Morning Coffee: Prepare for a flood of banking jobs in New York. The biggest problem with 20-something traders
UBS has already blinked and said it can't hang around to move 1,500 staff out of the UK before the Brexit negotiations are concluded, now Goldman Sachs has said that it intends to start shifting "hundreds" of UK jobs across to Frankfurt even before Theresa May serves Article 50 next week.
Goldman's move is merely confirmation investment banks aren't bluffing and jobs really are heading out of the City. Expect more announcements next week. Morgan Stanley president Colm Kelleher also said yesterday that the bank would "certainly" be moving jobs out of London before the two-year Brexit negotiation period is up, according to the FT.
"Our business model involves all employees who need to live in different places and have children and so on,” he said. “You can’t just order them around like units on the board."
Cue collective hand rubbing across the large cities of Europe, particularly Frankfurt, which is even shipping in craft beer to please a new breed of British bankers flooding across. Except, maybe it won't be Frankfurt, or Paris or Dublin that emerges as the big winner. Maybe it'll be New York.
The less conservative estimates put job relocations within the large investment banks at around 20% of headcount, and reports in the Handelsblatt in January suggested that 3,000 of Goldman's 6,000 UK staff could go. Goldman's new assertion that only a few hundred jobs will move to Frankfurt (or be recruited locally) may be an indication that Brexit really isn't that bad. Or these might merely be the jobs that have to be in Europe and proceed further job moves elsewhere. Decentralising London as Europe's key financial center might simply mean U.S. investment banks move people back to their home markets.
“You may see some business gravitating back to New York,” said Kelleher. “It’s not a disaster, it’s not going to be a blow-up. It’s not going to be the end of London, but clearly, we will have to adjust.”
Richie Boucher, chief executive of Bank of Ireland, also told the FT: “As far as investment banking is concerned, the presumption that it is a competition between London and another European centre has a degree of naivety. It’ll be between London and New York.”
Separately, there's a big problem with juniorisation on the trading floor, particularly in FX - young people who haven't seen a crisis tend to panic when something big happens. Job cuts and a tendency to keep cheap analysts, associates and VPs and fire expensive directors and MDs has ensured a lack of "old hands" on the trading floor, and this is a worry. This comes from the latest Bank of International Settlements report on the FX market, reported by Bloomberg, that says 20-something traders may be to blame, at least partially, for the flash crashes in the currency markets over the past two years.
“If there’s a shortage of senior people, there’s a shortage of knowledge,” said Keith Underwood , who runs his own foreign-exchange consulting firm and is a former FX trader who was previously hesitant to hand over his positions to juniors in other regions overnight. “I’ve certainly adjusted my orders, and I’ve also adjusted my sleep.”
If this is a genuine problem, it's not going to get better any time soon - recruiters suggest that 75% of vacancies for currency traders now are for people with two to five years' experience.
A bank by bank guide to Brexit (Bloomberg)
Banks need to show the true cost of Brexit (Gadfly)
Why Morgan Stanley made massive cuts in FICC: "Clearly we were all running outsized fixed income businesses — far too much capital, far too much leverage, far too much liquidity trapped in, very sloppy way of dealing with derivatives — all that stuff." (Business Insider)
Colm Kelleher says fixed income trading is doing well this year (Reuters)
The day after it said it was building its investment bank in Northern Europe, BNP Paribas says it's actually firing people in the UK, Luxembourg and France (Reuters)
Meet the great man manager who would replace Steve Scharzman at Blackstone (Institutional Investor)
Deutsche Bank is opening its fourth innovation center. This time in New York (Finextra)
How to confuse compliance monitoring tools - speak in a language other than English (Financial News)
Travel tips from the CIA: "Flying Lufthansa: Booze is free so enjoy (within reason)!" (Economist)
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