Strategic Change in Banking from Pre- to Post-Crisis: Evidence from Europe, North America, and Asia

By Boris Liedtke and David Young



Economic and financial crises often lead to profound changes in the way businesses, and especially financial institutions, are managed. In this article, we explore the extent to which such changes occurred (or did not occur) after the 2007-8 global financial crisis (GFC). Our results are based on comparing formal statements of strategy found in letters to shareholders from the chairpersons, chief executive officers (CEOs), and presidents of banks. In particular, we compare the statements made during 2006 (pre-crisis) and 2016 (post-crisis) by 36 “money centre” banks in North America, Europe, China and Japan. This group of banks accounts for most of the assets held by the global banking system.

We find that the influence of the GFC on bank strategy can be detected in several ways and most notably by an increased focus on risk and corporate governance, especially in North America and Europe. At the same time, growth became less important (if not entirely absent) as an explicit strategic goal for non-Chinese banks, although an emphasis on growth increased considerably among Chinese banks. Perhaps the most remarkable result is that, even post-crisis, value creation barely registered as an explicit strategic imperative.


Research Method

Following Gioia et al. (1994), we define strategic change as “a redefinition of the organisation’s mission and purpose or a substantial shift in overall priorities and goals” (p. 364). To identify strategies and any changes in them, we sought data that was comparable across the sample banks. We determined that letters to shareholders in a bank’s annual report met this requirement better than alternative sources. The main reason is that the success of strategic change depends on an organisation’s ability to convey new missions and priorities to its many stakeholders, and few tools accomplish this task as effectively as these letters.

Letters to shareholders discuss financial results, the bank’s current position, and its plans. They also address specific events (both positive and negative) that happened in the past year, changes in the bank’s share price, and – especially relevant for our purposes – key aspects of top management’s strategic vision. Such letters offer executives the opportunity to speak directly to shareholders and other interested observers. Therefore, a careful reading of them enables observers to identify areas that management intends to emphasise: financial strength, value creation, capital management, the bank’s competitive position, and so forth.

Thus, our research examines whether senior management of the world’s largest banks altered their strategies after the global financial crisis and, if so, how. We focus on the world’s largest banks (as defined by total assets at the end of 2016), because they are presumed to have the greatest effect on the global banking system’s systemic risks. This article discusses significant changes in banks’ strategies from the year (2006) immediately preceding the GFC to a more recent year (2016), nearly a decade after that crisis.

Our research examines whether senior management of the world’s largest banks altered their strategies after the global financial crisis and, if so, how.

Our sample was chosen entirely on the basis of asset size. Although a precise definition of total banking assets is elusive, estimates1 place total industry assets in 2016 at $33 trillion (US) for Chinese banks, $31 trillion for eurozone banks, $16 trillion for North American banks, and $7 trillion for Japanese banks. We included all banks that accounted for at least 1 percent of the total banking assets in all of these regions. The result was an initial sample size of 40 banks, each with assets of more than $870 billion (i.e., exceeding 1 percent of the four regions’ total banking assets, which amount to $87 trillion). The forty-first bank, which was not included in the sample, would have added less than 0.8 percent of total banking assets. We excluded four other banks owing to data limitations and mergers, so the final sample consisted of 36 banks. This sample covers about $63 trillion of banking assets, which is equivalent to 72 percent of assets in the four regions and to more than half of global banking assets. The sample banks are listed by region in Table 1.


When examining the letters to shareholders, we mostly ignored discussions of historical performance (e.g., earnings in the previous year, return on capital) and focused instead on statements that were oriented toward the future. We compared the stated strategies of these banks from their 2006 and 2016 annual reports. Because the annual reports for 2006 were issued early in 2007, the statements of strategic intent made by senior bank executives could not have been affected by the crisis that was soon to engulf the banking sector. We chose 2016 as a suitable year for comparison on the assumption that ten years was sufficient time for each of the institutions to overcome, and adapt to, the losses, dislocations, and regulatory changes that occurred in the GFC’s aftermath, and hence to modify their strategies accordingly.

