Banks may deal with money, but banking is first and foremost a people business. How a bank structures its management and employees will determine how it is able to respond to customer needs, how it will manage its investments and what the corporate culture will be like.

Traditional Bank Organizational Charts

When you look at a bank's organizational chart, you can expect to find the same pyramid-shaped hierarchical structure from one bank to another. At the top would be the CEO or president, followed by executive vice presidents in charge of different divisions, then vice presidents and then managers.

Many of the divisions in the chart would resemble other companies, like marketing and communications. Other divisions would be based on the bank's business units, such as corporate banking and retail banking, and you should expect to see a senior executive in charge of investment management.

Larger banks, of course, are likely to have more divisions, with executives and managers in charge of more specialized divisions than a smaller bank. Instead of one executive in charge of marketing and communications, for example, you could have three executives, like one chief information officer (CIO), another in charge of marketing and another in charge of communications. Investments may be divided into domestic and offshore investment management, while a smaller bank may have just one executive overseeing all investments.

The Move to Decentralized Structures

One of the big challenges facing banks today is whether to centralize control and responsibility in one location, in the hands of a small number of people, or to spread it among several people in different locations. There are good arguments for both models and, perhaps surprisingly, the same question is faced by large and small banks alike.

The urge to move to less centralization is based on two primary factors. First, geography is practically meaningless today, since most customers do their banking online and, when they have a problem, over the phone. Secondly, because information is stored digitally, it can be accessed by any employee who requires it and it can be updated and shared immediately.

Combined, these two trends mean that banks no longer need a rigid structure with information and responsibility contained within divisional silos. Instead, action teams can be arranged and rearranged as needed. In 2015, CenterState Bank moved to a decentralized structure for these very reasons.

The Argument for Even More Centralization

The same reasons some banks may favor decentralization are, for others, arguments that could be made to increase centralization. Because customers are less likely to walk into a local bank today and will use their phone instead, this means that most banking needs can be fulfilled from a single location. And because less work is required to manage and analyze information in a digital age, fewer decision-makers are required at the top.

The logical conclusion to this for some banks is that centralizing the company's structure will mean less overlap and lower costs. Large banks, like Bank of America, have continued to use a traditional unitary (U-form) organizational structure. Small banks have also embraced more centralization instead of less.

In 2019, for example, Arion Bank announced that it was adopting a more centralized organizational structure, reducing the number of divisions by two. The reason for this, the board of directors explained, was to reduce its cost-to-income ratio and to increase its return on equity. The result is that the bank department structure now has only three business segments and three support units:

  • retail banking
  • corporate and investment banking
  • markets
  • finance
  • information technology
  • risk management

The obvious benefit to more centralization is having fewer managers on the payroll, resulting in lower costs and higher profits in what will continue to be a highly competitive industry.