For Recruiters
Despite cuts elsewhere in the world, three of the top five Japanese banks have been making a hiring push in the U.S.

Japanese banks are recruiting on Wall Street. Here's who they've hired

So you want to work for a Japanese bank on Wall Street? The good news is: they're hiring. The bad news is Japanese banks have a reputation for hiring one year and retreating the next. For the moment, however, it's all go.

Some of the hires are juniors: MUFG plans to add around 945 people this spring, with Mizuho aiming to add 700 new graduates (down from 1,365 last year).

It's the senior hires that are most interesting though: Nomura added 12 MDs and 3 EDs for its investment banking business in the U.S. in 2017 and has continued to recruit this year. In January, for example, Nomura hired Samuel Evans from Sagamore Capital Advisors as a senior relationship manager, Eric Jacobs from RBC as an MD in the M&A group; and John Sheldon as an MD covering the beverage industry from a beverage-focused boutique. Nomura also brought on Charlie McElligott from RBC as a cross-asset strategist.

MUFG has also been busy adding client-facing bankers. Regina Bruni just joined from JPM as a director of trade finance in the transaction banking group. In March, Maureen Sullivan joined from HSBC as an MD and head of supply chain finance for the Americas. So did Sandy Salgado, who came from BBVA to run the Latin America corporate banking (LACB) group based in New York. This year's hires come after MUFG hired Robert Danziger, formerly of Citi, to run investment-grade acquisition and syndicated finance in the Americas last December.

Mizuho has also been busy. This month, it added equities sales-trader Craig Giordano, previously MD of institutional sales-trading at Sanford C. Bernstein, as the head of U.S. cash sales-trading. In January, Mizuho hired Adam Siegel from Credit Agricole as an MD of derivatives risk solutions. In the dying days of 2017, Mizuho also scooped-up Jonathan Yellen from Morgan Stanley as the head of power and infrastructure and Americas project finance.

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AUTHORDan Butcher US Editor
  • EL
    20 April 2018

    Japanese banking, as a reflection of the long crisis that Japan is experiencing, is constant news in the world economic press. For some (the structuralists), the banking crisis is one of the main causes of the evils of the Japanese economy as the banks are not fulfilling their typical function of financial intermediation. Let us resolve, then, the problems of banking and Japan will have taken a big step forward to get out of its chronic depression. For others (the Keynesians), 'it is unfounded to think that banking problems caused the Japanese disaster or that their resolution will restore prosperity'

    In what everyone agrees is that Japanese banks suffer from a very serious problem of default, which is leading to a solvency crisis of these entities. The historical origin of this explosion of default is the bursting of the speculative bubble of the eighties, but to explain the level of delinquency reached today, if possible, are more relevant both the long economic recession that lives in the country and the deflation that shakes the Japanese economy.

    Although sometimes very different data are published, if we follow the Financial Services Agency, the data of doubtful loans reaches 65,771 billion yen Since the Japanese GDP and the total loans of the bank are very similar, the ratio between, on the one hand, delinquent loans and, on the other hand, GDP and total bank loans reaches 12.2%.

    Such a high level of delinquency ends up undermining the solvency of banking entities. As is well known, the concept of capital used by Japanese banks is quite lax, since it includes the reimbursable funds that the State has been injecting in them, deferred taxes, accounting revaluations of their real estate holdings, and so on. Using the American accounting criteria, Governor Hayami lowered the quoted coefficient to 4%, well below the standard agreed by the Bank for International Settlements (BIS).

    The clearest argument against this idea stems from the clear improvement in the lender attitude of financial institutions. Simply, banking has been conservative in its management of assets in the last three years (logical in a process of reorganization of the entities) and its preference for public bonds has been reinforced by the scarce demand for credit from companies (which are also immersed in a process of financial consolidation and productive restructuring).

    On the other hand, and to further complicate the situation, we believe that Japanese banking also has a strategic management problem. This is reflected, on the one hand, in the difficulty to generate a greater volume of benefits (that increase the own resources of the entities) and, on the other hand, in its contrasted deficient evaluation of risks (which aggravates the already mentioned problem of late payment).