The contents of these letters published in the 2006 and 2016 annual reports were reviewed for each of the 36 banks. More specifically, we searched for key words and themes (“strategy markers”) that were indicative of the bank’s strategic direction.


Our Findings

Our research revealed that the evolution of corporate strategy, from pre- to post-crisis, was noticeably different between Chinese and non-Chinese banks. Among the most unexpected findings was the nearly total absence of growth as a stated strategy among Chinese banks in 2006, unlike the banks in Europe, North America, and (to a lesser extent) Japan. Yet, even though almost all North American banks in our sample mentioned growth as a strategic priority in 2006, only Bank of America did so in 2016. Thus, the widespread adoption of growth as an explicit strategy was reversed worldwide, except among Chinese banks, which shifted their priorities toward a pro-growth stance. In fact, the 2016 annual reports of many non-Chinese banks emphasised simplicity (or the reduction of complexity) in their operations: cutting back on product lines, divisions, and the number of clients assigned to each relationship manager, while exiting from less-profitable countries and regions. There was a new emphasis on narrowing the scope of bank activities, becoming smaller, and simplifying processes for the sake of clients, employees and operating cost structures.

When examining the letters to shareholders, we mostly ignored discussions of historical performance (e.g., earnings in the previous year, return on capital) and focused instead on statements that were oriented toward the future.

Deutsche Bank exemplified this strategy, stating that: “We focused our business. We completed disposals including of Abbey Life business, our 19.99% stake in Hua Xia Banks of China and our US brokerage unit, Private Client Services. We further announced the sale of our Sal Oppenheim Asset Servicing business.”2 Meanwhile, Citigroup’s Global Consumer Banks divested its retail banking and credit card businesses in Argentina, Brazil, and Columbia, actions that enabled the bank to consolidate its resources on its three major consumer markets: the United States, Mexico and Asia. Citigroup echoed Deutsche Bank in emphasising focus: “We continued to make progress in our journey toward being a simpler, smaller, safer and stronger institution.” Goldman Sachs also boasted of a more conservative balance sheet that would help the bank “better weather challenging environments”. One motivation behind the reduced investment that accompanies such “focus” is the desire to strengthen bank balance sheets; that is, to meet the higher capital requirements mandated after the global financial crisis.

In contrast to non-Chinese banks in 2016, most of which were contracting and narrowing the scope of their operations, a common theme among Chinese banks was expanding their geographic reach beyond China. For example, ICBC writes: “We gradually increased the number of overseas institutions and have established 18 overseas institutions and an equity join venture bank in 15 countries and regions, reinforcing the presence of our network [across] five continents.”

Under the reign of President Xi Jinping (i.e., since 2012), Chinese banks have renewed their emphasis on supporting state and Communist Party initiatives. China’s “Belt and Road” undertaking, launched in 2013, is probably the best-known example. Its stated aim is to reconnect the countries along the ancient Silk Road network by improving the trade and transport links between China and the rest of Eurasia.3 Most of the associated investments address infrastructure: upgrading roads, railways, bridges and port facilities. The initiative’s scale is enormous, as loans have been granted to more than 70 countries and total funding is anticipated to exceed $1 trillion. Given this level of commitment, Belt and Road is a high priority of the Xi government and of the Party itself. Chinese banks are expected to fall in line by viewing Belt and Road as fundamental, and their annual reports indicate that they are doing just that. In short, banks are among the front-line troops responsible for making the initiative a success.

For example, Bank of China’s letter to shareholders includes the following statement: “We … actively served the nation’s diplomatic strategy by holding the ‘Belt and Road’ international and cooperation seminar, which was widely acclaimed at home and abroad.” And from the Bank of Communications: “We strictly adhered to the State’s strategic ‘Belt and Road’ and achieved five successful ‘international expansion’ targets in 2016,” projects that included, inter alia, the establishment of branches in London and Luxembourg. In its letter to shareholders, China CITIC states that it “supported the implementation of the ‘Belt and Road Initiative’ with enthusiasm.” Similar statements can be found in the 2016 annual reports of China Construction Bank and the Industrial Bank Company.

