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Banks need more risk modellers of the right kind

Banks need more risk modellers of the right kind

Do you like models? Do you like risk? Do you like risk and models?  Share on twitterWe’re asking because it seems that banks may soon be in serious need of risk modelling expertise.

The Financial Times reports that the Basel Committee on Banking Supervision will soon require banks to use more detailed and consistent models to report their capital requirements and the creditworthiness of their asset portfolios. Until now, banks have had considerable freedom to develop their own internal models with which to assess their value of their risk-weighted assets. In turn, this has given them flexibility to calculate the amounts of capital they need as a result.

The new more stringent risk models must be in use by the end of 2016. Banks therefore have nearly two years to get to grips with the new regime and to reassess their capital needs. In the short term, it seems likely that banks will need the services of risk modellers familiar with the new templates to to help make the adjustment. They will also have a lot less need for the sort of inventive modelling talent that evolved to help massage risk weighted assets down.

Separately, academics have an answer for everyone wondering why banks don’t double their graduate intakes so that everyone can work a standard 40 hour week instead than working the lucky few for 80 hours+: it’s expensive to recruit. “Employers would prefer fewer workers and more hours given the fixed costs of employment — it costs a lot just to hire someone,” points out Peter Cappelli, a professor of management at Wharton. “Employees would prefer less hours at a given wage,” he adds. In other words, banks have the upper hand – interestingly all known attempts by IBD analysts to go ‘freelance’ and rent their services back to banks at an hourly rate have come to nothing at all.

Meanwhile:

A reminder that QE isn’t such good news for banks. “Every bank needs to re-evaluate its cost base quite radically in the current environment, because persistently low rates are a huge headwind to retail and wholesale banking profitability.” (Reuters) 

“I’d estimate about a third of those working on trading floors have never witnessed a Fed rate hike.” (WSJ)

The top twenty hedge fund managers in the world. (Valuewalk)  

Citi just moved saleswoman Mahnaz Safa from its markets business to a more client-facing role in IBD.  (Financial News) 

Are you a ‘repressed alpha’? Do you crave status, but pretend you don’t? (FT) 

Escape Espirito Santo! Join Autonomous Research, the independent financials-focused research house, which is moving into electronic trading and just hired Tony Nash. (Financial News)

Why you shouldn’t get too close to a failing boss. Internal candidates are being ruled out for the CEO role at Standard Chartered because they’re too close to Peter Sands, (Reuters) 

How to make conference calls more bearable. (HBR) 

Accountancy is not a psychopathic profession. (QZ) 

Beware the investment banking fakes (TheiBanker)

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