Honeycomb Connect

Frank Lee, Vice President and CIO, California Bank & Trust
January 2, 2007

Frank Lee currently occupies the position of Executive Vice President and CIO at California Bank & Trust, an $11 billion commercial bank with over 100 offices serving middle market customers.

With a breadth of experience drawn from a variety of roles in the financial services industry including: operations; acquisitions; systems planning; marketing; financial management; personnel and training; and strategic business planning; Lee considers himself well suited for his current role, which involves adapting technology solutions to serve strategic business processes. Lee’s approach to work stems from his strategic focus and is complemented by a strong technological acumen.

Professionally speaking, Lee draws particular satisfaction from, finding enabling technology for his customers, influencing the business strategy of his company and developing a team that works towards the strategic ends of his company. He takes a broad view of his responsibilities, measuring success according to financial contribution, service level, productivity, risk management and people issues.

Lee turns to his overall business strategy to help determine what technology support to implement.

“The thing that keeps me up at night is data security and the potential to overlook a violation of law by one of our customers.”

Frank Lee, Vice President and CIO, California Bank & Trust

“If we are trying to obtain competitive advantage I look for solutions that are avante-garde or leading edge, there may not be a pay out because there is no business model for it. Most of the time you consider yourself in plain competition, so you look for proven solutions and you want ROI over a three to five year period. If you are trying to tread water and keep up with the Jones’ you look at basic economic return, you look for throw away solutions and you no longer look for ROI.” 

Realizing technology is no panacea and drawing on years of experience fixing operating inefficiencies Lee carefully assesses business processes before searching for a technical solution.

“I don’t think you should have technology searching for an application. I think you should have an application that finds a technology enabler to get it done,” he says.  “In the end you want technology to be an enabler but you don’t want it to be the first solution you grab at.”

Lee has handled his share of system installations, including artificial intelligence systems for handling overdrafts, and remote imaging platforms, on each occasion he asks himself the same question, “how much new business am I going to generate as a result of this tool?” Nothing conjures anxious memories of wasted resources more than the time Lee and his team worked on developing the “ultimate deposit system.” Two years and close to $10 million later nothing had transpired. It took an outside team (and $100,000) just a couple of weeks to have the system up and running, “and it worked just as fast as we wanted it too.”

“Remembering what your objective was, that’s the key,” he says retrospectively.

Lee considers mergers and conversions his biggest professional challenge, “because what you’re dealing with are changes, significant, broad sweeping changes, and people are not necessarily prepared for change and they react very strongly against change. So your job is to try and influence that conversion and minimize the collateral damage on people and your customers.”

The sentiment seems somewhat inspired by events close at hand, when we spoke Lee’s department was busy converting out of a third party outsource organization.

Lee’s strategic focus is evident in more than just his approach to technology, it influences his management style as well. In order to align his staff comfortably with business priorities Lee ensures that his annual performance objectives are mapped closely towards the strategic objectives of the company, in turn, his colleagues line up their performance goals with his.

Lee asserts that, “work is not of any meaning unless you tie it to business objectives.”

The same philosophy is applied to financial profitability initiatives; Lee asks that any change in technology or business process bring direct profitability results. As a consequence over the last six years his organization has been responsible for generating around $20 million in direct profit improvement for the company (realized either through recouped expenses or with new revenue streams).

Lee likes to keep his staff focused on the customer, “if they are looking to solve a customer’s problem they became creative because they establish a partnership with the end user.” All the organizations programming requirements are handled by a third party, partly this is due to the speed with which the provider develops fast, efficient code, partly it’s because Lee likes to see any technology job function that isn’t customer focused outsourced.

The achievement he is most proud of, “I centralized work out of about 300 offices: I probably displaced the work burden of about 4,000 or 5,000 people, centralized it with maybe 3,000 or 4,000 people with net displacements of about 1,000, which I achieved through attrition rather than forced lay-offs.”

For Lee, the number one challenge currently facing the banking industry stems from the changing economic environment driven by a leveling-off of house prices which is making it harder to acquire large customer accounts.

“So you have to come up new with ways to bring in the smaller relationships that are very valuable,” he says.

“Work is not of any meaning unless you tie it to business objectives.”

Frank Lee, Vice President and CIO, California Bank & Trust

Second on Lee’s list are the complications imposed by government regulations. Increasingly the financial services industry is expected to act like an arm of law enforcement, with more requirements for banks to participate in information privacy, anti-money laundering and Patriot Act stipulations, he explains. Additionally, the Sarbanes Oxley Act requires that banks demonstrate due diligence in all business processes.

“The thing that keeps me up at night is data security and the potential to overlook a violation of law by one of our customers.”

Lee thinks banks over the last five years have had to handle themselves in a certain way as a result of societal issues. And balancing the need to eliminate paper transactions with data collection on behalf of the government can be a challenge at times.

“We are a partner with the regulatory authorities, it’s the culture in this country at the moment, in the Patriot Act environment, but at the same time you want to reduce the paperwork.”

Lee tries to capture relevant information for the regulators through data mining and uses image documentation in place of paper records as much as possible.

The ability to mine data is one of the major changes that Lee has noticed since entering the financial services industry in the 1970s. The sheer volume of data generated by financial institutions is daunting, but data mining offers an opportunity to make the data work for the organization, on the other hand it also increases the possibility of data breaches.

Lee thinks stronger authentication may be one way of preventing data breaches, citing challenge questions and user tokens as best practices in online authentication. But authentication is a challenge that goes beyond the medium of the internet. Other technology solutions include voice recognition for telephone banking and biometrics for over the counter authentication.

Another trend Lee has noticed is the confluence of electronic payment and delivery mechanisms of all kinds over the past decade which has finally made it possible to reduce the use of paper cheques. This in turn has increased the speediness of transactions.