Are Middle Office Escapees Dangerous?
Should a person ever be allowed to advance from the middle office to a trading role within the same bank?
On the day the rogue trader scandal at Societe Generale broke, we asked, "Is a bank playing with fire if it lets someone advance from back-office processing and monitoring, into a direct trading role?" We concluded it would be "understandable, albeit unfortunate," if bank leaders adopted the view that middle-office experience - like SocGen's Jerome Kerviel had - disqualifies an individual from being allowed to trade within the same bank.
Managements do seem to be moving in this direction, though. On Feb. 13, Bloomberg ran a story quoting several headhunters and government officials in Paris and London, concluding that Kerviel's unauthorized trading "ruined the chances of French bank clerks getting promoted to the trading floor."
Of course, it's always been extremely tough to go from trade processing, auditing or another support role to an actual trader's position (or any other front-office job, for that matter). So a natural response to this aspect of the SocGen affair might be: "That door was already closed anyway. So what's the big deal?" There's also the prospect the SocGen scandal might accelerate the trend toward increased stature and compensation for back-office and middle-office functions related to risk management.
What do you think? Are support and compliance staffers chasing windmills when they dream about getting promoted to the front office? Does the example of Jerome Kerviel - and Barings rogue trader Nick Leeson before him - make it bad risk-management practice to ever consider such promotions? Or are banks systematically denying their middle-office and back-office teams the respect and compensation they deserve - and only making matters worse by blocking any remaining opportunity for these professionals to demonstrate their value as "producers"?
Post your thoughts below.