    For many years (which some authors have described as 'financial socialism'), interest rates have not worked in Japan as indicators of scarcity; the risk assessment has been nullified by the close links between companies within large conglomerates (always with a large bank as a reference element thereof), and an important issue: strong economic growth for 40 years. Little by little, that economic scenario is being transformed: the financing of projects, more than of companies, is increasingly necessary, especially of small companies and in the service sector; Alternatives to typical bank financing for companies, especially large ones, are increasing; The scarcity of savings prevailing in the Japanese economy in its first years of growth has been transformed into a significant excess of savings; the big conglomerates (keiretsu) are breaking up, breaking even relevant companies of them. In this new scenario, the traditional Japanese banking is performing poorly. Although in recent years Japanese banks have changed attitudes, procedures, management methods, etc., these changes are still insufficient.

    What can the Japanese authorities do to solve the serious problems suffered by banking entities? Let's see what the authorities have done so far and why these measures have not been sufficient.

    The Government approved an ambitious rescue package for banking entities. On the other hand, it strengthened the Deposit Guarantee Corporation (the authorized endowment to the Corporation amounted to 18 trillion yen). Finally, it approved a series of measures to strengthen banking supervision and to facilitate the refloating of institutions in crisis (creation of an independent oversight agency of the Ministry of Finance, establishment of more rigorous prudential regulations on risk management and qualification, creation of a series of institutions to favor the liquidation of bankruptcies and the reorganization of entities,

    The most evident proof of the insufficiency of the measures adopted is in the data provided at the beginning of this article. In particular, it is worth mentioning several lessons learned from the measures: firstly, the reorganization of entities with a serious delinquency problem is very complicated in a depressive macroeconomic scenario. In this context, it is proven that delinquency is a dynamic phenomenon and that it multiplies as the suspension of payments and bankruptcies grows. Second, the strengthening of prudential and supervisory measures worsens short-term delinquency statistics, as the classification of risk assets tends to be stricter. An example of the perverse effect of a positive prudential measure is the application of the accounting according to the market price of the shares held by the banks (just in a period of collapse of the Nikkei). Third, changing attitudes is more complicated than changing norms. Due to the suspension of payments of Sogo and Mycal (only this last distribution chain had a liabilities of 1.7 trillion yen), the companies' lack of prudence has been appreciated. Mycal should have been registered as 'debtor in danger of bankruptcy' (which requires provisioning at least 70% of that debt), but this has not been the case. In fact, the total provisions have not exceeded 15% of the debt with the banks. Even a large Japanese bank increased, the loans to Mycal by 60%. Fourth, the Government's participation in the reorganization of bank losses, when these jeopardize the viability of the financial system, seems unquestionable. You can discuss how to intervene, but not the intervention itself. The latter has been very frequent in Japan since the beginning of the crisis. Fifth, the strategy maintained by the Japanese authorities for years (waiting for the problems to be resolved on their own) has been proven wrong. The Nordic experience in the decade of the nineties is the opposite: immediate actions to attack the solvency problems of banking. Much of the scarce pressure felt by the Japanese government to quickly solve this problem is because Japan is a large net foreign creditor.

    Koizumi's government should approve a concrete plan for banking sanitation (some concrete measure has already been presented to Parliament). For the public statements of the Cabinet, some general lines of the same may be the following:

    Reinforcement of the ordinary inspections of the banks and carrying out special inspections to verify the risk rating and the provisions provision developed by the entities on certain debtors.

    - Systematization of the risk situations of debtors and the actions to be carried out in each case: preparation of debt restructuring plans, action against debtors according to civil laws, sale of debts to the Resolution and Collection Corporation, injection of money public, etcetera.

    - Measures to facilitate the purchase and subsequent management of doubtful loans by the Resolution and Collection Corporation, which could go as far as sanitizing and revitalizing debtors with problems. So far, the RCC has bought delinquent bank loans for a very small amount: about 40,000 million yen, obtaining a discount of 96% of the face value of the same. In this area, the RCC competes with private investment banks, such as Goldman Sachs and Morgan Stanley, which are already conducting debt securitization operations.

    - Creation of a public fund that acquires, in an orderly manner, the cross-shareholdings and, in general, investments in banking shares.

    With measures of this type, the process of banking reorganization will be accelerated, but they will be insufficient if the economic recovery does not arrive. We are sure that once the recovery begins, the demand for credit will be stimulated and thus the financial intermediation function of the bank will be fully restored.

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