This is a very exciting time to be working in FIG DCM, providing you're at the right bank

What with the UK banking levy and the Bank of England's latest Financial Stability Report, this is an interesting time to be a financial institutions group debt capital markets professional, unless you're at somewhere like RBS.

The banking levy, which comes into full force in 2012, will be raised on banks' consolidated balance sheets, but will exclude insured retail deposits, repos on sovereign debt and tier one capital. It will also be raised at a lower rate on long term funding of more than a year, which currently accounts for 60% of UK banks' wholesale borrowings.

Meanwhile, the Financial Stability report notes that banks will need to refinance or replace 750m of loans by 2012, amounting to 25bn a month for the coming 2 and a half years. The Bank of England is planning to close its special liquidity scheme in 2012, which could make this 'problematic.'

In combination, the two phenomena promise to keep FIG DCM types very, very busy.

Big debt rollover in difficult market

"The banking levy is a sideshow," says Simon Maughan, European banking analyst at MF Global. "The big issue is how on earth they roll over this debt without the special liquidity scheme.

"When I've spoken to the Bank of England, they've said banks will just have to go to the market. But that's going to cost."

"There are various regulatory moves around the world putting an emphasis on more stable bank funding," says Simon Adamson, an analyst at Creditsights. "This implies banks will be issuing more debt, but you need the capital markets to be open for that to happen."

But if you can't get your own house in order, how can you help clients?

Various banks devoted a lot of energy to building up in FIG DCM earlier this year.

Maughan says where you work is becoming increasingly important.

"The first job in FIG DCM will be to fund your own bank," he claims. "Once you've done that, you can go to clients."

Maughan points out that Credit Suisse extended the duration of its funding to over four years last year. "That now looks very smart and their DCM people have the credibility to go and see clients. But if you're a FIG DCM guy at RBS and you offer to sort out someone else's debt, they're going to laugh in your face and say you can't even sort out your own," he adds.