Are most MD's promoted from within a bank?h

Uh, no. Almost all are internal. At that level it is very, very hard to find talent. Moreover, a managing director is a revenue-generating asset to the firm and getting there is a risky proposition. A bank would not look externally for a potentially unproven director (not VP unless it's GS) and then promote them to MD. Too much cost and too much risk. It is rare for a bank to bring someone in from outside as they will not have seen the strength of their client relationships or even their ability to manage processes. The transition from VP (an execution role) to Director (increasingly a client coverage role) is extremely tough and you see a lot of people leave the business at this level. This is the apex of the execution role, which is highly valued by PE, industry and others and so leaving as a VP or director is common as you are not making MD money but have great experience. If a banker carries on and builds client relationships they are considered for an MD role but this often has to do with the amount of revenue they contribute and the quality of their relationships. Moving from D to MD is the toughest promotion in banking (far tougher than analyst to associate, which is the second hardest).

It's a long way of saying that if you are a Director that covers clients and do a good job you are highly protected by your firm as you are a cheap revenue generator and it is hard for a competing bank to poach you. If you are a bank, you are going to strongly prefer internal promotion because you have better knowledge and promoting internally is more likely to be immediately accretive. Taking a chance on someone from another bank is 1) more expensive and 2) more risky. Having said that, it does happen. If a Director is a rock star and is in the wrong spot (not being supported properly or the bank is not doing that well) other banks often know and it can get competitive.

Hope this helps.