Insights

Credit & Risk Management

CREDIT & RISK MANAGEMENT MARKET COMMENTARY, Q2 2016

• Article by BRUIN Financial

CREDIT & RISK MANAGEMENT MARKET COMMENTARY, Q2 2016

MARKET OVERVIEW

As predicted, Q2 saw an increase in the general appetite to hire across financial services. This trend was consistent across both buy and sell sides with many firms able to complete hiring processes before the EU referendum vote. Positions that had been approved for hire pre-referendum are still available, indeed there is little evidence suggesting loss of headcount post referendum and in some areas we have seen increased demand as a direct result.

The message from our clients so far is that it is very much ‘business as usual’ in terms of hiring, with now an additional remit for specialists from the Brexit result. Not only will organisations need to continue their implementation of pending regulations such as MiFID II during the transition period, but the UK seeking to establish a new EU regulatory framework to maintain access to EU markets will demand specialist expertise

Regarding compensation, 2016 bonus figures within Investment Banking tended to be weighted heavily towards the senior end of the market. For professionals at VP level and above bonuses averaged circa 36% of basic salary in contrast to Analyst to AVP level which was circa 20%. Across Asset Management a similar trend was noticed with commensurate figures of 31% to 17% respectively. More information can be found within the BRUIN Financial Bonus Survey.

Areas which have seen high amounts of activity across the Asset Management space have been Investment Risk across asset classes and First Line functions within Operational Risk. In Investment Banking Model Risk functions have been recruiting across Model Validation, Governance and Analytics. Also, Enterprise Risk functions are seeking ICAAP, RRP and Stress Testing experts. Recently there has been a flurry of activity within the IFRS9 space where Credit Risk Modellers are sought.

Given the magnitude of the decision of the referendum vote and the unprecedented nature of this event it is extremely difficult to make accurate predictions for the next quarter. However with a productive Q2 finished we expect Q3 to be focused on monitoring activities and the ongoing economic/political climate. From a candidate perspective these are likely to be uncertain times and now more than ever it is important for firms to be flexible on hiring criteria.

ROLE PROFILES

Credit Risk Management
There has been a steady flow of Credit Risk roles in Q2. The Banks and small to medium enterprises continue to hire across financial institutions and sector specific corporates. On the corporate side we have seen the need for specific product knowledge about lending.

Operational Risk
The vast majority of hiring in this space has been in Asset Management which seem to bulking out their First Line Risk & Control functions. As these teams are relatively small and new, firms have to be flexible on the background of the candidate when hiring. Firms are having to invest time in training candidates within these roles due to the lack of available talent within the market. These roles often require candidates to have specific product knowledge and the ability to communicate effectively with senior stakeholders.

Market Risk
Market Risk has been comparatively quiet in the last quarter. Roles that have come up tend to be replacement hires. It remains to be seen in the wake of Brexit whether Market Risk Management functions which will be under stress due to market volatility will receive increased headcount. Market Risk Analytics has seen hires across Investment Banking and Consultancy. FRTB continues to be a source of challenge for Banks, further information about the recent BRUIN FRTB breakfast seminar will be circulated in due course.

Investment Risk
Investment Risk is where we have seen the majority of our roles this quarter and where we have had the majority of success across all asset classes. Candidates in this space are generally looking to move closer to the Front Office and more exposure to Fund Managers as opposed to Second Line oversight ‘policing’ functions. Some clients, depending on their structure can offer this and these roles are highly sought after. Due to the technical nature of these roles candidates are seeing large salary increases to move within this space. We expect this to continue into Q3.

Quantitative Analytics
Across both buy and sell side Quantitative Analytics has been very active in the last quarter. The Investment Banks have been doing a lot of hiring in Model Validation, Governance and Analytics across asset class looking at both Pricing and Risk Models. Candidates with knowledge of Machine Learning and Object Orientated Programming languages are heavily sought after. It is becoming ever more difficult to find candidates with the niche skill sets required who are willing to move into a similar role. Firms must be more willing to compromise on skill set requirements and willing to train people. Otherwise hiring processes can take months rather than weeks.

Temp
During the latter parts of Q2 we saw a general increase in requirements throughout the contract and temporary space. However, due to uncertainties pertaining to factors including the Brexit vote, larger Investment Banks have not being hiring extensively. We anticipate an increase in job volume as a result of the referendum, particularly for change and operational / business risk professionals with not only regulatory knowledge but product knowledge as well.