Global banks appear ill-prepared to handle the sheer amount of effort required to complete impending stress tests and will likely need to add risk professionals and other staffers to complete the work, according to a new PwC report.
The study results are interesting as they showcase one of the major problems regulators have with banks: they can be arrogant in their self-assessments. “Of course we’re fine!”
PwC found that all 24 banks included in the survey are confident in their ability to meet regulatory requirements and pass stress tests, which determine whether a firm is well-capitalized enough to withstand a major economic collapse. Yet, only 13% of respondents reported they already have sufficient, adequately skilled staff to conduct the actual regulatory stress testing. Confidence comes easy I guess.
Either way, more bodies are needed, and that means hiring. Only 12% of banks included in the survey currently employ more than 20 people to support their core stress testing teams. As context, various U.S. banks that weren’t included in the study employ between 40 and 70 “stress testers.” One unnamed American bank says that it has 500 people dedicated to regulatory testing (please, for their sake, make it J.P. Morgan).
“The way global banks prepare for stress testing needs to change. Past experience has shown that very demanding regulatory stress testing regimes require larger teams with the appropriate skills,” said Keith Ackerman, PwC financial services risk and prudential partner.
So, if you have a background in risk management or accounting, now may be a decent time to shop around, particularly at non-U.S. banks.
Why Wall Street is Afraid of Bill de Blasio (eFinancialCareers)
How big of an effect would de Blasio’s new tax have? That all depends on how many zeros are in your paycheck.
Deutsche Bank capped cash bonuses at roughly $400,000. For many in the U.S., the cap likely doesn’t matter. A DB source told eFinancialCareers: “Nothing very exciting. I think we are in line with Morgan Stanley and Credit Suisse. People are used to the pay now I think. Probably similar numbers to last year but far less grumbling.”
Bonus payments at Barclays may not be as bad as expected. The bank has reportedly put aside nearly $4 billion for bonuses, an 11% increase over last year. Barclays laid off hundreds of bankers just last week.
Cost Control Problems (eFinancialCareers)
Credit Suisse is targeting a cost-income ratio in its investment bank of 70%. In the fourth quarter it was 101%. Oops.
KKR saw its quarterly profit nearly triple year-over-year on the back of increased management fees and a well-performing investment portfolio. Perhaps the best news is they appear to be still hiring. Operating expenses were up due to headcount growth.
The Netherlands is very serious in its demands that bankers remain ethical. All 90,000 Dutch bankers will be required to recite this pledge, or a non-religious alternative: “I swear that I will do my utmost to preserve and enhance confidence in the financial-services industry. So help me God.”
Former SAC Capital Advisors LP portfolio manager Mathew Martoma was found guilty of insider trading on Thursday following two days of jury deliberation. Prosecutors still haven’t gotten to founder Steven A. Cohen, but man have they tried.
Buzz Around the Office
Hopefully Life Doesn’t Imitate Art (Buzzfeed)
Wellesley College students are complaining to school officials about a shockingly life-like piece of art that’s new to campus. It’s a sleepwalking man in his underwear.
Quote of the Day: “Build your own dreams, or someone else will hire you to build theirs.” – Farrah Gray