The buy-side remains active which marries nicely with the increase in candidates wanting to move into this area, seeking more open mandates and often a less corporate environment. Fintech is still a particularly popular sector but there is increasing competition for the best candidates.
The sell-side tells a different story. With tougher internal controls on budget, reflective of performance conditions there are many more constraints on hiring.
LIBOR transition to SONIA
An area of hiring demand on the sell-side that cannot be pushed back however are preparations for LIBOR transitioning to Sterling Overnight Index Average (SONIA) in 2022.
The transition follows the 2012 LIBOR scandal where traders and rate-setters were found to be manipulating rates to benefit the trader’s position. This undermined the world’s trust in LIBOR and London’s place as a financial centre and resulted in UK and US regulators issuing billions of pounds worth of fines.
In 2017 the central banking working group voted for LIBOR to be replaced by SONIA with the Bank of England stating that it is ‘based on robust transaction volumes’ and is ‘considered close to risk-free’. Whilst being a positive and progressive step, this poses a major challenge for our financial services. LIBOR is a fundamental part of the system and is entrenched in almost every model with more than $240 trillion in global financial products using it as a reference rate.
Some suggest that the cost of going into every product, process and system to make the swap could cost in excess of $200 million for some banks. It’s a cost that simply can’t be avoided but will weigh heavily on the sector that is already under pressure.
The scale of this transition is widespread so the 2022 transition deadline leaves little comfort. Firms are wise to start making moves towards this, starting with an inventory of the skills and experience they have to tackle it. The people they had to implement LIBOR may well have moved on since.
Consultants can offer a happy solution here; bringing specialist knowledge without the permanent overhead cost. We have a strong bench of LIBOR specialists. We advise firms to act fast to get ahead of the curve before the talent pool starts to deplete.
Aside from this, nearshoring of risk functions continues to grow notably in credit risk, quantitative risk and model validation. Again, this coincides well with a steady increase in the willingness of people based in the UK to move. We have also been able to access local domestic candidate pools for our clients and can support you in this way too should you look to relocate departments.