The Shift from Wall Street to Washington

What changing regulations mean for our banks, and how Mike Hernandez is helping PNC Financial Services harness emerging technologies

Though other employers told him he was overqualified, PNC Financial Services welcomed Mike Hernandez with open arms.

Mike Hernandez was interrupted early in his job interview at PNC Financial Services. Nancy Pollino, an EVP and Shared Services CFO, asked how Hernandez thought a financial institution should manage investments in emerging technologies. It was a challenge Pollino was charged with by PNC’s CFO Rick Johnson. Hernandez relied on his strong financial and technical backgrounds (as a CPA and project manager) and shifted into consulting mode. Pollino was impressed with Hernandez’s answer, and when he suggested she create a finance project management office, she hired him on the spot.

That was 2010, and Hernandez spent his first 18 months building and managing the office he created along with other leaders at PNC. Together, they have launched the comprehensive finance technology transformation strategy that is fundamentally changing the way PNC handles accounting and reporting. Business partners like Oracle, IBM, Rolta, and Highstreet ESG have worked with PNC to conceptualize and implement advanced technologies to respond to rapidly changing capital and risk and reporting requirements.

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Since the financial crisis, the pendulum has shifted to greater regulatory influence. The reforms were necessary, but there is a significant opportunity cost to compliance. Financial institutions like PNC need to continue to invest in products and services that help our customers. A healthy banking system is necessary for economic growth.

After graduating from Penn State, Hernandez started his career in Philadelphia, where he worked in accounting at Deloitte before moving to Mellon Bank’s internal audit group. In 1988, he moved to Columbus, Ohio, with Bank One (now JPMorgan Chase & Co.), and stayed for 16 years in various functions of management. Hernandez says the numerous roles and his eclectic experience helped him land the PNC job. In fact, he previously created his own position for Crowe Horwath when they needed to address a gap in service in the areas of wealth management and trust consulting. That job ended in 2009 as the financial crisis started hitting his consulting clients hard. While other employers, overwhelmed by Hernandez’s breadth of experience, told him his résumé was too dense, Pollino and PNC were drawn to his vast and unusual expertise. “Finance at PNC had not previously made technology investments of the size and scale they were planning, but they were forced to do so as the bank expanded in size from the National City acquisition and new regulatory requirements were instituted after the crisis,” he explains. “I had just the right background to step in.”

The first move was to understand PNC’s leadership, organization, and resources related to IT, project, and program management. Hernandez won approval to hire full-time employees and staff his office well. He built a team from external and internal hires. The focus of finance technology investments are largely driven by what he calls the banking industry’s “shift from Wall Street to Washington.” As the regulators have driven the agenda and investment in the banking industry in the name of safety to the financial system, banks must keep up. “It used to be that if you wanted to know what was happening in banking you would go to New York,” Hernandez says. “Today, if you want to know what is going on in the industry you go to Washington.”

For banks, the new regulations come at a great cost. The largest banks must maintain extra levels of capital and community banks struggle to keep up with new requirements. Hernandez works at PNC to build out an infrastructure with finance and risk that supports the increased need for data to drive mandated reporting.

Bank transaction volumes create a mountain of data across hundreds of systems which support customer business. Thus, modern banks that face heavy regulatory scrutiny must understand every shade of internal information. “All of that data comes together in two areas: finance and risk management,” Hernandez says. “We need to create a clear picture of what’s going on and demonstrate to regulators that we have a clear understanding of the business.” Hernandez is working with finance, risk, and IT leaders to transform a once fragmented system into a holistic and cohesive model.

After Hernandez had his finance project management office up and running, he was looking additional challenges and was asked by Johnson and controller Greg Kozich to take over as director of accounting operations. “I essentially wear two hats. Operationally, my team and I make sure our financial data is timely and accurate to support or financial reporting. Strategically, I engage with a leadership group that is defining how are systems and data infrastructure will support the growing demand for information about the business,” he explains.

Just over three years ago, Hernandez was looking for a job. He was told he was overqualified. “Employers wanted me to appear more focused and present a narrow expertise, which was discouraging because I had worked really hard to have all these experiences and accomplishments,” he recalls. He was a CPA. He understood finance. He had an MBA, and project management experience, and professional certifications, and risk management knowledge. He held audit positions, and ran operational groups, and consulted on technology projects within the industry. “Without all of these experiences that other prospective employers wanted me to hide, I may not have been hired at PNC. I just needed to find the right place where the experiences I’ve had are valued,” Hernandez says.

In addition to his work at PNC, Hernandez serves on the advisory board for the Association of Latino Professionals in Finance and Accounting’s Pittsburgh chapter. He came to the nonprofit group, seated in Los Angeles, looking to expand his professional network in 2009. After Hernandez helped start the group’s chapter in Columbus he served as the chapter president. “The group is dedicated to helping expand expanding opportunities for Latino leadership in the global market,” he says.

Hernandez says he is in the right place with the right company and has been enjoying the Pittsburgh community. He and PNC are a good fit. “It’s interesting work because the industry keeps changing. In many ways, the changes are just at the beginning because regulations are still being handed down. We are still responding to the shifts and investing resources to keep current and compliant,” he says. As lawmakers continue to write new regulations, he and his colleagues across the business oversee the bank’s investment in reporting and protecting secure data for 2,500 bank branches that generated more than $15 billion of revenue in 2012 and almost $4 billion in the first quarter of 2013.