Financial Markets Layoffs Means Retail Balance Sheets Are Kings

Heard about the Morgan Stanley Conference this week.

Sashimi, Ding Tai Fung, Jumbo Seafood, Ya Kun and Illy’s coffee at ballroom foyer… and wagyu beef and Hokkaido seafood. Take your pick.
Free cab rides, massages and shoe polishing.

That is the life.

Meanwhile, brokerages are laying off again. Hearing NDF brokers going this week in Singapore and another equity derivatives desk of an Australian bank closing down in Hong Kong. This brings the number of equity desks down again after the half dozen I heard in the past months which is a strange phenomenon especially when the stock markets are piping hot.

Nov. 15 (Bloomberg) — Australia & New Zealand Banking
Group Ltd. said equity derivatives trading head Stephen Kennedy
in Hong Kong left after the lender pulled back from introducing
its warrants product.


Barclays to cut another 1,700 jobs across UK branches.

Nov. 15 (Daily Mirror) — BARCLAYS announced 1,700 job
losses yesterday in a drive to replace branch staff with even
more machines.

Areas hiring still with private bank vacancies and the odd trading job. Market sales roles not growing as banks change their focus to the private clients. Risk departments are the in thing now and regional banks revamping their risk models with huge demand for risk consultants particularly in the field of derivatives and the requirement for the Dodd Frank Act compliance.

All these signify a big shift of risks out of bank balance sheets into the personal balance sheets of the retail client. Individuals are taking on risks that used to be on banking books, in the form of derivatives, options, traditional assets like bonds and equities and structured notes.

Balance sheets are getting more costly under Basel 3 and banks are paying up for capital to bolster them. European banks are quite crucially short funded and assets will continue to be unloaded into the street now that we have the ECB stress tests next year ahead of the ECB assuming their full bank supervision powers in Oct 2014.

Banks are seeing individuals as their exit key and ramping up the PB business. Hearing some smaller private banks extending generous leverages for universal life policies and giving up to 100% leverage for new accounts.

That is all good for the individual but for the lack of supervision and proper risk management, would we be creating a new black hole like the bottomless pit of central banks balance sheets that will have its day of reckoning in the future ?