L: Can you briefly describe your career path for our readers?
AB: I started my legal career in 1997 in the Prague office of White & Case as an associate after I graduated from Charles University. I spent three years in the law firm working primarily on M&A, Restructuring, Capital Markets, and Banking work.
I then went on a secondment to Citibank in the Czech Republic. I was supposed to stay on for only four months but I ended up being the General Counsel for the bank. This particular experience offered me a very wide exposure because the whole legal function in this bank consisted of only five lawyers so we each had to touch upon every aspect of the business. For this reason, it was a perfect learning ground for me.
Two years later, Citibank asked me to become General Counsel of Central Europe, which I did until 2004 when I received an offer from Citibank to move to London where I became the Deputy General Counsel for the EMEA region for Corporate and Investment Banking.
In 2007, I joined GE Capital as the General Counsel for the CEE region. Four different positions later within GE and I am now back in London as the General Counsel for GE Capital EMEA.
L: Would you ever go back in private practice?
AB: I have to admit, when I went on the secondment, I did not imagine I would be out of the private practice for long. But I was lucky to have interesting opportunities constantly presenting themselves to me as in-house counsel and never felt a need to go back to private practice.
In private practice it’s very hard to really get under the skin of your client. As a General Counsel you leave a real mark on the functioning of the company and its success.
L: How would you define the role of a General Counsel?Is it primarily that of a legal specialist, of a manager, or that of a board advisor? How do you split your day between these roles on average?
AB: For me, the General Counsel is the key manager for legal risk. He/She is the leader that can look at the complicated legal issues and drive legal and business solutions for these issues while being a part of the management team and advising the Board. The General Counsel has to be a counsel on some of the most complicated business issues that relate to the reputation of the business.
This also means rolling up your sleeves and getting involved directly in some of the transactions, litigations or regulatory issues. The other aspect of the General Counsel work is the managerial one. In our case, there are around 100 lawyers across GE Capital EMEA across 19 different markets. Having the right people in the right jobs is critical for the proper coverage of the business from a legal perspective.
The General Counsel needs to be closely involved in regulatory and compliance issues. The triangle between legal, regulatory and compliance needs to work in perfect harmony, especially in the financial services industry.
L: Based on the need to ensure harmony between these three different functions, do you believe they should fall under the same hat?
AB: At the moment I am the compliance leader as well but that is due to change soon as we will put a new leader in place that will report directly to the CEO of the business. Compliance risks are significant in today’s business and regulatory environment and that is a key reason why we decided to make this change. We want to make a clear statement about the importance of compliance.
I do believe there needs to be close cooperation and synergy between compliance, legal and regulatory but I not believe that they need to be under the same hat. Arguably that happens anyway as they all end up having reporting lines to the CEO. I think it fundamentally comes down to ensuring proper communication and coordination. In fact, a lot of regulators, including those in Germany and the United States, have an explicit view on this and, in general, they prefer compliance to be separate from the legal function.
L: You are responsible for the whole EMEA region. What best practices have you developed to cover such a wide range of jurisdictions, each with its different regulatory environments and challenges?
AB: The most important thing I would identify is hiring the best lawyers in each market and relying on them to deliver flawless support. This is the best protection one could possibly set in place. Obviously I have a rhythm with the country teams to make sure that material issues are properly elevated and addressed. Also we have established practice groups in certain areas to ensure best practice sharing and a consistent approach to legal risk.
In addition, I have been working in the wider European region for the past 8 years and in the CEE for 10 years. Over the years, it is possible to start to understand some of the key specifics of each market. Also in the EU it is a bit easier today since directives and regulations provide for some convergence.
L: In an economic environment where GCs need to be budget conscious, what are your approaches to ensuring an efficient, yet lean legal team across your jurisdictions?
AB: Indeed this is one of the most significant questions GCs have to deal with. We have to balance the cost, service level, performance of our teams, and operational risk. There have been a number of tools that we have been using in order to ensure effective legal support. We have been mapping key customer and business needs. We have been reviewing how lawyers are spending their time and are making sure that they concentrate only on material legal issues.
L: As a general approach, do you prefer building a large in-house legal team or outsourcing as much of the work as possible? Why?
AB: There is not one answer to this question. Certain work is better done in-house and certain types of work are better outsourced to external law firms. For example, it does not make sense to keep an in-house team to handle complicated M&A transactions.
In-house lawyers tend to specialize in key business areas and provide support on a rolling basis. They can partner with different business units better than external law firms can.
L: When you do decide to outsource legal work, what are the selling points you look for in choosing the firm(s) you will work with?
AB: Obviously, the quality of external lawyers matters greatly, but at the same time their services need to be provided at a reasonable price reflecting today’s environment.
We have a preferred list of law firms that we want to work with. We like to build long-term beneficial partnerships whereby we provide a steady flow of work but receive a more cost effective service in return.
L: There is a lot of talk around companies pushing more and more for non-hourly based, alternative fee systems. To what extent is that a priority for you?
AB: We do look at them, but I do not think there is a system that makes sense all the time. I feel the working relationship between us and external counsels needs to be economical for both the firm as well as us as a client on the long run.
What we do look for is predictability. We seek a clear statement of how much the work is going to cost and expect to stay within that cost target. We understand that there is a margin at play for the law firms but we appreciate billing consistency since it allows us to budget accurately. We believe that it balances out over the long run and both law firms and we benefit.
L: To what extent would you say legislation in the banking industry has converged across the jurisdictions you cover? What about in the case of non-EU markets?
AB: In the EU convergence is ensured via the regulations and directives I mentioned earlier. When referring to non-EU markets there are slightly more variations but core banking regulations (Basel I, II, and III) still apply across the main markets.
L: The general trend has been to regulate an increase in capital buffers and limiting the amount of exposure banks can have. How do you see this impacting the industry?
AB: I find it to be an understandable response of regulators to what has happened 4 years ago. What I find to be important is to look at the impact of regulatory changes on banks holistically. I do not think there is one area that is problematic on its own. It is the combination of a series of regulations that might cause that associated costs of regulations become too high for banks and investors. In order to comply you need a certain size and economy of scale to justify the cost of compliance. That may result in unintended consolidation in the market with only a small number of the biggest players being able to adhere to all the recent regulations. I do not believe that this is what was intended originally by regulators and governments. Such consolidation may actually increase risks for the banking system and the society.
The other issue is the capital charges that lenders have to put against certain classes of assets, especially in the case of small and medium-sized enterprises. Because of these charges, it might make far less sense for banks to lend to them.
I believe that the regulators are doing the best job possible but we should avoid going overboard. I think that a wide-reaching dialogue, which involves all stakeholders, can help to avoid such a risk.
L: What do you see as the biggest regulatory challenges the industry faces at the moment or in the near future?
AB: As a pan-European lender we see a wide number of challenging regulatory and legislative issues. One I touched upon already is that adding up all the regulatory charges and capital buffer requirements might make the cost of lending too high.
Regulators need to understand that measures such as the financial transaction tax will impact the end cost for customers. This is not a cost that institutions can absorb on their own and it will most likely trickle down to customers.
Another area that we are keeping a close eye on is the proposed new approach to lease accounting which could significantly change the way both lessors and lessees account for leases. If the changes come into force the new model would effectively eliminate off-balance sheet accounting for operating leases, bringing them on the balance sheet.