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What BCG’s big new banking report is really saying about your job

BCG banking report 2016

It's kind of ugly

Boston Consulting Group has released its authoritative state of the nation report on investment banks in 2016. It is not pretty: the banking industry is not in a good state. If you aspire to endure in financial services, you probably need to act on the information contained in the (BCG) charts below. And soon.

1. BCG says you’re lucky to have a banking job

Look how bad things are. And they could get worse.

BCG crap times

2. BCG says your balance-sheet-heavy banking job is just as endangered as ever

So you thought banks had already cut their risk weighted assets (RWAs) sufficiently to achieve a sustainable return on equity? How wrong you were.

New regulations like the Fundamental Review of the Trading Book (FRTB) and the introduction of capital floors will force banks to revisit the way they calculate their existing RWAs and will almost certainly force banks to revise them upwards – by 28% according to BCG.

This will then necessitate further cuts to RWAs – and to jobs which necessitate heavy use of the balance sheet – in future.

BCG Banking report 2016

3. BCG says your job is still under threat – especially if you happen to be a very expensive individual in the front office

Banks are cutting costs to stay still. Front office costs have fallen 5% since 2013, but back and middle office costs have risen 4% so the benefits of front office cost cutting have been mostly cancelled out.

BCG cost cutting

4. Your fixed income job should command a far smaller pay packet than in the past

Historically, fixed income traders in investment banks were paid the most. This needs to change. The chart below suggests DCM bankers should really be the best paid in future.

BCG banking report 2016

6. BCG is saying you may want to get out of a bank and into a ‘high frequency hedge fund’, an ‘execution venue,’ a big data and software analytics company, or a fixed income ETF

BCG revenue migration

7. BCG is saying that if you insist upon moving into Fintech, make it data and analytics. Forget about Blockchain for the moment 

Data and analytics are where all the money is. Or at least, they’re where the money was in 2015.

BCG banking report

Photo credit: Portrait of a Galapagos Marine Iguana – Best Seen Large or Original by A.Davey is licensed under CC BY 2.0.

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