Efficiency 2015 Annual Report

We Live at the Rate of Changes

We headed to the deserted and peaceful seacoast of Jūrmala for an interview with Ernests Bernis, ABLV Bank Chief Executive Officer, during which he told us how an effective bank differs from a simply good one, as well as explained the meaning of a team and how bank employees can be motivated in the 21st century. However, the most important thing that Ernests Bernis shared with us was that his dream bank already exists.

It seems you’re a legendary person: we’re told you’re the most efficient, the most forward-thinking, the most democratic executive around… Your subordinates tell us with delight that shareholders’ meetings, board meetings and regular reunions, including the ones attended by you, take place in conference rooms observable by visitors to the bank. Was this your special idea to impress the team?

Of course, I’m a serious top manager and although sometimes I may look as if I have a furrowed brow, in general I’m a breezy and joyful person. I don’t understand the need to create problems when you can omit them. If it’s possible to work in a way enabling other people see you, it might inspire others.

Are you being sometimes expressive?

Yes, and quite often. That’s my management style.

What about the Latvian temperament which keeps people within bounds?

We’re a multinational team. And all of us are different: whether it comes to our functions or our temper. You can’t decide once and for all, which line to take, including emotional behaviour: we work together and have the same goals. It’s the main thing that unites us. My employees forgive me my excessive emotions like strong language.

However, those working directly with clients have the most difficult tasks. They have to save face in any situation. Communication with such bank employees influences the clients’ opinion about the bank, not to mention our multi-functional private bankers who have to know dozens of things! On the one hand, they have to explain all the paperwork to clients, which is becoming even more difficult; namely, new requirements regarding documents and new procedures for establishing business relations. On the other hand, they have to keep trust-based relationships with clients and not to discourage them from further collaboration. The most important thing here is that our front team have to do it all by themselves online: one-on-one with our clients.

Can you help them in any way?

We do help them: they undergo training and we explain new conditions and requirements to them. Together, we think about how best to clarify the situation to clients. It’s important for me to know that our employees feel supported. However, I can’t go to meetings with clients in their place. Those are the tasks they have to complete themselves. The way in which private bankers build relationships with clients and direct them toward complying with the current requirements is the key to perfect service and successful banking.

In that case, what is banking efficiency?

On the one hand, efficiency can definitely be expressed in numerical values; on the other hand, it’s the result of the integral and interactive performance of our team. In my opinion, the concept of efficiency also includes the ability to change; the rate at which the bank adopts these changes and the skill of maintaining quality while making all these complicated manoeuvres.

On the one hand, efficiency can definitely be expressed in numerical values; on the other hand, it’s the result of the integral and interactive performance of our team.

How do you evaluate ABLV Bank in terms of efficiency?

I don’t need to evaluate it. We have repeatedly changed in response to different challenges of time. And not once have we lowered our quality or slowed down.

Do you have any strategic plan to face new challenges? Right now, it’s not a good time for the banking sector in Latvia, Europe or Russia…

… or America! For the last ten years, there has been no place on Earth where banking has been easy. Recently, governments in many countries have taken very serious steps toward tightening controls over banks in executing their role as a regulator. It’s difficult to name a single reason for that. There are many significant factors here: the financial crisis of 2007–08, anti-terrorism efforts, as well as countries’ desire to look closer at their residents. Behind all these numerous reasons, there is a requirement for banks to know their clients even more profoundly than ever and to identify possible suspicious transactions in a timely manner. Of course, the regulator doesn’t want to track these transactions itself. It would be like looking for a needle in a haystack. However, it doesn’t want to experience the “surprises” of 2007–08 crisis again, when the state bore all responsibility for collapsed banks. Now the regulator and the state are delegating more and more control and compliance functions to banks. Just imagine what a difficult task we have been set! As a result, the potential of the business activity of credit institutions is being seriously eroded.

Does this mean that banks have less scope for efficient manoeuvres?

