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DCM bankers adapt to life out of office

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Banks have started splitting up trading teams across locations, while many of those working in the capital markets have been stuck at home. This has caused a couple of hiccups and worries but some wonder if it will lead to a shift in attitudes about meetings and work flexibility once coronavirus passes.

Firms have implemented restrictions on attending meetings depending on the number of people present, although that number varies between banks, according to one source close to a number of firms in the capital markets. And while banks might be stopping employees attending meetings of more than 25-30, regulators and central bankers are understood to have a lower tolerance.

Banks are also dividing staff between their homes, their normal offices and disaster recovery sites, although the first option is less available to traders.

Morgan Stanley has a business recovery site near Heathrow, west London, that has been up and running since last week — primarily for traders — as the bank seeks to split up teams.

Goldman Sachs has a second location in Croydon, south London where it would be able to continue trading. It has a plan to split staff between there, its office in Plumtree Court in central London, and their own homes. This strategy would involve all London staff but has not yet been put into place.

Nomura, like many other firms, will have sales and trading teams in different hubs giving it cover in case of illness in any site, according to a source.

“Specific measures such as sanitary measures, distancing measures, rotation by sub-teams or working from home arrangements, where relevant, are in place to reduce any risk of contamination,” said Société Générale. “Business travels are suspended internationally and business travels in France are limited.”

Last Thursday, BBVA moved around 100 people from both front and back office to a back-up location.

The first source said that some banks have implemented a policy of cleaning offices every three days. “I’ve heard ridiculous figures, that cleaning one office, which is of course a big building in Canary Wharf, would cost £80,000 every three days.”

Can markets cope?

Bankers are now discovering how effective capital markets can function when teams are split up.

“We’ve split our teams into three, all working from different offices,” said a third source. “While the tech works and we are in contact, what we really miss the information flow that you get from one big trading floor, and all the teams together. Ideally the best time to be working from home is in the good times — it’s the bad times like this when you really need to be fully up to speed in talking all the time.

“But we’re all split up and the information flow is not there.”

One head of syndicate said that splitting staff between locations was not a perfect substitute for the trading floor. “You miss the chat and the quorum of for to eight people being able to talk about stuff they’ve heard around the market. Those things take fractionally longer to happen.”

But he added: “We’re 80% there. We can operate and talk about what deals will happen when markets reopen.”

Socialising outside of office hours had also been affected. “You can’t force people not to but there have been comms advocating common sense,” he said. “It’s no good splitting a team up and then having a big desk night out on a Thursday.”

A fifth source said that origination and structuring bankers could work from home more easily than trading and syndication teams. “I do know syndicate people with three screens at home and a powerful computer... But if everyone is sent home, rather than operating in separate off sites, then you have to question the market’s capacity to function. If what is happening in Northern Italy happens to the Southeast of England then we do have to wonder if our capital markets can actually operate.”

One executive at a Milan-based investment bank said: “We are doing OK but the whole situation is very tough and I am afraid it will last for quite some time, not only here but also in most of the world.”

Issuers and investors may struggle more than banks, because they lack the back-up offices. “The problem with working from home is that you have no feel for the market,” said one head of debt capital markets in London. “Monday was a really good example of this — the link between screens and reality was completely broken. Issuers and investors were seeing one price on screen while sales and trading at the banks were seeing another, completely different number — the real number. This problem will be exacerbated if investors and issuers are working from home.” 

A new way of working?

One credit investor feared that there would next to no liquidity in bonds if market participants were split up or required to work from home in quarantine. The investor, who works as a portfolio manager an asset management company in London, said that many funds would not be in a position execute trades in a timely fashion.

“The simplest implication will be that you can’t trade because there is nobody trading,” he said. “Let’s say a bank has 20 counterparties, it is likely there will only be about three that will be set up properly.

The investor said that he was not particularly concerned about his own firm’s ability to carry on submitting trade instructions in the market. But he suggested that other investment companies might be more restricted in their decision-making processes.

The head of DCM said: “The real concern for me if there is a Italy-style lockdown in London and there is a ban on public transport and bank staff cannot get into the office — the real one or the back-up one. Without the bankers at their desks, then we have real problems. Markets will not be able to function if bankers cannot get into their buildings.”

The banker pointed to booking tickets and settling trades. “It has to be done inside the bank. For this to change it is going to need a big relaxation by the regulators and this is unlikely to happen quickly or even at all. The infrastructure is just not there for markets to operate functionally on a remote basis.”

The Association for Financial Markets in Europe, a trade body, said: “Our members already have well-rehearsed business continuity programmes which deal with most scenarios, however, there are regulatory oversight challenges associated with working from remote locations and firms will need to review their policies and procedures to ensure how best to comply with their regulatory obligations. We are working to support our members to ensure the smooth continuation of trading.”

Others wondered whether changes to working patterns might last beyond Covid-19.

The head of syndicate said the banking sector had always been very old fashioned about working from home. “The minute someone mentions it, it gets a roll of the eyes.”

But his firm went from having just one central London location to allowing people to do everything from home within 10 days. “I hope it alters the perception over working from home.”

One head of loans and leveraged finance at a US bank said: “What I’ve learnt is doing conference calls and video calls are as or more effective with internal meetings and long-term clients than face to face meetings.

“If you have an established relationship you don’t need face time. That’s the feedback from our Asian colleagues, who have worked from home for the last six weeks, as well. Teams connect three times a week there, dial in on video conference... But if you’re pitching to new business the face time will work.”

The fifth source also noted some upside to the new arrangements. “Running a conference call while looking out though one’s window overlooking the wetlands of Barnes [in west London] has now proven to be possible and people quite like it,” he said. “It might well change market habits going forward.”


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