Unlike IBD and markets, people working in these divisions generally do not face clients but instead work intensively with others working for the bank.
Although not a direct revenue generator, operations allows the bank to function smoothly and makes sure the bank gets paid.
In operations, bonuses will be much lower than those of traders, salespeople and investment bankers.
However, the salary is more stable and working hours usually shorter.
Areas with operations include risk management, treasury management, clearing, technology, compliance and legal.
Ensures the bank does not take on too much risk, given the risk vs return trade-off
The role is of increasing importance following the financial crisis.
Tasks involve analysis the market and credit risk that an investment bank or its clients take onto their balance sheet during transactions or trades.
Credit risk focuses on capital markets activities, such as loan syndication, bond issuance, restructuring, and leveraged finance.
Market risk conducts reviews sales and trading activities and provides hedge-fund solutions to portfolio managers.
Other risk groups include country risk, operational risk and counterparty risks, which may or may not exist on a bank-to-bank basis.
Credit risk solutions are key parts of capital market transactions, including debt structuring, exit financing, loan amendment, project finance, leveraged buy-outs, and sometimes portfolio hedging.
Responsible for an investment bank’s funding, capital structure management, and liquidity risk monitoring.
Banks, for example, must comply with regulations such as the Basel III and must pass stress tests conducted by financial authorities
All these regulations act to ensure the bank is safe and can operate under shocks, preventing a financial contagion.
An issue banks currently struggle to solve is the “too-big-to-fail” phenomenon
The “too big to fail” theory asserts that certain financial institutions are so large and so interconnected that their failure would be disastrous to the economy, and they therefore must be supported by government when they face difficulty.
Denotes all activities from the time a commitment for a transaction is made until the time it is settled.
Clearing is necessary because the speed of trades is much faster than the cycle time for completing the underlying transaction
In most cases, simple trades are cleared automatically through huge electronic systems.
However, for some instruments there may not be a standardised clearing platform.
To finally settle a transaction, it needs to be made sure that stocks or shares bought and sold by the bank’s traders are exchanged for the correct amount of money.
To achieve this, the necessary documentation needs to be prepared and it needs to be made sure that the bank is paid the right price or pays the right price for a transaction.
The daily work of a junior working in clearing and settlements mostly involves intervening when computer systems fail.
In these cases, one needs to find out what went wrong, why it went wrong and how to fix it.
In areas of the market where clearing still isn’t automated, a lot more needs to be done by clearing and settlement professionals to complete a transaction.
More and more steps are being taken to automate these markets to save costs and future regulatory changes might require the launching of centralised clearing houses for these kinds of transactions.
As you work your way up to the operations hierarchy you will progress to more strategic roles, like deciding which parts of the process can be outsourced and how the process can be designed more efficiently.
Can be both analytical and developmental.
In analytical roles, you would help the bank’s technological infrastructure run smoothly.
You provide solutions for technical issues found in the bank.
In developmental roles, you work to develop the bank’s in-house software.
This role could be very exciting given the shift towards e-trading.
Often, a specialist role would require technical knowledge is required to develop and execute complex algorithms.
Acts as a control function for the business
Compliance works closely with external regulators such as the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA), to understand the requirements for financial institutions like banks, and then report on our progress.
Banks often employ in-house teams to provide legislative oversight and advice on products
The legal team works closely with all areas of the business to identify, manage risk and provide practical, timely and commercial legal solutions.
Scope of work includes reviewing product terms and conditions, advertising clearance, working on complex legal projects and reviewing contracts.