No. I’d rather say that top managers run short of time. These days, bank managers focus their activity on complying with legislative provisions on time and simultaneously maintaining a sufficient level of bank efficiency.

Is this a common problem?

Lately, more and more colleagues from other banks in Latvia and abroad are complaining that their managers are participating in business matters less and less.

What do they do instead?

They’re busy dealing with amendments and projects related to changes in regulation. What did the crisis of eight years ago demonstrate to the regulator? It highlighted deficiencies in the process of regulation and control! And that discovery scared everybody, in part because some credit institutions that were hardly expected to get into difficulties got into them. These were the banks with very high credit ratings, a few of them with indisputable ones! And so, these banks, which had been treated as safe and trouble-free, suddenly collapsed: including some names we can’t even remember now… It was a discovery and “thunderclap” for society and the governments of many countries. As a result of these events, lots of banks were forcedly nationalized, many received state support, also at the expense of taxpayers. Now that the situation is better, people are starting to forget about the crisis. However, as far as regulators are concerned, this experience has left its mark: they concluded that in order to prevent similar collapses in future, regulation must be tightened!

So the idea of better and tougher regulation wasn’t born yesterday, it has been nurtured for many years. Morally, we were ready for this. However, readjusting to new requirements and building a new compliance system while keeping the existing banking system take a lot of time and effort: each bank has its own corporate culture, management style, understanding of clients, customer approach, and reputation. And my task now is to make our bank comply with the increasingly stringent requirements of the regulator, while retaining all our advantages at the same time.

That’s not what you dreamed about when you wanted to become a banker…

Frankly speaking, the only thing I dreamed about before starting working at the bank was becoming the head of a collective farm. I see, you don’t believe me. Honestly, in 9th grade for no reason I had an “idée fixe” of leading a collective farm. It almost came true, by the way. And now my relatives play jokes on me saying that dreams do come true. No matter how you slice it, I’ve been working at ABLV for 21 years now. So, there is something from the dream, I guess.

Readjusting to new requirements and building a new compliance system while keeping the existing bank system take a lot of time and effort.

Being the head of the collective farm seems more joyful to me. The bank, especially heavy regulated, as it apparently will be in the nearest future, is a rather boring place to work.

Not exactly. Everything is changing and it’s always interesting. I’m a bit upset that recent years I have to perform tasks that I would rather not… You have certain plans on your way to work, but eventually find yourself preoccupied with something else. But this is also a part of our job; overcoming obstacles, you know.

Being a client of ABLV Bank was always considered to be a privilege: the assigned trio of private bankers, the possibilities of remote service, the fulfilment of all wishes, business support and much more. In other words, ABLV Bank has never been a bank for broader society. Aren’t you going to expand your client base in order to earn more? How far are you ready to go to improve your financial indicators?

We don’t aim at that directly. I’d say that, due to the ever-increasing scope of requirements regulating relationships with clients, the situation is more likely to develop in another way: becoming our client now takes more time than it did ten years ago. This is the reality of our time. In order to open an account, we need to check many parameters. Unfortunately, sometimes this process can last for months… But I will consider our task to be completed if we can keep a step ahead of the increasing number of requirements. It’s the main thing for us so far. Once the regulation of the sector becomes less active, we’ll continue to work on improving our efficiency.

Some people say the crisis is receding…

There is no definite answer to that: for the last five years we’ve been talking about moving forward in the context of Latvia. However, it’s difficult to say whether this is happening as a result of the economic policy of the government or our aligning with Europe. Or maybe we’re simply trying to make up for lost time. Opinions differ.

There’s a saying: you go to war with the army you have, not the army you might want. So, I consider myself lucky, as I have my dream team, which means we can do anything!

For which period do you plan the business?

For three years. Trying to plan something for a longer period is useless now, taking into consideration the current situation in Europe and the whole world. It’s very likely that the time will come and we will decide to expand our activities or geography. However, in the year to come we’ll focus on Latvia. We have to reorganize our work with clients, determine new requirements for our relationships, information disclosure, declaring one’s activity and complying with these declarations on the part of the clients.

