Large banks are circling the staff of smaller brokerage firms in China. New rules mean that security firms and banks – once kept firmly apart from one another by local regulators – will be competing for the same expertise. And, given the size and clout of the large banks, there’s one likely winner.
Chinese banks, given their state-owned status, have a massive advantage over smaller firms because of the scale of their balance sheet and their dominance in the fixed income currencies and commodities sectors in China. Once they’re allowed into the securities business as well, they can flex their muscles and start eating away at the business of smaller securities firms.
One senior director at UBS Securities in China is delighted at the news. He now has “more career choices”, he says, although he admits these opportunities won’t happen overnight. In a report on Monday 9th March, analysts at China International Capital Corporation (CICC) compared the emergence of banks in China’s securities market as “elephants stepping on ants” and this is likely to apply to their ability to sway talent away from the smaller firms.
One senior vice president working at Citic Securities – one of the largest securities houses in China – says that he has already received calls from headhunters and news of the regulatory change only broke this week. “Analysts, traders, bond originators and trade financiers should all be needed,” he says. “And banks will need to build up these departments from scratch.”
“It will indeed be quite a long process,” agrees a Beijing-based financial headhunter who asked not to be named. “Banks don’t have these functions now. It’ll take years to build up such teams and capabilities.”
Banks have bigger wallets than most smaller securities firms and will certainly pay more for talent, although money is not the only incentive here. “More importantly, banks can offer positions and titles,” says this Citic SVP. “Because it’s new, it’s creating almost everything, and this will encourage people who want to be promoted quickly.”
Although employees of security firms are generally excited about the potential change, it doesn’t mean they are going to troop into banks in large numbers. The anonymous headhunter pointed out that it’s not impossible for security firms to get banking licence in the future, thus reverting the process completely. “We certainly don’t know when,” she says. “But it’s just a matter of time.”