The guys at the top really haven't a clue.
"In the end the bank is like a shell. You need a place to trade from, this is how we saw our bank. Sometimes an entire team can be poached and go from one bank to another. There's no loyalty either way. And the top at your bank has no idea what's going on, how could they? Why would anyone tell them what's going on?"
This comes from a former currency and bond trader at a big bank in London. Over the past 20 months of interviewing banking staff I have heard many speak of their bank in these terms. This raises an alarming question that still goes largely unaddressed: how can you make a bank safe when some of its staff can run up gigantic losses while having seemingly zero loyalty towards it? This investigation suggests that banks are not only "too big to fail", but also "too incoherent to manage".
"Where I worked people seemed obsessed with power structures and keeping on top. For instance, when someone was made redundant a remaining trader would do a deal between his book and that person's, creating a profit in his book and a loss in that of the person leaving … Then the remaining traders will complain about the guy being a crap trader.
"It's a dog-eat-dog world. But at the same time it's the traders versus the bank … Even the head of markets, the guy in charge of all the traders, seemed mostly interested in maintaining the status quo. He is on the side of the traders, against the bank. Management consists of traders who have worked their way up. What kind of people do you think they are?"
The full interview is warmly recommended if only for its insights into the allure and pull of trading. Today's interviewee felt himself "dying a little every day" in his job. Yet, given the chance, he'd spend the rest of his life trading.
"As a trader you can be everything you want to be, at least in some ways."
One final point. This blog is read by insiders who often take the trouble of sharing their own experiences. That is invaluable. Today, it would be really useful to find out how representative today's interviewee is. Is it really true that "a bank is a collection of divisions engaged in permanent civil war", as this risk analyst put it?
While you're at it I would also love to hear more from insiders about what seems the biggest taboo among bank staff: so-called Chinese walls. As you know, some staff in a "universal" investment bank will be privy to information that could make others in that same bank a lot of money – for example a mergers and acquisitions banker may be working on a major deal for company X while a few floors up someone is trading shares in that company. Banks claim that there are Chinese walls between those bankers, ie they don't talk. How credible is that? Almost everyone I have spoken to over the past two years either dodge that question, roll their eyes or say "bullshit".
Today's interviewee puts it like this:
"Of course traders are constantly inquiring across the bank: what's happening? What are our big clients like institutional investors doing? Then they "front run" those investors; buying ahead of them so when the price rises as a result of the subsequent buying, they pocket the difference. We could simply have logged on to our system to see what was happening and what they were doing all the time."
This banking blog features interviews with more than 80 insiders across the world of finance. Here is a guide to help you find your way. For insiders there is this index of interviewees ranked by activity. Are you by any chance working in human resources in a bank, or are you a trader in government bonds? Please help this blog: firstname.lastname@example.org. Anonymity guaranteed.
Traders can be very different animals, depending on their "product" (shares, bonds, derivatives, wheat) and whether they trade for clients (flow) or for the bank's account ("prop"). This derivatives flow trader gives some more examples of the dog-eat-dog world he finds himself in: "Some managers are simply psychopaths. They come up to you on a day when you've lost money, and say: "you are losing money. Why are you losing money? Do you enjoy losing money?"
This "prop" trader, meanwhile, seems almost serene: "Fear and greed are a trader's two worst enemies."
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