Westmont Magazine The Risky Business of Banking

Taking some risk is a necessary part of life, but how can we determine the right amount? Helga Houston ’83 lived with that question at Bank of America, where she became a risk executive after years in real estate and corporate lending. She gauged risk first in wealth and investment management and then for the bank’s global consumer and small business division in Charlotte, N.C. More than 450 people reported to her there, assessing risk in consumer credit (credit cards, mortgages and car loans), in the bank’s exposure to market volatility, and in compliance and operations.

Then, in the fall of 2008, the global financial meltdown submerged the banking industry. “Once it started, it happened very quickly,” Helga says. “When markets lose confidence, it creates a snowball effect — crisis breeds crisis.” Her job was a casualty, and she left Bank of America after more than 22 years.

“It was a great learning experience,” Helga says. “By virtue of my position, I was held accountable. It led to a great time of reflection and opportunity to understand what I needed to learn.”

After five months off, she decided to open a business financial consulting firm to have more flexibility and time with her family. Her husband, Hal, is a full-time father to their four children, 13, 10, 8 and 5.

An economics and business major at Westmont, Helga remembers her philosophy classes best. “They were a big factor in helping me make my faith personal,” she says.“I grew up in a Christian home, but college was the first time I realized people interpreted Scripture differently. The need to make a decision for myself and understand and defend my faith became a critical part of my spiritual growth and has shaped my life.”

When Helga graduated in 1983, the job market was terrible, and she took the first position she could get. Over the years, she worked for a number of banks in a variety areas, including real estate appraisal, commercial real estate, investment banking and structured corporate credit. Today she draws on all this expertise in her consulting business.“My career illustrates the changes in the industry,” she says. “Most of the banks I worked for no longer exist.”

With hindsight, Helga identifies factors leading to the dramatic downturn and resulting impact on the banking industry. “Through 2006, everything was about double-digits earnings growth,” she says. “Analysts and investors were very tough on banks that didn’t meet expectations.There was tremendous pressure to grow, and banks that didn’t significantly underperformed. The investment in risk analytics didn’t keep pace with growth.”

“At the same time, regulators didn’t keep pace with the complexities and changes in the industry. When outsized growth happens more quickly than expected, it’s important to understand why. If something seems too good to be true, it probably is. In fact, corporations and consumers both took advantage of the situation and didn’t ask questions like, ‘Can I afford this much debt?’ It’s never as simple as pointing a finger in one place.”

Some banks have emerged stronger because of effective leadership, but many are still struggling, Helga says. “The CEO sets the tone and inspires confidence. It has to start at the top. They must be willing to hear the bad news as well as the good.”

Helga brings her financial expertise — and understanding of risk — as a new member of the Board of Advisors, which advises President Beebe.