Banks’ pledges to bolster their audit and financial crime functions in light of the global financial crisis have also buoyed hiring trends for candidates with the right experience.
While investment banking jobs have dried up or become more competitive, banks are increasingly spending millions each year on boosting the amount of staff in other areas to comply with regulators. This comes on the back of a shift to electronic trading desks, with high-frequency trading firms poaching investment bankers, as new rules banning proprietary trading at banks loom large.
“Since the financial crisis, banks have certainly turned more risk-averse,” says Jared Barlow, associate director of admissions at the W. P. Carey School of Business.
Jared says that regulatory compliance now includes higher capital charges and assessment of systemic risk from newly formed financial regulators. “As such, financial institutions have a high number of individuals employed in the compliance, auditing and risk-assessment functions,” he adds.
Standard Chartered, the British bank, has doubled the number of staff in its financial crime unit and has increased legal and compliance headcount by 30% in the past year.
But there are also opportunities for business school graduates to make their mark in professional services firms, which service the financial sector in these areas.
“Compliance auditing, as well as financial-reporting auditing, are major service lines by large accounting firms,” says Jared, whose business school graduated 13.6% of its MBA cohort into financial services last year, second only to the technology sector.
“The Big Four and other large international public accounting firms are engaged in assurance in many areas, including internal-control adequacy [and] sustainability accounting.”
Banks have been forced to increase hiring in these areas after finding themselves in regulatory hot water. StanChart was forced to pay a multi-million dollar fine in August, while BNP Paribas, France’s biggest bank, was fined billions in June by US regulators after violating sanctions on some countries.
BNP has said it has increased its compliance staff by 40% to 1,600 in five years. It has pledged to bolster its compliance, legal, audit and risk management functions further in light of recent sanctions.
William W. Sihler, a professor of finance at the Darden School of Business, thinks that regulators are driving banks to employ more staff. “Just dealing with the regulatory scrutiny is taking considerable time and cost,” he says.
HSBC is spending between $750 million to $800 on its compliance and risk program, up considerably from $150 million to $200 million last year, and Macquarie, the Australian bank, has tripled the amount it spends on direct compliance in three years to about $300 million.
“It is true that a certain risk aversion can be read in recruiters’ strong preference for candidates with substantial prior experience,” says Pascal Michels from the career services team at IESE Business School. But he adds that as the economic climate improves, appetite for career-changers may return.
But while he says that IESE’s MBA students are mainly hired in investment banking divisions, he thinks there is a private market for compliance, risk and auditing roles. “Undoubtedly there is a real appetite in these areas at the experienced hire level, and MBA candidates with the right profile may find it an option to tap into,” adds Pascal.
However, while business schools like HEC Paris have this year sent large numbers of MBAs into front office positions in corporate finance and capital markets areas, knowledge of compliance and regulatory issues is increasingly demanded in interviews for jobs in a variety of areas.
“They are increasingly being challenged in interviews on three topics in particular: ethics, compliance and regulation,” says Jacques Olivier, director of finance programs at the French business school.
He adds that there has been an increasing trend at banks to hire more staff in compliance and risk management, but this has not been immediately reflected in HEC’s raw employment figures.
While the crisis has prompted banks to adapt, so too have business schools in the teaching of their MBA and master’s programs.
Jacques says that ethics and compliance play a major role in the design of the finance curriculums at HEC, for example. A new dual MBA-MIF degree, launching next year, has made ethics and corporate responsibility a compulsory learning component for all of HEC’s MBA candidates.
Dual degree students are also required to take a course on bank regulation, and a course on ethics and compliance taught in collaboration with the CFA Institute. “HEC Paris takes these topics very seriously,” says Jacques.
At IESE, students can opt for electives in enterprise risk management and ethics and finance, taught by Prof Jan Simon who is a former director of Goldman Sachs.
“These electives in particular would definitely be an asset for any compliance and risk management team,” says Pascal.
The CFA Institute, which administers the CFA exams which are increasingly popular with financial sector employers, has changed its curriculum – between 10% and 15% of which is now focused on ethics.
Kate Lander, head of education for EMEA at the CFA Institute, says the CFA qualification is becoming increasingly useful for risk management roles. “Clients want credibility, and employers want to hire people who have a good understanding of risk and regulation,” she adds.
Beyond compliance careers at banks, Jared says that “financial forensics” has emerged as a lucrative service line in many large professional service firms – areas that are “huge issues” in business.
“Students from Master of Accountancy programs that include coursework on forensic accounting, internal-controls evaluation, corporate governance and sustainability accounting are attractive to employers,” he adds.
However, even in less niche areas MBA candidates will need to have the right experience. “While opportunities in compliance, risk and audit may abound, these will generally require considerable previous experience in that function,” says Pascal.
While such regulatory costs are putting pressure on banks, and forcing them to hire more staff, the trend shows no sign of abating – several of Europe’s top banks including UnitCredit, Société Générale and Deutsche Bank say that they face US scrutiny over sanctions.
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