- February was a disappointing month for bonuses in the audit sector, leading to more passive candidates on the market. There is demand for capital markets and technology auditors. - Compliance hiring continues strongly in financial crime and advisory roles. Asset managers are also hiring for guidelines monitoring. - Demand remains for model validation and risk professionals, especially around Basel III, CVA, and liquidity. Front office quant roles are shifting toward programming. - Projects in controls and trading technology are ongoing, with demand for business analysts and project managers. Banks are preparing large teams to investigate interest rate swap compliance. - Regulations around Dodd Frank, EMIR, and client reporting are an ongoing focus for implementation.

1. February 2013 - Market Update
February was a month of reflection regarding the bonus numbers just announced, and the prospect of EU
legislation impacting future basic salary & bonus levels.
In a serious setback for the UK’s fight to head-off some of the remuneration curbs, the European parliament
secured agreement on a mandatory 1:1 ratio on salary relative to variable pay, which can rise to 2:1 with ex-
plicit shareholder approval.
David Cameron said, “We need to make sure that regulation put in place in Brussels is flexible enough to allow
banks to continue competing and succeeding while being located in the UK. So we will look carefully at the
outcome of the negotiations before working out the appropriate [position to] take at Ecofin [the EU’s financial
policy council].”
The impact will be partly softened for the City of London by giving more favourable treatment to long-term pay
linked to the health of a bank, such as equity or bonds that are written down when an institution fails.
As part of the compromise, up to a quarter of variable pay can be issued in instruments deferred for more than
five years. Crucially the value of this long-term pay is discounted, so it has a lower weight within the ratio. In
nominal terms, this could increase the ratio significantly above 2:1.
The European Banking Authority will be given the task of determining the type of instruments that win favoura-
ble treatment and the discount rate that is used to calculate their value within the ratio.
The deal, if confirmed, is a major victory for the European parliament negotiators, who insisted on pay curbs as
their price for passing Basel and a sign of London’s relative isolation on some financial services issues.
As well as a prized bonus cap, which would go into effect in January 2014, parliament also prevailed in re-
quiring banks to reveal their taxes and profits on a country-by-country basis from 2015, as long as the extra
transparency is not judged by the European Commission as an impediment to inward investment.
While the deal preserves the freedom for national authorities to require banks to hold more capital, the most
important UK priority throughout the negotiation, the remuneration exemptions, fall well short of London’s
demands. Senior bankers warned that the pay curbs, which were not part of the Basel accord, will reset the
balance of arguments for operating in Europe, with potentially far-reaching implications.
The reverberations of the cap will be felt beyond the banking sector. MEPs want the tougher version eventu-
ally to apply to hedge funds and investment managers, who are subject to existing bonus rules designed for
banks.
Industry hopes of an exemption for international offshoots of EU-based banks, as well as US or Asian banks
operating in the EU, were dashed. The only concession was the promise of the review, led by the EC, which
will examine the impact of the remuneration curbs two years after implementation.
The vote on the legislation in the European parliament is now scheduled for 21 May and countries have until 1
January 2014 to implement the rules.