As further evidence of the Xi administration’s reach, nearly all leading Chinese banks expressed their commitment to the Communist Party in their 2016 annual reports, despite the fact that none did so in 2006. Thus, the Bank of China writes: “We will carry on technological innovations, intensify Party and team building, and take concrete steps to perform our social responsibilities.” In its letter to shareholders, Bank of Communications reports on its efforts to support the state’s 13th Five-Year Plan by “deepening reform, promoting transformation [and] development and strengthening Party self-discipline.” It goes on to say, “We firmly implemented the decisions of Party Central Committee and State Council and closely adhered to their most fundamental objective, serving the real economy.”

Although China CITIC Bank Corporation does not specifically mention the Party, it does quote Deng Xiaoping, as follows: “Be brave in innovation, be generous in contribution.” A similar quote can be found in China Construction Bank’s letter: “Looking into 2017, the Group will loosely follow the national strategy of the ‘13th Five-Year Plan’, and continue to contribute to supply-side structural reform and support development of the real economy.” Another instance of toeing the Party line is this statement, from the chairman, in the Bank of China’s 2016 annual report: “We will carry on technological innovations, intensify Party and team building, and take concrete steps to perform our social responsibilities, so as to reward our shareholders and the public for their trust and support by delivering better and better performance!”

The 2016 annual reports of other (non-Chinese) money centre institutions included language that underscored the importance of responding quickly to changes in government policy or in macroeconomic conditions. There was also an increased emphasis on compliance with banking regulations, some of which were enacted in the aftermath of the GFC. Yet, because such banks are private and function in societies that are relatively more open and democratic, there was no explicit acknowledgement of the need to carry out government policy.

Recall that one rather startling result of our research was that so few of the sample banks named value creation as a strategic imperative. Defining value creation as “returns on capital in excess of the cost of that capital”, we searched for any mention of this strategy as a stated objective. However, we found little, in either the pre-crisis or the post-crisis period, that was directly related to this value-creation imperative.

Even when a bank did mention value creation as a strategic priority, other statements in the same letter suggest confusion about what value creation actually means. In its 2006 annual report, for instance, Banco Santander claimed that “the return on … investments must always exceed the cost of capital in a maximum period of three years”, by which it likely meant that, in present-value terms, investments have a three-year payback period. But then the letter also stated that the bank “pay[s] particular attention to growth in earnings per share (EPS).” It’s certainly true that, all else being equal, the higher the EPS, the better; however, this ceteris paribus condition hardly ever holds. After all, managers can take many actions that boost EPS without creating value: “earnings management” can be used to inflate accounting-based earnings without increasing the bank’s value; and the bank can buy back shares and thus increase EPS by reducing the number of outstanding shares. Senior executives are incentivised to engage in such behaviour when their annual bonuses are linked to EPS targets.4 Promoting EPS growth, then, does not amount to promoting value creation and may even impede that goal in the banks that do adopt it.

Other banks addressed the issue of return on capital, but without explicitly stating that their aim was to generate returns greater than the opportunity cost of that capital. Post-crisis, HSBC, for example, discussed the importance of maintaining its dividend and of returning capital to shareholders via share buybacks; it also claimed “to make strong progress in implementing our strategic action to improve returns”. Yet, at no point did HSBC identify value creation as a strategic goal. The Italian banking giant UniCredit was one of the few banks to cite value creation as a strategic priority in the post-crisis period, although it made no mention of the need to earn returns greater than the cost of capital. Rather, its letter to shareholders reads: “Our priority is to increase Unicredit’s capacity to create value by strengthening its balance sheet and taking a more vigilant approach to risk management.” Mitsubishi UFG also mentioned higher capital returns as a strategic priority but makes no commitment to value creation per se.

