Morning Coffee: Bankers are getting cool tech jobs in Silicon Valley. How the professionals deal with “naughty” clients
After spending a few years as a slow-burning story noticed mainly for its impact on the labour market for banking IT professionals, cloud computing for financial services has now gone mainstream with a big article in the New York Times. We can now expect that across the industry, older and less technical bankers will be making notes to ask “what about this cloud thing” at the next board meeting, with the hope of moving on to “how can we make some money from it”.
The answer to that second question, of course, is “very carefully”. As the NYT profile says, financial firms have been surprisingly slow to move systems on to the cloud, particularly when one considers the potential benefits from doing so. And the reason for this is the same reason which explains about half of the weird things in banking – it’s a regulated industry. Most companies can take an afternoon off if they have severe IT problems, but bad things tend to happen to banks when they say that everyone can have their money, but not quite yet.
Nightmare scenarios of bank runs caused by operational failures are a particularly acute fear for the people who regulate the banking system, because unlike most other kinds of crisis, it’s not obvious what the central banks could do if they happened – there’s no such thing as an “IT provider of last resort”. In principle, moving to the cloud could improve reliability and security as well as efficiency. In practice … it seems that a lot of people look at the occasional major outage and think something like “what if that had been a major payment system?”
But this very suspicion and reluctance seems to be creating a few opportunities for technically minded bankers. The big cloud providers need to understand the pain points and specific requirements of their financial clients in order to be able to sell to them, and so they’re hiring from Wall Street. The heads of financial services business at AWS, Google Cloud and Microsoft Azure are, respectively, alumni of JP Morgan, Citi and Bank of America. It seems that in order to make this move you need to tolerate a bit of “title deflation” – Vice President is a pretty senior rank in non-financial companies – but the opportunities are potentially very big too.
Elsewhere, there’s a distinction growing up between clients who reputable investment banks simply won’t touch, and those who are just a little bit naughty. For example, cannabis is still banned by Federal law in the USA. But it’s legal in Canada and effectively decriminalized in many US states. And it’s a growth market, which investors want exposure to. What to do?
Well, it seems that you need to get a bit ingenious. Bankers have been putting together deals for “a B2B events and media group”, which just happens to run trade shows for growing equipment, packaging solutions and raw materials “in the cannabis sector”. They’ve arranged convertibles deals which trigger in the event of US legalization. Effectively, smart and aggressive bankers – mainly in specialist boutiques rather than the bulge bracket - are trying to arrange structures which maximize exposure to the naughty business, while minimizing the risk of getting arrested.
The strange thing is that the boundaries of what’s considered “naughty” and what’s “evil” are always changing, and don’t necessarily match up to the legal position. The prison system of Alabama and the gun manufacturing and retail industries, for example, have had huge trouble over the last few years finding an investment bank that’s willing to do business with them. And there haven’t been any clever little boutique shops buzzing around either, trying to structure deals with plausible deniability. It seems that the ultimate regulator of what kind of business is untouchable by the banking sector is the court of public opinion.
Credit Suisse is laying off 69 people in New York after the collapse of Archegos. (New York Times)
The aspirational back-to-office dates seem to be moving backward. Bank of America’s most recent guidance was to work from home for “the first week of January”, Citi “the first few weeks” and Goldman until January 18. But Jefferies is looking at the end of the month and JP Morgan has “offered the option of working from home for the first two weeks” but set a date of February 1 when “all employees are expected to return to the office”. BlackRock is “providing flexibility through Jan 28”. (Reuters)
The new Mayor of New York might not be reading the room; Eric Adams has said “you can’t run New York City from home” and “That accountant from a bank that sits in an office — it’s not only him, it feeds our financial ecosystem. He goes to the cleaners and get his suits clean, he goes out to the restaurants”. (Fox News)
Credit Agricole is the latest bank to start recruiting in Australia. It’s not quite clear why so many firms see such appeal in a notoriously competitive and overbanked market, which has plenty of incumbents and startups of its own. Whatever the reason, it has to be good for the labor market. (Euromoney)
It’s not clear which investment bank Michael Kline of Pointy Snout Caviar used to work for, and he doesn’t have a LinkedIn. But since he came up with the idea for his business while sitting on an island in Kenya “eating caviar with gelato spoons”, it’s probably safe to assume he was quite successful at it. (Cool Hunting)
Bank of America has recruited Benjamin Saunders to its FIG investment banking group from JPMorgan. (Bloomberg)
Chris Rokos won’t be happy with the 26% loss his fund made last year, but it’s easier to take a philosophical view of these things when, according to the accounts recently filed by Rokos Capital Management, he took a £509m profit share last year and just closed a $1bn fund raising. At the end of the day, big swings like this don’t matter so much in the exciting world of global macro – clients almost like to see the odd big loss, because it shows that you’re taking enough risk to make a big profit. (FT)
Goldman Sachs is aiming to double its operation in Israel (after replacing Sarel Eldor and Danny Akerman), trying to take advantage of the diplomatic agreement last year which now makes it possible to pitch Israeli startups to Gulf sovereign wealth funds. (Bloomberg)
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