Banks are chasing back office staff in London, Paris and New York in a revived push to support their high-flying front-office stars. Knowledge of complex derivatives products or settlement required.
London: derivatives drive pay
A salary survey by Morgan McKinley, the middle and back office recruitment specialist, suggests pay in the middle and back office is rising on the back of rising demand for derivatives staff.
Salaries for people working in OTC derivatives settlements are up over 13% on last year, says Morgan McKinley. Staff with three years experience can earn salaries of 38,000 plus. Growth has been more dramatic in areas such as derivatives documentation, where some people with two years' experience are being placed on 40,000.
Figures are based on discussions with 350 individuals working in the banking operations area at over 65 financial institutions in the City of London.
'Candidates with relatively little experience are commanding high salaries,' says Kirsten Duffy, head of operations recruitment at Morgan McKinley. 'There is a shortage of candidates to work in this area.'
Rival recruiters confirm the trend. Andrew Hanson, manager of operations recruitment at Robert Walters, says salaries for staff working in derivatives clearing and settlements have risen 10% during the past year. Some heads of credit derivatives settlements working in London are now on base salaries of 80,000; he says bonuses can add 50% to 75% to this figure.
People with more than two years' experience in derivatives settlements, derivatives documentation, client service, and trade support are in big demand according to Hanson. 'There is a premium for the right people in credit derivatives, interest rate derivatives and equity derivatives.'
Mike Hartwell of middle and back office search firm Hartwell Buck is similarly upbeat. 'Every single bank out there is hiring for derivatives,' he says. 'Bonuses have risen to reflect that.' At the junior level average bonuses are 25% to 35% of base salaries, says Hartwell; for VPs and above that figure rises to between 75% and 100%.
Demand for skilled clearing and settlements staff to work with derivatives instead of cash products is drawing high-calibre staff into the industry. Hartwell says, 'Graduates, MBAs and qualified accountants are finding their way into clearing and settlements. A few years ago that wasn't the case at all.'
Redundancies in cash products
It's not all good news in the back office. Deutsche Bank, ABN Amro, Credit Suisse First Boston and Dresdner Kleinwort Wasserstein are making cuts in middle and back office divisions. ABN Amro alone is axing 1,350 wholesale banking jobs, many of which are expected to go in back office and administrative functions in London.
Outsourcing and offshoring are also expected to take their toll. Morgan Stanley, for example, already houses some clearing and settlement related to cash products in Glasgow. Others are alleged to do so in India.
Nevertheless, there are some bright spots. Simon Maughan, head of European banks research at Dresdner Kleinwort Wasserstein, says HSBC, Royal Bank of Scotland and Barclays Capital, will all be looking for back office staff in 2005. 'These banks are on an expansionary footing. It's difficult to hire only front office people - they will also need extra back office support.'
Paris: senior staff needed
Operations hiring in France is subdued, but recruiters report a few green shoots of revival.
'There's been very little back office hiring for three years,' says Chantal Deschamps, a back office hiring specialist at Vendômes Associés in Paris. 'Now there is some activity again.'
HSBC CCF and Calyon are among the hirers. Last year HSBC hired Pierre Guichot from Société Générale to manage its derivatives operations in France. Deschamps says Guichot is building his team, currently around 35 people.
Parisian clearing and settlements staff are poorly remunerated compared to their counterparts in London. According to recruitment firm Robert Walters, back office staff in French banks with five years' experience, can expect salaries of just €50,000.
However, Antoine Morgaut, managing director of Robert Walters in France, says salaries rose 15-20% last year, with pay for fixed income derivatives operational staff taking the lead: 'There is a shortage of good people and teams in Paris were historically understaffed in this complex area.'
Morgaut says the biggest shortage is at managerial level: 'It is very difficult to find people to fill senior posts. There is a considerable lack of talent at this level.'
A salary survey by Robert Walters says senior managers in back office functions in Paris can expect to earn €100,000 or more.
Wall Street: credit derivatives set the pace
Banks on Wall Street are also joining the rush to hire derivatives back office staff.
Jim Gillespie, a consultant at Robert Walters in New York, said hiring is up considerably on this time last year. 'We are only three weeks into the New Year, but we have done infinitely more than twelve months ago.'
All banks are looking for back office staff to work with credit derivatives products, says Gillespie. As a result, after a few years in which salaries were flat or down, they have begun rising. He said vice presidents in the derivatives back office area can expect salaries of $60,000 to $75,000, with bonuses of 10% or more.
As in the UK, US banks have been trimming back office costs outside the derivatives area. Bank of America cut around 150 back office, support and mid-management jobs in Manhattan last October, following its merger with Fleet Boston. Last week, Wachovia announced plans to make 3,500 to 4,000 US job cuts by 2007; most are expected to fall in the back and middle office.
Nevertheless, Frank Fernandez, chief economist at the Securities Industry Association, says US clearing and settlements staff need not fear their jobs moving to low cost locations overseas. 'Security is more of a concern than cost per unit, and lot of clearing needs to be done instantaneously; there are delays if information has to cross the Atlantic.'