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Lawyers are so bound by precedent that they can be caught in a trap of becoming backward-looking, according to Stephen Gannon, the veteran general counsel and chief legal officer of Providence, Rhode Island-based Citizens Financial Group Inc.

Steve Gannon

“Our clients are completely focused on innovation, and particularly on what technology can do to help customers,” noted Gannon. “So much so that someone said, 'We are becoming technology companies with banking licenses,' and I think that's true.”

Gannon spoke with Corporate Counsel recently about significant trends he is seeing in the banking industry, ranging from the use of technology to diversity to outside counsel management.

He spoke from experience—35 years of advising the financial services industry. Before joining Citizens, Gannon served seven years as deputy general counsel at Capital One Financial Corp. in McLean, Virginia, and six years as general counsel of the Retail Brokerage Group at Wachovia Securities in Richmond, Virginia.

Prior to that, he was in private practice for 20 years at several firms as a litigator and securities counsel in Richmond, including LeClairRyan; what was then McSweeney, Burtch, and Crump; and Hunton & Williams. He also spent two years with the U.S. Securities and Exchange Commission's Enforcement Division in Washington D.C., including one year as a branch chief.

His work at Citizens, though, has been some of the most challenging of his career. He led his legal team when the bank separated from a troubled Royal Bank of Scotland in 2014, and the same year oversaw the bank's initial public offering—the largest commercial bank IPO in history.

These days, Gannon said, he is “putting a lot of thought an effort into artificial intelligence. All internal legal departments must get smarter about using it.”

Gannon said Citizens now uses AI in risk management and human resources, “and we want to use it more in legal to better manage outside legal bills and to drive more stability and predictability with regulators.”

He also finds cybersecurity threats worrying. “It's no secret everybody is concerned about that,” he said, explaining that the legal team conducts tabletop exercises on what happens in case of a breach or if some part of the bank's network goes down.

“There will be a legal and regulatory impact, and we want to be ready when it happens,” he said.

For how long? “This will probably never end, and we will always be preparing,” he said. “We are baking it into our culture.”

Gannon said when he arrived at Citizens in 2014 that there were “a couple hundred law firms” on the bank's provider list. “We shrunk it to 70. Then, in another round, to 45. And there will be more shrinking, as AI data gets richer every year, to compare and assess law firms,” he explained.

But it's not just about the money. It's also about the quality of results and the length and depth of relationships. “At the end of the day,” Gannon said, “when you are thinking hard about a difficult problem that can really impact the bank, you want advice you can trust. Use the data but value the relationships.”

Gannon's sense is that GCs are in “a pretty good place” when it comes to hiring outside law firms. The legal industry has bounced back strongly from the recession, he said, and a series of recent mergers have created strong, robust firms that can deliver services across a wide variety of business and geographic areas.

“If there's one firm not able to deliver the value proposition we want, we are happy to move on to another,” he said. “There are a wide variety of firms that have set a high [performance] bar for themselves, and I have broader choices than ever. There is a smorgasbord out there for us.”

Gannon touched on other aspects of his work as well:

• Diversity. The legal department created an “innovation council” made up of nonmanagement employees so that ideas would “bubble up.” Gannon said he has accepted every recommendation on diversity and inclusion, including adding diversity to the scorecard used to evaluate outside law firms. He brings in diverse speakers from the legal world and is actively involved in the bank's business resource groups, which are networks for women, people of color, veterans and LGBT.
• Regulations. He said efforts are underway to simplify and streamline the complex regulations adopted under the Dodd-Frank Act. “Regulators have a new commitment to transparency and to giving us more predictability,” Gannon added.
• Corporate Governance. The GC said he oversaw significant changes in the corporate governance function in support of the bank's board of directors. The enhancements include more board involvement, with outreach to investors and listening to understand their concerns; more board training on important issues; and continual board evaluations. “In 2017, we had the best year ever, financially,” Gannon said. “And we think the board leadership and good governance did a lot to contribute to that.”