In the boom years, conspicuous
consumption in the bars was investment bankers' natural release
from long hours in the office. Now the office sits on their
shoulders while they sup.
After a series of banking scandals, banks’ compliance teams
are ramping up their checks on every aspect of office life, such
that even social outings are under scrutiny, with training
sessions on what you can and can’t say over a beer with
colleagues.
“Everyone is more paranoid, that’s for sure,” said one
department head at a European investment bank, where the trading
floor is festooned with posters reminding staff to report any
suspicious behaviour.
At his bank and at least one other European firm, executives
said they were being asked to take part in an increasing number
of behavioural coaching sessions, including simulations of pub
outings.
These were mainly done via webcasts, where participants act
out conversations with colleagues where the talk turns to
clients or office gossip, two bankers said.
“You have to turn around and say, ‘No, let’s not talk about
that’,” said one.
Such simulations and extensive compliance checks, including
regular sweeps of emails and phone calls, are part of the new
reality since the 2008 financial crisis, as watchdogs like
Britain’s Financial Services Authority replace their now
pilloried light-touch supervision with a more active and
intrusive stance.
Successful convictions of individuals for market abuse
schemes in the UK have also put bankers on their guard, as have
scandals such as the manipulation of the Libor interest rate, a
benchmark rate on which trillions of dollars of financial
products are based. Barclays PLC is already counting
the cost of that scandal – $453 million in fines – and others
are under investigation.
A haul of incriminating and embarrassing emails linked to
the global Libor probe has put individual traders on the spot
and made them acutely aware that their communications are being
examined as never before.
“There are even some (market abuse) cases of information
leaking in open trading rooms, where someone took notes on what
was being said and traded on it,” said Stuart King, a former FSA
and Bank of England official now advising on compliance issues
at consultancy Promontory.
“That will lead to a different working culture.”
Two senior trading managers said staff were encouraged to
make notes of their discussions in key meetings, for instance,
or were being advised to limit with whom who they shared
potentially sensitive information about clients.
LISTENING IN
Some worry the extra scrutiny will make it harder to do
their jobs and will make much of the smallest slip-ups, while
doing little to help uncover sophisticated market abuse schemes.
“You are increasingly worried about running things by
investors in case you give someone an unfair advantage,” said
one equities banker, referring to rights issues and share sales.
Investment banks are doing much of their own checks
in-house. That includes housing special, multi-lingual teams to
listen live to calls or to trawl through recordings of
conversations, bankers in London said.
Software is sophisticated enough to search for specific
keywords in recorded calls or emails – a company name around the
time of a merger or acquisition to root out instances of insider
trading, one banker said.
“The bank doesn’t want to sit there and be told (by
regulators) there is a smoking gun; it wants to find it first
and work out how to deal with it,” s a id James Worsnip of
consultancy AlixPartners, which helps banks with the forensic
examination of communications.
SENIOR STAFF UNDER SPOTLIGHT
Regulators like the FSA, meanwhile, are making their
presence felt on the floor much more, sometimes asking mid-level
managers to step aside for impromptu chats in the course of
their rounds, bankers said.
Division heads in particular are under more scrutiny than
before. An FSA attempt to punish a UBS banker for
compliance failings that occurred in his UK wealth management
division was thrown out in April, but the case sent shivers
through the senior ranks of the City of London.
It is closely studied by managers now required by the FSA to
undergo more robust interviews when they take on top jobs,
Promontory’s King said.
“It should protect you,” said the head of one debt team. “If
you are doing everything by the book, it means you know you can
show you have done nothing wrong.”
