What Talent Plans Say About Strategy

What Talent Plans Say About Strategy

AUGUST 15, 2024

By: Tyler Brown

Technology, Risk, and Cybersecurity

Staffing challenges at banks with less than $100 billion in assets appear to have eased, according to research by Bank Director, as financial institutions (FIs) shrink or put off hiring. They’re looking to cut costs as they anticipate economic instability, normalize staffing levels as aggressive hiring during the pandemic left them overstaffed, and match the number of branch-based roles to demand among a shift to digital banking.

Respondents overall plan to net hire for commercial and business lending despite worries about the economy as they look for stable, diverse, long-run sources of revenue. And with tighter margins due to higher deposit costs, growth of the loan portfolio most likely will come from expanding the business and taking market share from competitors. Bankers are keeping that long-term view in mind.

Despite the hiring slowdown, why would bankers still make a push in cost centers?

Technology: Operational inefficiencies due to legacy technology strain FIs’ resources as they try to maintain robust systems, build out digital services, and improve the customer experience. Artificial intelligence is an increasingly important tool for banking applications, from fraud detection, risk assessment, AML/BSA compliance, analytics, automation, and underwriting. But modern technology ultimately demands investment in modern infrastructure and the staff to support it.
Risk and compliance: Regulatory action that affects the banking industry causes a need for more compliance resources. Agencies proposed changes to capital requirements to align with Basel III; the Consumer Financial Protection Bureau issued guidance that requires lenders to provide clear reasons for credit denials in AI-powered underwriting; regulation taking effect in 2026 redefines criteria under the Community Reinvestment Act; and updated guidance requires banks to regularly evaluate and update their contingency funding plans.
Cybersecurity: It’s well past time for FIs to lean into cybersecurity — as we wrote, cyber risk is an increasingly important operational risk factor, particularly given the increasing threat of cyberattacks and FIs’ mixed ability to protect against them. It may be an even greater challenge for smaller FIs, and as we observed, bankers expect regulatory activity related to cyber risk to pick up. Bankers are responding: The category was the only one in the study’s top five where more respondents expected to increase staff in 2024 than in 2023: 21% of respondents this year said they expected to increase staff vs. 15% last year.

Organizations need to keep their hiring priorities straight — and that depends on management holistically revisiting a bank’s underpinnings. It’s easy to ignore cost centers in favor of growing revenue-generating parts of the business.

What Talent Plans Say About Strategy

What Talent Plans Say About Strategy

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