Francesca McDonagh is not the first top banker to quit because of Ireland’s pay cap — in fact she is the fifth to leave the country’s two top lenders in four years.
In her next job she will need every ounce of the toughness she has a reputation for: she is jumping ship as chief executive of Bank of Ireland for one of Europe’s most accident-prone financial institutions: Credit Suisse.
Where she helped turn round BoI, which looks likely to exit state ownership this year, Credit Suisse has spent the past two or three years lurching from one crisis to the next, with problems ranging from a corporate spying scandal to costly and damaging risk management blow-ups.
The challenges McDonagh faced at BoI — she joined five years ago in the midst of Ireland’s tracker mortgage lending scandal when its market capitalisation was half that of its rival AIB — will certainly stand her in good stead when she starts in October as the Swiss bank’s head of Europe, Middle East and Africa.
Credit Suisse chief executive Thomas Gottstein told the Financial Times that McDonagh had impressed during the recruitment process with her experience and expertise.
“She has very relevant wealth management and banking experience from her time at Bank of Ireland, and at HSBC before that. This is really a great match for us to mutually benefit from her skills.”
It is not the first time McDonagh, 47, has made rather an impression. When the comprehensive schoolgirl, neither of whose parents had been to university, was turned down by three Oxford colleges, she rang them up, convinced there had been a mistake. She knew she had to “hustle a bit” to make her Oxford dream come true, she later recalled.
“I think there’s been an administrative error, surely I’m destined to come,” she remembered saying. Two still turned her down but the third invited her to come and convince them. She did, and studied philosophy, politics and economics at Greyfriars.
McDonagh was born in South London and grew up in Croydon, supporting football team Crystal Palace and idolising star striker Ian Wright.
She credits her resilience to being the child of a refugee — her mother moved to the UK as a teenager during the Suez crisis — as well as a woman and a former state school pupil in establishment circles.
After university, it was her “passion for exploring the world and just a genuine level of student debt”, she later said, that launched her into a graduate trainee scheme at HSBC’s investment banking division at age 22. She stayed at the bank, often in international roles, for two decades.
Under her tenure, BoI’s market capitalisation has overtaken that of AIB and by the time she leaves, in September, the state should have exited its stake in the bank completely. “She’s not about to take her foot off the pedal in the next couple of months,” said a figure in banking who knows her well.
A senior industry figure who asked not to be named said she has a reputation as a “screamer and shouter” and for being a “challenging personality” to work with.
But the person who knows her well said that was an “outdated view” — although she had “steel in her spine . . . She’s calm in a storm. She has exacting standards”.
A lover of travel and a foodie, she reads Nordic noir and crime novels to relax. And “anyone who knows her well knows that the way to distract her is to show her pictures of dogs,” the person added.
She also relishes getting stuck into a corporate problem. “She has a huge intellectual curiosity, she enjoys looking at problems from different angles to see how she can find a solution. She takes tough decisions — she gets her sleeves rolled up and her hands dirty,” the person added.
Her decision to leave BoI has reignited criticism of pay caps at Irish banks. Having been the recipients of the eurozone’s biggest bailout more than a decade ago, they are now subject to a €500,000 cap on salaries for senior executives.
Even though McDonagh secured an exemption to the cap and earned €961,000 last year, she can expect to at least double her pay at Credit Suisse, based on similar roles at the bank.
“In the last four years, the two pillar banks in Ireland, AIB and BoI, have lost two CEOs and three CFOs. In every instance, there’s one common thread: remuneration,” said the senior industry figure.
Her move to Credit Suisse is reminiscent of the switch Ralph Hamers made two years ago from chief executive of Dutch bank ING to the same role at another Swiss bank, UBS.
Hamers had previously been a vehement critic of limits on banker pay in the Netherlands, arguing they caused a brain drain. When he joined UBS he became one of Europe’s highest-paid bankers.
Two months ago, McDonagh herself said in an interview with Ireland’s Business Post newspaper that pay restrictions in Ireland were “out of step with reality now”. The cap was right at the time, she added. But Irish banks were now having to compete for talent “with one arm tied behind their back”.
The IMF has also recommended relaxing the pay cap. In a statement on Thursday at the end of a review of Ireland’s economy, it highlighted “banks’ need to retain talent” as one of the “lingering issues” of the financial crisis.
“Politically, it’s very challenging to change, but it does have a cost,” the senior industry figure said. “As long as we have restrictions in place, we’re always running the risk of Irish banks becoming a training ground for other businesses.”