Uncovering the investment banking cliques

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Investment banks, despite being global behemoths, would have you believe that everyone is singing from the same hymn sheet. Everyone is indoctrinated into the same training scheme, everyone is on message and everyone buys into both the brand and the culture of the organisation.

This, according to a new study, is sadly a fallacy. Instead, investment banks are organised into what effectively amounts to a series of cliques, divided by both job functions and geography.

The study by Tim Hinemann at the HafenCity University in Hamburg on the ‘Geographies and Knowledge Practices of Global Banks', suggests that investment banking employees are “embedded in a specific local context and that this shapes they understanding of data and information” and that this is why “investment practice and the behaviour of branches or departments might differ from one financial centre to another”.

Inevitably, despite attempts to promote an homogenous corporate culture through flying out young investment bankers from various locations to meet up with their peers or meetings to encourage “shared experience, expertise and commitment to a joint enterprise” this “embeddedness” within a particular financial centre that determines their social and cultural behaviour, it suggests.

More disturbingly for the investment banks, perhaps, is the growing distance between divisions. The front and back office have “Chinese walls” for compliance reasons, but this also causes individual cultures within the different departments, suggests the research.

“Investment bankers consider themselves to form a high-status group, especially because their understanding of the market, which in turn emerges through their proximities to other market actors and exposure to market gossip, information and interpretations. Because of this, investment bankers form a distinct network within a bank: they are defined by particular social and cultural attitudes and behaviours,” says the report.

In other words, investment bankers in the front office, shockingly, have a high opinion of themselves relative to colleagues in other departments. This is also reflected in the “low status” afforded to the ever-more important risk management teams, it says.

The cliques are not limited to the advisory side of the business. Traders are offered insights by economists and analysts within the bank, which they generally view as “unhelpful for their work because market prices were moving too fast or had nothing to do with economic fundamentals”.

Instead, therefore, “traders relied less on knowledge from related occupations and more on knowledge from their colleagues on the trading floor”.

So, before you start buying into the corporate brand and espousing all things Goldman Sachs and Morgan Stanley, it might be an idea to get in with your team first. “Global investment banks are no monoliths, acting according to some inner logic. Instead they are made up of different logics, which are constructed out of occupational and spatial labour.”

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