President Obama wants to transform the world of banking as we know it. His plans – if agreed by Congress – will prevent US banks, or financial institutions that own banks, from investing in, owning or sponsoring a hedge fund or private equity fund. They would also bar proprietary trading.
But how much of an impact could that have on financial services hiring in Japan?
It could be quite significant, says Yoshiki Kumazawa, a consultant at Morgan McKinley Japan. “In particular, hiring areas within global investment banks and hedge funds will be affected as institutions review their approach to risk following the global financial crisis,” he says.
With the reforms set to regulate how investment banks can spend their own money in an effort to ensure that they cannot use investment strategies that will expose themsleves to overly high levels of risk, Kumazawa says the hiring market for principal investment and hedge funds is unlikely to see a return to pre-recession levels.
“Already in Tokyo the demand for professionals in these areas has declined. Investment banks are now focusing their hiring on more traditional broking and advisory roles,” says Kumazawa.
Iwona Bancerek, a senior consultant at recruitment firm CDS, says the effect of US reforms can also be seen in recent FSA proposals for new regulatory guidelines. The proposals – recently published in draft form for public comment – would include regulatory amendments to strengthen the supervision of remuneration at financial institutions. Other issues covered were transparency in the OTC derivatives markets, new trade reporting requirements and risk management provisions.
There were also quite a few changes proposed in the settlement area, which Bancerek says have the potential to affect the middle-office job market, where there will be a need for more resources in the settlement and clearing of derivative transactions.
And, although over the past year Tokyo has seen shrinking operational risk management teams – in addition to many IT risk teams having been shifted to other Asian centres – there could be some good news for people in risk management
“With all these reforms ongoing both in the US and in Japan, risk management job opportunities might grow in Tokyo, with risk departments having additional headcounts in 2010 and 2011,” says Bancerek.