The average base pay for investment banking jobs in Hong Kong has shot up by 15 percent in the past year, and has outpaced salary hikes in London’s financial center.
Analysts in Hong Kong have seen pay increases in the range of 20 percent, while managing director-level staff have seen 25 percent average raises, according to a story from Britain’s Telegraph. Average base pay for investment bankers now hovers around HK$890,000 (US$ 114,428). Whereas similar staff in London saw pay increases in the neighborhood of 12 percent. All this is pretty remarkable given the uncertainty in markets, belt-tightening among banks, and the ongoing hangover from the European debt crisis.
“Investment banking teams operating in Hong Kong have performed more strongly than their counterparts in London and New York in 2011. Generally banks are keener to invest in their teams in Asia than in Europe and the US and that has meant a bigger boost for Hong Kong bankers’ base pay,” said Mark O’Reilly, managing director of the recruitment firm Astbury Marsden which conducted the research.
But insiders expect things to cool down next year as the Eurozone crisis puts more of a damper on growth, and conditions force larger global banks to be more cautious about hiring and salaries, including their Asian offices.
In fact, O’Reilly commented that many of these pay raises were agreed upon early in 2011, when confidence in the banking sector was stronger and banks were eager to retain key staff in order to be well-positioned for a possible recovery. Now, with less of a recovery in sight, pay raises are fewer and more modest.
Some banks, such as HSBC, are even paring back their Asian units. Research from another recruitment firm, Morgan McKinley, shows that 35 per cent of financial services firms plan to reduce their headcount within the next six to 12 months.
One bright spot on the horizon is staffing for compliance. As Hong Kong has expanded its range of financial products, it has triggered a greater demand for compliance professionals. Staff working on compliance teams reported an average 21 percent increase in salaries over the past year, nearly double that reported in London.
Does the growth in Asian investment banking jobs present an opportunity for you? Is it something you’d pursue? Add your comments below.
The UK is proposing legislation that will force banks to separate their investment banking and consumer banking business. The move is part of complying with the findings of an independent commission on banking led by John Vickers, a former Bank of England Chief Economist.
Back in September, Vickers suggested that banks should create fire walls between their consumer and investment banking divisions, and boost the amount of equity or capital they hold to between 17 to 20 percent, to better withstand shocks to the system. It was in response to the 850 billion pounds (US $1.3 trillion) that the British government has had to spend, pledge and loan to big UK banks since the financial crisis took hold in 2007.
The announcement comes a week after British Prime Minister David Cameron opted out of a European accord to stem the Eurozone’s debt crisis, reports Bloomberg. Cameron’s position was joining the pact would stifle the UK’s ability to support its own financial industry. The Vickers proposals are Britain’s own attempts at preventing another financial crisis and shielding taxpayers from having to shell out for massive bailouts.
“We cannot risk having a repetition of that financial catastrophe that we had three years ago,” said British business secretary Vince Cable. “We can’t have a position where the banks are too big to fail.”
The move sounds similar to the Glass-Steagall legislation passed by Congress in 1933 that prohibited commercial banks from collaborating with full-service brokerage firms or participating in investment banking activities. Glass-Steagall was repealed in 1999. As a result, the distinction between commercial banks, investment banks, and brokerage firms has blurred. Many banks own brokerage firms and provide investment services, according to Investopedia.
Which leads to the question: do you think the UK developments will put further pressure on Congress to pursue similar regulations, or reinstating Glass-Steagall? And what effect would that have on the health of the investing banking industry and investment banking jobs? Add your comments below.
It’s no secret that some star traders at big Wall Street investment banks may be looking for greener pastures in the wake of the new Volcker rule. The Volcker rule is part of the Dodd-Frank financial reform bill signed by President Obama last month. The rule stipulates that big banks can’t invest more than 3% of their Tier 1 capital into private equity and hedge funds.
The rule mostly affects the big firms with proprietary desks such as Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup and Bank of America. An article in TheStreet.com says Goldman, for instance, is considering moving its two large proprietary trading desks, which manage about $9 billion, into its asset management arm.
But working in asset management may be a downgrade for these top guns. Apparently there’s a belief on the street that proprietary traders get better information than their counterparts in asset management. And it’s not without some quantitative support. Goldman’s proprietary results in areas such as fixed income currencies and commodities have tended to be better than their asset management cousins.
If proprietary traders are forced into the asset management division, it could mean they’ll be even more willing to entertain offers from hedge funds looking to lure away top talent. The assumption is that hedge funds could match the information resources to which they’ve grown accustomed.
What’s your take? Do you think the big firms give their own desks an edge? Add your comments below.