Will it end your trust-based relationships with the clients?

All clients I have had contact with are receptive to the increasing requirements. However, sometimes disputes could occur in an attempt to comply with them. Therefore, our private bankers have been set a difficult task, which is, not only to save relationships with clients, but also to modify them in such a way so that they correspond to the current reality. And I’m sure the private bankers will do their best.

For a top manager, you’re surprisingly confident about your employees. You not only trust them but also spend more on them, judging by the numbers…

If you know this, you should also know that the output of every one of our employees is better than the output of any employee of any other bank in Latvia. That’s how our system of motivation works, thanks to which we have the appropriate number of specialists and impressive productivity. This is great indeed: our corporate culture confers fair and generous remuneration to our employees for their input. Our employees, in turn, perfectly do their job. Therefore, firstly we earn more and then spend more.

Is the competition high when it comes to vacancies?

We mostly announce competitions for entry-level positions. When it comes to other positions, we generally don’t have vacancies. The reason is that bankers joining via entry-level positions develop their career and climb higher, which means that others are also moving forward. There has never been high employee turnover at ABLV. We have had cases in our history when an employee has moved up the career ladder from a simple officer to a top manager in six to seven years. There  is also another factor: sometimes an employee works in one position for five years, for example, and then suddenly, and unexpectedly as far as others are concerned, reveals his or her full potential in another position! And his or her performance becomes even better and more efficient than previously! I love such discoveries!

What would your dream bank be like?

I have a very simple answer to this question. My dream bank is ABLV Bank. I absolutely love the people I work with, although we may argue and shout at one another. I have to say I’m satisfied with my colleagues, subordinates, managers. Our group consists of roughly nine hundred people in Latvia and abroad. I know more than half of them by sight and personally know all top managers.

We have already had and will definitely have more difficult situations. And I’m proud to work with these people, I’m absolutely confident about. There’s a saying: you go to war with the army you have, not the army you might want. So, I consider myself lucky, as I have my dream team, which means we can do anything!

Table of Contents

Creative team: Arnis Artemovičs, Ernests Bernis, Jānis Bunte, Anna Celma, Ilmārs Jargans, Jekaterina Koļesina, Sergejs Mazurs, Samanta Priedīte, Jūlija Surikova, Romans Surnačovs
Project managers: Anna Celma, Jūlija Surikova
Interviews: Jānis Bunte, Ingrīda Drazdovska, Konstantīns Gaivoronskis, Katrina Gordejeva, Ilmārs Jargans, Jekaterina Koļesina, Sergejs Mazurs, Romāns Meļņiks, Sergejs Pavlovs, Romans Surnačovs, Jānis Šķupelis
Text authors: Leonīds Aļšanskis, Jānis Bunte, Anna Celma, Vladislavs Hveckovičs, Jānis Grīnbergs, Māris Kannenieks, Ļubova Kazačenoka, Jekaterina Koļesina, Zane Kurzemniece, Aleksandrs Pāže, Gints Pumpurs, Dmitrijs Semjonovs, Jūlija Surikova, Kaspars Vanags, Benoit Wtterwulghe
Photography: Arnis Artemovičs, Uldis Bertāns, Mārtiņš Cīrulis, Ieva Čīka, Krišjānis Eihmanis, Andrejs Hroneloks, Alise Jastremska, Valdis Kauliņš, Valts Kleins, Marks Litvjakovs, Sergejs Mazurs, Reinis Oliņš, Samanta Priedīte, Gatis Rozenfelds, Polina Viljun, LETA foto, Marka.photo, Studija F64
Proofreader: Jānis Frišvalds
Translators: Jekaterina Koļesina, Nataļja Malašonoka, Lidija Marsova, Jūlija Surikova
Design: Aivis Lizums, Valters Horsts

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