In 2016, a consistent theme across Europe, North America, and Japan was the changes brought by technological disruption. That disruption was interpreted as a threat to future profitability, as an opportunity for future growth, and sometimes as both. Thus, banks viewed the advent of “financial technology”, or fintech, with uncertainty. A few banks (e.g., Santander) boasted of collaborating with fintech start-ups, while others (e.g., ING Group) viewed such innovation as more threat than opportunity: “New entrants to the market, like FinTechs, are making it more challenging to compete.” For its part, Japan Post Bank mentions “dealing with FinTech”, but without offering any clues about just what that means. Another aspect of technological disruption is cybersecurity, and banks in all regions wrote that increased efforts were needed to counter the threat from Web-based fraud.

Our review reveals the somewhat surprising result that environmental issues were more prominent in 2006 than in the post-crisis period. Crédit Agricole is one notable example: “In the light of the results of the carbon balance assessment carried out in 2006, priority targets have been set for reducing carbon dioxide emissions, accompanied by training of working groups in charge of transport, energy and raw materials matters. As regards the indirect impact of our activities, Crédit Agricole has developed customer incentives by launching environmentally-friendly financial products.” However, climate change was a much less prominent aspect of banks’ letters to shareholders in 2016.

Another instance is that of BNP Paribas, which likewise addressed climate change in 2006: “The recent conclusions reported by the Intergovernmental Group of Experts on Climate Change … reinforce BNP Paribas’s commitment to combating climate change. We have created a Carbon Team to provide trading and financing products to enable our clients to seize the opportunities related to CO2 emission quota mechanisms”; no such language was used in 2016. Lloyds Banking Group also addressed climate change in 2006 but largely ignored the issue in its 2016 annual report. The following text appeared in its pre-crisis letter to shareholders: “We recognised the challenge posed by global climate change and we are committed to making meaningful reductions in our carbon footprint. We have already set a target to reduce property related CO2 emissions by 30 percent, and we aim to enhance this plan through the introduction of a carbon management programme and other initiatives.” However, there were some exceptions to this pattern. Royal Bank of Scotland is one of the few banks that, in 2016, explicitly cited the management of climate change as a continued strategic imperative.

One more prominent post-crisis theme, at least in Europe and the United States, was the management of “legacy issues” (e.g., lawsuits, regulatory actions, charges of improper mortgage practices, and various criminal charges), many of which resulted from actions undertaken prior to and during the financial crisis. Deutsche Bank, for example, “resolved major litigation matters. Of our twenty most significant litigation matters, which include RMBS and account for roughly 90 percent of the anticipated financial impact, we achieved full or partial resolutions in nine, including some of the largest, and made progress on most of the others.” Royal Bank of Scotland (now officially RBS) noted, in its 2016 annual report, that “the attributable loss, at around £7 billion, was more than three times as large in 2015. It is hard to present that as a positive outcome for shareholders, though in fact it does reflect the impact of stronger efforts to resolve the bank’s legacy issues.”

Perhaps the most notorious of these legacy issues was Wells Fargo’s cross-selling scandal, which erupted in 2016 when it emerged that the bank had added a huge number of products to client accounts without their permission. The scale of this subterfuge became apparent when thousands of clients began to complain about charges on accounts they never asked for. An interesting aspect of the affair was the prominence of cross-selling as a strategic imperative in 2006, a clear indication that the scandal’s groundwork had been laid at least ten years before. In its 2006 annual report, Wells Fargo boasted of its cross-selling efforts, citing with pride that one in five clients already had at least eight different products with the bank. This statement is significant, because the bank later devised its “eight is great” slogan, a message to all bank employees that eight accounts per client was a bank-wide goal rather than an exceptional achievement. After the scandal broke, the strategic focus of Wells Fargo shifted to understanding how such unacceptable sales practices proliferated and to rebuilding trust among its clients and other constituencies. As the 2016 letter to shareholders reported: “We are committed to transparency as we connect with all stakeholders more frequently through increased communications. … We are conducting thorough reviews and investigations to fully understand where things broke down and where we failed.”

