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Credit & Risk Management

Credit & Risk Management Market Commentary, Q2 2015

• Article by BRUIN Financial

Credit & Risk Management Market Commentary, Q2 2015

MARKET OVERVIEW

Following on from the start of year surge in recruitment in Q1, Q2 saw the Risk market maintain its high volume of hires. This was very much a quarter of two halves; April and May saw a slight dip in the number of newly created roles, with much of the hiring being precipitated by resignations following the bonus run (a trend consistent with previous years). However the May General Election saw the advent of a wave of newly created positions across the risk spectrum, and this period up to the beginning of Q3 has been heralded as the busiest period in terms of job volume since the Credit and Risk Management desk at BRUIN was conceived. These trends have transcended the Sell and Buy side institutions; and there is no sign of the volume of jobs slowing down in Q3.

The Risk market continues to be a candidate-driven entity. With such an abundance of opportunities available, candidates are able to take a more passive approach to finding their desired role. Clients and recruitment agencies are finding that the most desirable candidates are waiting for them to make the first move rather than seeing them apply to job adverts.

Institutions are now under more pressure than ever from the Regulator to employ SMEs from more technical backgrounds to explain and justify the nature of their work. The creation of these new hybrid roles, combined with the ever-steady high demand for technically skilled professionals to fill roles in their natural environments, has seen candidates in the risk space being able to command external salary uplifts of between 20-25%+, compared to the previous 15-20% market rate uplift.

Sought-after Risk candidates have the upper hand in the meta-game with their employers: they know their value, and they know that their current and potential employers do as well. For a candidate to not receive a counter-offer upon handing in their notice is now definitely the exception rather than the norm. Strong candidates coming fresh to market will often see several job specifications in their inbox within their first day of searching; and the pressure is on clients to move quickly and decisively to secure these candidates ahead of their competition.

ROLE PROFILES

Market Risk

Q2 has seen an increased desire for candidates in Market Risk Methodology, particularly at AVP level. Traditionally candidates in this space have come from statistical backgrounds, with strong knowledge of Monte Carlo and Time-Series Analysis. However more recently candidates with general purpose programming language skills have been in demand as firms seek to develop more sophisticated VaR models.

Risk Appetite and Economic Capital are also significant an area of growth, with business’s more inclined to look at Market Risk from a firm-wide strategic perspective. Desired candidates in this space will be predominantly Market Risk focused but they will also have experience working in different areas of risk as well as experience in facing off to the Regulator.

Investment Risk

The appetite to hire for Investment Risk has not slowed from the already high volume we saw in Q1. All areas have been in demand but there has been particular call for those with multi asset experience as well as those candidates with LDI experience moreover, due to new AiFMD regulations firms are also looking to increase their alternative and real estate teams. This increase has meant that what was a dearth of candidates in Q1 has turned into a desert, with most active candidates known in the market and recycled around companies. All levels are sought after with mandates for whole teams including “heads of” not uncommon. Increasingly we are seeing that businesses will look only at those with the particular system skills that are used in house so as to negate any latency period whilst training.

Credit Risk

We have seen a marked decrease in the number of credit roles that are coming to market. The areas of hire have remained constant with continued focus on leveraged finance and high yield analysts across both banking and ratings.   The demand has been highest for AVP level candidates which has put pressure on already shrinking pool of candidates. With banks and rating agencies completing the majority of their hiring in Q1 and early Q2 we foresee mostly replacement hires over the coming months.

Credit Research

Q2 has been quieter in credit research even more so than an already slow Q1.  These roles are becoming more and more network driven and as a result the requirement to use agencies (except at the very senior end of the market) has decreased heavily. We are finding that asset management clients have been hiring junior candidates direct from sell side roles such as M&A and origination. Again, candidates at all levels are demanding a premium to move externally utilising and leveraging off the competitive nature of the current marketplace.

Operational Risk

Whilst we are aware that many of the Investment Banks have made redundancies at the very senior end of Operational Risk that has opened the door to restructures driving roles at the mid level (VP). The main volume of roles seen has been across the FLOD with knowledge of particular business areas or products favourable to each particular role. Operational Risk roles however are positions where agencies are less in demand as the roles are less technical and often less niche in nature and therefore we have not seen great volumes of positions in this space.

On the buy side, we have seen the usual flow of Operational Risk roles at a steady pace. There has been a certain trend towards stand alone Operational Risk roles where strength of character and a certain level of experience to command gravitas within a business are also pivotal. In contrast to the sell side, we still witness the need for buy side institutions to engage agencies in such searches due to the historical prevalence of cultural fit being pivotal to sourcing the perfect candidate. Agency involvement can therefore often speed the process by devoting time to assessing a candidate’s motives, approach and personality and only presenting those who will be a strong fit for their client.

Quant Risk

The quant space saw significant increase in headcount across 2014 within the banks and yet this has seemed to continue throughout Q1 of this year. Whilst the volumes may be similar, the focus within Quantitative hiring has altered for 2015. We have subsequently seen a decline in hires across both Model Validation and Model Risk Audit which were prominent in 2014 and growth across other areas such as Market Risk Methodology at the AVP Level in particular, CVA/XVA Analytics and further Credit Risk Quant Analytics.

Market Risk Methodology in particular has been a main area of hire and due to the sheer lack of candidates in the market in this area, as such teams are relatively new, competition has been fierce between Banks and Agencies in sourcing candidates. Due to this we have gradually started to see some flexibility with regards to the level of experience of candidates and some consideration for those with impeccable Quantitative degrees from top Universities who have been working in a technical area such as Market Risk yet to ascertain a Quantitative role. This is also similar in the CVA space where flexibility in level has also been apparent.

PREDICTIONS

The election result in May of this year had less impact than many expected, however with the EU referendum now looming we can expect that businesses will be wary of any large scale hiring till the UK’s position within the EU stabilizes. Further afield, with the Greece situation still largely unresolved, many banks are still directly exposed to Greek debts. Moreover, with a lingering chance of contagion in the wider Euro Zone there may be caution to increase headcount on any large scale.

Following on from the ECB’s stress tests, companies will continue to feel the force of increased regulation, with firms likely to continue the growth we have seen in stress testing roles in general. More specifically, we expect candidates with liquidity reporting experience to be in high demand in the near to medium term. We foresee business’s trying to build a comprehensive response to these regulatory pressures ending in a holistic risk management structure by the deadline imposed by the Basel committee.

With the summer months approaching and with bonuses expected in the coming quarter we expect that as usual hiring will slow across the board. However we do not anticipate the slow down will be as deep as 2014’s where we saw a great dearth in new roles coming to market.