Hello and welcome to the Fides Weekly Update. Take a look at this week’s key trends, moves and developments in legal and compliance.
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1) Is a compliance cool down on the cards?
As financial penalties finally begin to subside for global banks, and a digitalisation of processes floods middle and back office operations, many are forecasting a drop in compliance hiring, with news of job cuts already surfacing.
Bloomberg published an article this week exploring discussions in the market that compliance staff are reducing. In total, banks have paid $321 billion worth of penalties globally since 2008. Now these figures are levelling out and the regulator is shifting its attention to the asset management industry, compliance is no longer immune to the cost pressures and restructuring plans banks are facing.
Automation is also taking a toll on compliance headcount, particularly for monitoring and surveillance operations, a function in which technology has the potential to replace the majority of jobs. Royal Bank of Scotland is the most recent bank to begin swapping out staff for digital processes, as it prepares to axe up to 2,000 jobs checking new customers for suspicious traits.
Meanwhile, the same hiring trends seem to be hitting the US banking sector, the FT posted. Wall Street has witnessed a slight slowdown in the compliance hiring surge, although this is expected to increase dramatically with the President Donald Trump’s strong views on deregulating the industry. Last week Trump’s elected individual to lead the Commodity Futures Trading Commission (CFTC) J. Christopher Giancarlo was appointed permanent chief of the organisation. Giancarlo, who has declared that his aim is to “reinterpret [the CFTC’s] regulatory mission”, plans to focus on fostering economic growth, enhancing U.S. markets, and “right-sizing” its regulatory footprint. With these new objectives dominating the US securities market, we expect a much further decline to for US compliance headcount.
Talks of a slowdown in compliance come as no surprise to the industry. A correction to the frenzy hiring in this space was expected as banks cannot continue to support cost centres such as compliance. However, the areas of compliance in which we are seeing job losses largely consist of low-level remedial responsibilities, such as KYC. These positions were initially created by banks in order to satisfy the regulator after the crash, and these are also the positions most affected by incoming technology.
Taking a look at demand for top level compliance professionals, we have seen no evidence of change, with front-office advisory positions particularly unaffected.
Although financial regulation may no longer be as high on bank agendas, it is unlikely regulators will become any less stringent in the forthcoming years, leaving the need for compliance officers as necessary as ever.
2) Lloyds Banking Group cuts 22 legal roles as part of ongoing restructuring
Lloyds Banking Group is to cut a further 22 legal roles as part of a further restructure of the bank’s legal team, announced group GC Kate Cheetham on Tuesday.
It is not known whether particular areas of the legal team will be affected, or if the cuts will be spread among Lloyds’ various legal departments, consisting of up to 150 lawyers.
In addition, a total of c.5.5 full-time equivalent (FTE) roles will be created to ensure the legal team has the right skills to support the Group deliver its strategy.
The bank was understood to be assessing up to 80 legal roles in total, with the 22 redundancies announced due to be completed in May.
The role reductions are part of the bank’s strategic review which was announced in October 2014. This included the cutting of 9,000 jobs and the closure of 200 branches over a three year period.
However, in relation to the legal function, the overall goal is to enable people to work on big projects and reduce bureaucracy.
These cuts follow on from a restructuring 12 months ago which led to job losses for junior lawyers at the bank’s London headquarters, and 25 mid-level legal redundancies from its litigation team in April 2015.
Like Barclays and HSBC, Lloyds also completed a panel review at the end of last year, cutting a number of firms from its UK legal panel in attempt to streamline costs, with DLA Piper and Norton Rose Fulbright both missing out.
3) Movers & Shakers
Chief executive Sharon White reappointed for a further two years, with senior partner Roland Foord re-elected for a second three-year term.
Head of IP Simon Clark and trade mark attorney Ian Gruselle join Bristows with seven other lawyers and support staff as BLP refines their strategy
New York-based international funds partner Parik Dasgupta joins the corporate practice of Reed Smith.
Office Openings & Closings