2008 was a year of change; the US elected its first black president, Kosovo declared its independence from the rest of the Ukraine and Michael Phelps harvested more medals than any other athlete in history at the Beijing Olympics. But there was one event in particular that shook the Financial Services industry to its very core: the Lehman Brothers’ bankruptcy filing. The news that the US giant had fallen sent shockwaves rippling through the industry, leaving no one indifferent. As a direct result, the Regulator rushed to toughen up its Client Assets Sourcebook and clamped down on any failures to meet the newly instated regulations, with CASS quickly becoming one of its primary focuses.
With all financial institutions walking on eggshells, one wonders if this harshening of the rules has hampered economic growth, as many fear, or if it was, in fact, a catalyst for the creation of a myriad of new, exciting roles that will do nothing but stimulate growth. Those who fear regulatory fines will have a negative impact on the economy argue that capital spent on paying off fines is capital that will not be reinvested; hence constituting a clear loss. Institutions that see fines looming in the distance will (as is only logical) begin saving money for this purpose, and form a capital buffer in preparation for battle. Many argue that this will represent a substantial loss, and might even lead to a state of economic stagnation in relation to hiring in banks.
However (and this is a big however), most institutions are seeing the new, stricter rules, as an opportunity to spot weaknesses and hire skilled staff to address them. In this sense, thus, it would seem that fines are the direct cause of a sharp increase in recruitment in certain areas within financial services. As an experienced recruiter, I have noticed a significant upturn in the past 24 months in the demand for skilled candidates, which would seem to be the direct result of employers being fined by the Regulator for rule breaching. Even companies that haven’t been reprimanded by the FCA are recruiting heavily in areas such as Financial Crime, Compliance or Client Assets. Is this, I wonder, not positive for the economy? Responding to, or trying to avoid, regulatory fines has engendered employment opportunities and higher salaries for workers with skill sets that are now highly in demand. We are seeing entirely new departments in financial institutions appear from thin air; departments whose existence 8 years ago we would’ve deemed implausible. So to the pessimists: yes, institutions might be cutting down in certain areas and saving capital to prepare for possible fines, but they are also being forced to recruit in these hot and extremely competitive regulatory skill set areas.
As was mentioned earlier, a spike in CASS demand was an area born out of the Regulator’s increased scrutiny after the Lehman Brother’s bankruptcy. I have been able to see first-hand how the demand for those trained to work in CASS has skyrocketed, and people originally skilled in this field have been accelerated to higher salaries and more senior positions. To exemplify this, the average salary uplift for people I have placed with CASS roles over the past 24 months is 27%. There has also been a rush to train new recruits, especially within consulting businesses, who have been overwhelmed by the demand for CASS help. Banks then fiercely battle it out to recruit skilled talent via increased salaries.
It would seem then, that new regulations are clearly having an effect on the culture, structure and recruitment pattern of most financial institutions. And as always is the case with big changes, it’s a matter of adapting, or getting left behind.