: Sourcing talent within Risk and Compliance

The Human Capital Specialists | www.leathwaite.com 1 3

January 2016

Philip Doyle joined Tandem as Head of Financial Crime

(MLRO). Philip joined from Fair Isaac Advisors, where he held

the role of Principal Consultant, Global Fraud.

February 2016

Eleanor Dewar joined Sainsbury’s Bank as Head of Policy and

Advice, Compliance and Conduct. She joined from Tesco Bank

where she was a Senior Audit Manager.

Jason Costain joined Williams & Glyn as Head of Financial

Crime Operations. Costain joined from Co-operative Bank where

he was Head of Financial Crime Prevention.

March 2016

Paul Blackmore joined Harrods Bank as Head of Operations

Assurance. He joined from Metro Bank where he held the role of

Head of Operational Risk.

Peter Rossiter joined Starling Bank as Interim Chief Risk

Officer. Rossiter joined from Brighton Consultancy where he

spent a year providing interim risk management services.

June 2016

John Hunt was appointed Chief Risk Officer (Retail) for

Together Money. He joined from Nationwide where he was

Head of Group Risk Oversight.

Alison Verlander joined TSB as Director of Compliance and

Regulatory Risk. She joined from RBS where she held the role of

Head of Business Model Analysis and Conduct Delivery.

August 2016

Mark McFadyen joined Virgin Money as Head of Financial

Crime Risk and MLRO. McFadyen was previously UK Head of

Fraud for the RBS Retail Business.

Dr. Usman Chaudry joined Tandem Bank as Head of Credit

Risk and Enterprise Wide Risk Management. Chaudry joined

from Standard Chartered where he held the role of Director,

Global Head, Policy and Risk Governance.

Margot Lyons was appointed Chief Risk Officer for Ulster

Bank. Lyons joined from GE where she was the MD of Risk

Management for GE Financial Markets, and Head of Operational

Risk for GE Treasury.

September 2016

David Kindred joined start-up bank Civilised as Interim Chief

Risk Officer. He joined from Tesco Bank where he was Interim

Financial Risk Director.

Mark Thundercliffe joined CYBG, the independent UK bank as

Chief Risk Officer. He joined from HSBC where he was Chief Risk

Officer for the retail banking and wealth management

businesses in Europe.

January 2017

Iain Laing joined TSB Bank as Chief Risk Officer. Laing joined

from Nationwide where he held the role of Chief Risk Officer.

Petrina Oliver joined Aldermore Bank as Head of Enterprise

Wide Risk. Oliver joins from RBS where she held the role of

Head of Prudential Regulation and Frameworks, Risk Analytics

and Models.

Allan Reid joined Sainsbury’s Bank as Head of Financial Crime.

Reid joins from Williams & Glyn where he held the role of Head

of Financial Crime.

Graeme Forrester joined Sainsbury’s Bank as Chief Risk

Officer. Forrester replaces Mark Mullington who is relocating to

Australia.

Leathwaite

Leathwaite is a Human Capital Specialist offering business intelligence,

executive interim solutions, executive search services and management

consulting to a global client base, with market knowledge and a worldwide

network that are held in high regard by our clients.

Peter Johnson is part of our Governance Practice which focuses on legal, risk,

compliance, financial crime and regulatory affairs.

Peter can be contacted at +44 207 151 5151 or peter.johnson@leathwaite.com

Peter Johnson, Leathwaite

Appendix: A selection of CRO & Head of Compliance People Moves

Challenger Banks: Sourcing talent within Risk and Compliance