Poor CEO succession planning poses “a significant risk” for U.S. banks, according to a new analysis. 

Over the past decade, half of the CEO transitions that occurred at banks with between $20 billion and $250 billion in assets were abrupt or unplanned, Russell Reynolds said in a Nov. 8 report. 

That can have a number of implications for banks, including hurting their stock prices. 

In its report, Russell Reynolds also flagged a “potential looming retirement cliff” in the industry. C-suite executives at midsize banks spend an average of 15 years at their companies and have spent an average of six years in their current roles, the firm said.  

Current bank CEOs’ average age is 58; nearly one-quarter of bank C-suiters are 65 or older. “This suggests that banks may soon be encountering a leadership vacuum,” necessitating established succession plans, the analysis warned.  

When bank CEOs departed abruptly and without any public announcements of long-term succession plans, those bank stock prices took a hit: Their stock fell by an average of 7% the day after the announcement and finished 8% lower one month later, the analysis said. 

Tenured CEOs that have had a successful run “tend to cloud the urgency and good corporate hygiene” that’s needed for solid succession plans, the analysis noted.  

The Russell Reynolds analysis recommends banks give more attention to three specific aspects: crafting tangible succession plans, improving internal leadership development and increased involvement of boards. 

A lack of succession planning and the absence of a successor can also lead to firm buyouts. Earlier this year, the National Credit Union Administration issued a rule requiring boards of federally insured credit unions to set up and follow succession planning processes for certain executive roles.