2. Audit
The bonus season was largely a disappointment for many in VP & Director level audit positions, resulting in an
influx of candidates that would have been considered highly passive in 2012.
There is an appetite for Capital Markets auditors following either resignations or mobility into the business, with
several firms already succession planning in this area and starting to informally meet with good quality individu-
als from competitors, so they have effective relationships in place should they need to move quickly to recruit.
February has also seen move activity in the Technology Audit space, with some responsibilities being reorgan-
ised out of the UK and into various global regions resulting in individuals seeking new opportunities.
Further changes at EMEA or Global Chief Auditor level has created continued uncertainty, with 3 top tier Banks
either currently without a Chief Auditor or preparing to welcome a new appointment. This has resulted in senior
management within these firms looking forward to seeing how future frameworks and team structure material-
ise during the next few months.
Compliance
Another busy month, with Financial Crime hires continuing to dominate, plus increased appetite for individuals
with strong Front Office Advisory experience.
Top tier investment banks have released several roles, largely across various asset classes, plus we have seen
Asset Managers & Hedge Funds entering the market looking for additional advisory resource.
AML-associated Compliance areas such as KYC, Sanctions, AML Policy, AML Operations, Anti-Bribery and
Business Intelligence have also seen further headcount signed-off, and these roles being released to external
suppliers.
Asset Managers also seem to have demand for Guideline Monitoring candidates, across various salary levels,
and on both a permanent and temporary basis.
There has been some turnover of CF10/CF11s within Asset Managers, resulting in a flow of roles and changes
at the top therefore to come over the next couple of months.
Quantitative
Model Validation is still relatively buoyant. Teams looking after derivatives pricing validation, as well as Risk
modelling validation groups are becoming increasingly visible to the business and therefore the workload is
increasing creating the need for headcount.
Risk model validation groups are especially busy with continually changing regulations around Basel III, RWA
and CVA.
The front office quant groups continue to suffer at the hands of the market, especially the traditional exotic
derivatives pricing quants. The profile of a front office quant is becoming increasingly ‘automated’ with a focus
on large scale vanilla trading, leading to the need for a different ‘quant’ skill set and a propensity to hire pure
programmers rather than mathematicians.
Credit and Market Risk
Whilst there is a small appetite for hiring across Corporate Credit Risk, Credit Risk Control & Credit Risk Re-
porting teams, most banks are still pushing ahead with a direct recruitment strategy as their first resort.
Attempting to utilise internal mobility, website & job board advertising & direct recruitment teams as a cost
control measure seems to be providing a reasonable flow of suitable candidates, with external suppliers being
used only where these methods are failing.

3. Market Risk Management, Liquidity & ALM are still ‘in demand’ skillsets with a modest job flow being observed
across this space.
Operational Risk recruitment remains buoyant with a volume of roles both within the Risk and Control Self
Assessment (RCSA) space and also the development of Control Evaluations; Key Risk Indicators (KRI) & dash-
boards; and Internal & External Incident Reporting.
Change Management
February has seen a number of project requirements around the front office controls environment, specifically
looking at incorporating regulatory changes, with many of these projects also focused on streamlining efficien-
cies within trading technology.
Due to the present climate banks are running multiple and costly projects across a number of vertical areas,
we are seeing additional bolstering of PMO functions who are charged with bringing greater consistency, em-
ploying correct methodologies & ensuring projects are cost effective and in line with business expectations.
Predominantly the market continues to be interim hire driven, whilst there is an appetite to transition roles to
permanent staff, employers are cautious regarding the ongoing requirement for permanent staff being based in
the UK versus their desire to offshore where possible.
From a skillset perspective, Business Analysts with trading function subject matter expertise to consider how
technology enhancements can remove layers of manual process are in demand. Upcoming projects to man-
age & harmonise existing silo technology and to maximise relationships with key clients and look more holisti-
cally at product offering are expected to launch soon.
SME Derivatives: With the FSA announcing that 90% of interest-rate swap test cases it recently examined did
not comply with at least one or more regulatory requirements, UK retail banks are bracing themselves for the
process of investigation and compensation due, with an expectation that the final bill for banks will exceed
£10billion.
Sizeable project teams of already 100+ staff to begin the investigation and sophistication review are being
built, with many banks combining internal secondment with an intake of contract staff to get this moving. The
demand is for hedging product subject matter experts, case handlers, business analysts & project managers
to manage the initial customer file review. From a technical perspective there is an appetite for interest rate
product specialists, commercial banking experts or regulatory professionals who possess a deep understand-
ing of COBS suitability rules and TCF principles.
Dodd Frank & EMIR: The sector is still adopting Dodd Frank & EMIR regulations with the immediate focus cen-
tred around understanding the existing principles, awaiting further clarification on the next phase of principles,
designing new control measures and changing methodology. From a skillset perspective there is an immediate
need for regulatory experts, clearing & settlement professionals who understand the new rules concerning
client registrations, reporting and the overall clearing of OTC transactions.