The Global Markets Practice at Pure Search covers functions and asset classes across Capital Markets, FX, Fixed Income, Commodities, Equity Linked Products and Global Transaction Banking throughout EMEA and Asia.
Pure Search’s consultants reveal how investment banks are putting in place a ‘back to basics’ approach with less focus on commodities.
Simon is Co-Head of Pure Search’s Global Markets practice and is responsible for Fixed Income and Foreign Exchange.
John leads Pure Search’s Equities product lines, including Derivatives, Synthetic Prime Finance, Prime Brokerage and Global Electronic Solutions.
Colleen heads the Global Commodities front office practice in respect of the appointment of Traders, Sales People/ Originators, Structurers and Quantitative and Fundamental Analysts.
How has the Front Office of banks changed structurally in recent years?
Has the increased regulation had an effect on hiring in the Front Office?
Given the structural changes of the Front Office of banks, where is talent moving to?
John: Banks have arrived at a crossroad in the last few years in terms of what businesses they are remaining in. They are pulling out of certain products as they renew investment and impetus in others. Tier one capital ratio, return on weighted assets and return on equity are still a trouble area for banks in general. There’s still a massive drive on how banks restructure their balance sheet in line with Basel III.
Colleen: The commodities product lines are the ones that have been impacted the most because of all the new regulatory implications. A number of banks that had a significant presence in the commodities world have withdrawn from most of these markets - just keeping precious metals because these are regarded as investor products.
They are cutting back on propriety trading and they are cutting back on peripheral activities that are deemed not to be core - there has been a lot of going ‘back to basics’.
Simon: Yet despite the increased emphasis on a ‘back to basics’ approach, I’m not sure the banks are becoming easier places in which to work. But they are certainly becoming a lot savvier in terms of regulation and governance and to an extent some banks are becoming hamstrung by regulation and credit changes, which has a direct impact on their profit and loss. So from that point of the view it has become more transactional in the way they structure things to generate income, because a lot of the profit has been taken out.
John: Because of increased regulation and an emphasis on risk around business, traders are now being asked to validate and provide evidence that they have a strong understanding of the risk parameters of the business that they carry out.
There is a renewed drive to evidence during the interview process that they have a very strong hold on their business and these risks – this is becoming more and more prevalent in the conversations between candidates and clients. There is also a need for candidates to be able to show they understand the clients that they are working on behalf of and the risks around those clients; what the usages are versus the return that those clients are giving. That has become far more detailed.
And so candidates are being drilled and are being asked to provide granular detail about how they make money on a daily, weekly and monthly basis. In addition to being asked about the validity and strength of their relationships with clients and the credit perimeters around those clients.
Colleen: The talent pool is going from the banks into the larger trading houses which are taking advantage of this new supply of talent that wasn’t easily accessible to them before. They are stepping into some of the shoes the banks were wearing before, in terms of financing and adding value to the trading organisation through acquiring infrastructure and warehousing opportunities.
John: We are also seeing movement now to other banks that three or four years ago people would previously not have entertained the idea. Buy side is still a strong pull and hedge funds are not affected by some of the regulations that are suffocating banks.
Colleen: The Canadian banks have traditionally been regarded as being ultraconservative. In the dynamic trading days, traders wanted to go to places they could take huge risks and take advantage of the market volatility - Canadian banks never really sold that image. It’s interesting how they have gone from being not the most attractive of banks to certain individuals, to now being highly attractive because they have got staying power; they are dedicated to their markets and they have got a strong focus on their client franchise and why they are here. Although they are still fairly conservative and risk-averse, that’s now become an attractive proposition.