Credit & Risk Management

Credit & Risk Management Market Commentary, Q4 2014

• Article by BRUIN Financial

Credit & Risk Management Market Commentary, Q4 2014

Market Overview

The UK Economy grew by 2.6% percent across 2014 demonstrating the fastest pace since 2007. Unemployment levels fell to 5.8% and it was certainly a more prosperous year across financial services despite fluctuating oil prices, political unrest in Europe and mounting regulatory pressure brought on by ECB and the BoE stress tests. Q4 of 2014 however was marked as the slowest quarter in terms of expected growth and this was evident to some extent in the volumes of hire experienced across the sector.

At the beginning of the quarter levels of recruitment remained bouyant. The Banks showed a greater willingness to hire within Risk in comparison to previous years despite severe competition in the market. Prominent areas of hire were Liquidity Risk, most likely driven by the changing Liquidity requirements instigated by Basel III and also Quantitative areas including both methodology and validation roles at all levels. The buy side also saw a certain appetite to hire at the beginning of the quarter, roles were predominantly amongst Operational Risk at the mid to senior level and sat with centralised functions. From a Credit perspective, Front office Corporate Credit Research roles were also a focus across the Emerging Markets and the High Yield space.

December however provided a stark contrast in terms of activity levels across Risk recruitment. This is typical of the time of year and the record numbers of those out of the office to enjoy the festivities was evident this year.  Levels of roles dropped significantly and we saw more reluctance across the candidate pool to enter conversations regarding potential moves as the holidays and bonuses took precedent. The banks in particular showed a reluctance to hire, perhaps due to filling their hiring quota for the year whilst Asset Managers rushed to complete on going hires but did not show willingness to release new roles. The slow down across December can however have only been the calm before the storm- as 2015 has already showed great promise and a significant focus from Financial Service across the board on Risk hires.

Role Profiles

Credit Risk:
Q4 began with a warning from the Federal Reserve to banks that more capital should be held if the rise in high risk, high yield loans continued. This led to a marked increase in demand for candidates with strong leveraged finance backgrounds. This demand was seen across all sectors with a concentration from our Investment Banking and Ratings clients.

Continuing on from strong demand in Q3, analysts with a background in Emerging Markets were highly sought after, particularly those with region specific languages e.g. Nordic/ Eastern European, especially in conjunction with Emerging Market experience. Similarly within Credit Research we saw a focus on junior roles with Emerging Markets & High Yield experience

Operational Risk:
Through the last quarter we saw a higher level of redundancies at the senior level across the Investment Banks, mainly due to internal restructures. This led to a large pool of banking experience across the candidate market at a time when most roles within the industry being filled with internal candidates as the skill set required for an Operational Risk role is usually less niche than other areas. Candidate flow through asset management kept to its usual pace, with many roles just below Director level released to market and profiles often being a blend between risk and audit. The challenge here was finding those willing to make a sideways move from a narrower candidate pool as Asset Management experience has been an unfaltering pre-requisite.

Market Risk:
In Q4 we saw a continuation of candidates willing to move within Market Risk, but fewer roles coming to market. Role profiles became less product specific and took a turn towards regulatory experience such as economic capital, IRC (soon to be IDR) as well as VaR analysis. As most large Investment Banks have begun to outsource their reporting functions to lower cost jurisdictions we have seen less volume in this area but have instead seen a need for stand alone Risk reporting roles with remote direct reports. The main challenge there has been to source candidates with the requisite seniority to step into a purely reporting role, which can often be seen as almost a step backwards.

Investment Risk:
Volumes have increased in this area from the decline in Q3. The roles we saw from our clients were very specific to asset classes and a move towards the demand for exact system skills to match the job in hand. Along with technical prowess clients were very keen for candidates to have the softer skills required to build relationships and liaise with portfolio managers as well as the wider business.

Quantitative Risk
For us Q4 was very bare in terms of Quantitative roles. This was mainly due to banks filling their quota for the year. Conversations with our clients towards the end of the quarter lead us to believe that this will be an area of growth in Q1 2015. The main focus in this sector will be in the model validation and Methodology space as well as substantial growth in the more regulatory specific area including IRC (IRD).

Contract & Temporary

As with permanent roles, the contract market saw its fair share of peaks and troughs throughout 2014.  Key areas for recruitment throughout have been quantitative methodology roles both credit and market risk and stress testing positions with very specific asset classes.

Operational Risk

2014 saw a steady market for operational risk contractors.   That being said Q4 had a quick up turn in buy side positions which has been the result of a mixture of new headcount, sick/maternity covers and department restructures.    Several new Chief Risk Officers or Heads of Operational risk have been appointed in the city which generally brings change, wanted or unwanted.  The effects of this are likely to be seen throughout Q 1 of this year.

Market Risk

Mostly remained stagnated throughout.  Some movement but for project based or short term covers and we believe this is likely to continue throughout 2015.

Credit Risk

Traditionally a low volume area in the temporary market due to the nature of the role and relationships required with the business.  However, initial indications going forward into 2015 seem to suggest banks will have a requirement for (CCP) central counterparty clearing house backgrounds.  This will be due to the increasing demand from the BOE for stability and transparency post 2009.

Quantitative Risk

This space was buoyant throughout H1 of 2014.  As the roles are generally quite niche in nature the candidate pool for each hire in the contractor market is small.  Thus making each role more and more difficult to resource for.  Common themes have been a PhD education, credit modelling background and extremely strong SQL/VBA.


Q1 of 2015 has already got off to a great start, with volumes of roles at increasing levels, particularly across the Investment Banks. The appetite to hire risk professionals seems to have increased significantly looking forward over 2015 with sell side looking to tighten controls in the face of the regulator and with lots of restructuring and movement at the very top on the buy side. We expect to see this continue across the quarter, as the economy continues to improve and as confidence within financial services grows further.

Areas we predict to be busy are Credit Risk across Investment banking with a focus of Emerging Markets and Credit Risk Review- teams now being established in the UK rather than being solely based in the US. Quantitative roles will also be an ongoing focus and a competitive one. More specifically on the buy side, we expect to see volumes of roles within Operational Risk at the Manager to Senior Manager levels as well as Investment Risk with teams forced to grow as activity levels increase again this year.

On the candidate side, the January bonus period seems to have been less of a deterrent than usual with regards to movement in the market. It is predicted that 37% of UK workers are looking to change their jobs this year and this has certainly been reflective in the proactivity and receptiveness with have seen across the Risk candidate pool. The market will however remain to an extent candidate driven due to the niche nature of many of the roles and particular skill sets required. We therefore expect to see more bonus sign ons and more significant uplifts salary across Q1.