Our last key finding is that nearly all European banks had strong reservations about three issues that arose in 2016: the fallout from Brexit, which British voters narrowly passed; the election of Donald Trump as President of the United States; and, to a lesser extent, the Italian “no” vote on its constitutional referendum. One such bank, Credit Suisse Group, wrote of the significant additional volatility observed in the immediate aftermath of these events. Similar concerns were often expressed regarding macroeconomic developments, as low interest rates and an unusually flat yield curve adversely affected bank profitability. Related to all these concerns was the perceived necessity of responding to market shocks as they occur; in Bank of America’s words, “we must be agile and adaptive”. Mizuho picked up on this theme in its 2016 letter to shareholders: “While paying careful attention to the development of regulatory reforms of the global financial system, we are aware of the necessity for establishing a financial base supported by a balance sheet that is resilient against the uncertainties in the world economy, and by a sustainable and stable profit structure.”



One limitation of our study is that simply identifying a strategy does not, in itself, say much about the depth of a bank’s commitment to that strategy. We considered a ranking based on the strength of each strategic statement (e.g., weak, neutral, strong). However, we decided against the idea when it became apparent that cultural differences among the sample banks (in Asia, Europe, and North America), as well as the individual “tone” adopted by each executive, had a major influence on the words used to express strategic intent. Hence our contemplated ranking might well have reflected cultural differences and character types, more than genuine differences in strategic direction among the sample banks. For this reason, we made no a priori assumptions about which aspects of a bank’s strategic intent were the most important.

Another limitation is our reliance on materials written in English. Of course, letters to shareholders were originally prepared in English for banks in anglophone countries (e.g., the United States, Canada, and the United Kingdom). In most other cases, however, English versions were offered to readers as “convenience translations”. In other words, they were prepared in the language of the banks’ home countries and then translated into English. We acknowledge that some meaning is almost certainly lost in the translated versions, whose quality was highly variable.

Finally, although a CEO’s or board chairperson’s letter to shareholders typically contains true information about how top management views the bank and its strategic priorities, there is definitely a “public relations” aspect to that letter. It is usually written so as to put the bank in the best possible light, a tendency that necessitated the challenging task of distinguishing genuine intentions from mere marketing hype. Nevertheless, we remain confident that our focus on mandated executive statements yielded a source of reasonably objective data that can be compared across different banks.


With very few exceptions, banks did not explicitly identify value creation as a strategic priority, either before or after the GFC.

Summary and Conclusions

The global financial crisis affected bank strategies in many ways, most notably by the marked de-emphasis on growth in North America, Europe, and Japan. The banks in those regions shifted their strategies, post-crisis, toward strengthening internal controls, improving governance, increasing focus, and downsizing. Meanwhile, Chinese banks initiated dramatic growth plans, with emphasis on expanding their geographic reach. This strategic change may have been driven, at least in part, by the Party leadership’s preoccupation with its Belt and Road initiative. Another important change in China was the direct control over bank strategy exerted by the Party and the state; such control had been less heavy-handed before the crisis.

It is also worth reiterating that, with very few exceptions, banks did not explicitly identify value creation as a strategic priority, either before or after the GFC. Although many banks mentioned the importance of sustaining or improving profitability, they were reticent about the need to earn value-enhancing rates of return on invested capital.

About the Authors

Boris Liedtke is a Distinguished Executive Fellow at INSEAD Emerging Markets Institute and has over twenty years experience in the financial sector. He was the CEO of international banks around the world and has served on the boards of directors for companies throughout Asia, the US and Europe.

David Young is Professor of Accounting & Control at INSEAD. He is the author or co-author of several books, and has also published in a wide variety of academic and professional journals. He has consulted extensively for companies in Europe, the U.S. and Asia, mainly on value-based management and financial analysis.


Gioia, D.A., Thomas, J.B., Clark, S., and Chittipeddi, K.R. (1994). Symbolism and strategic change in academia: The dynamics of sensemaking and influence. Organization Science, 5(3): 363–83.


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