This was told to me by an investment banker I met a few days back, who obviously doesn’t want to be named. But like Matt Levine writes about people being worried about bond market liquidity, there is also a similar worry about the liquidity of the market for investment bankers as well.
And once again it has to do with regulations introduced in the aftermath of the 2008 global financial crisis. It has to do with the European requirement that bankers’ bonuses are not all paid immediately, and that they be deferred and amortised over a few years.
While good in spirit what the regulation has led to is that bankers don’t look to move banks any more. This is because each successful (and thus well paid) banker has a stock of deferred compensation that will be lost in case of a job change.
This means that any bank looking to hire one such banker will have to compensate for all the deferred compensation in terms of a really fat joining bonus. And banks are seldom willing to pay such a high price.
And so the rather vibrant and liquid market for investment bankers in Europe has suddenly gone quiet. Interbank moves are few and far in between – with the deferred compensation meaning that banks look to hire internally instead.
And lesser bankers moving out has had an effect on the number of openings for banker jobs. Which has led to even fewer bankers looking to move. Basically it’s a vicious cycle of falling liquidity!
Which is not good news for someone like me who’s just moved into London and looking for a banking job!
PS: speaking of liquidity I have a book on market design and liquidity coming out next month or next next month. It’s in the publication process right now. More on that soon!
I think there is a fair share of Invest Banking opportunities for fresh grads. And lack of people moving from one job to another doesn’t prevent fresh openings from coming up. It’s in fact conducive for someone looking to get into the market. I have observed over time that IB is one field which is largely “name” and “contact” driven than resume driven. That doesn’t at all mean that you can bullshit your way to the top. On the contrary, it’s one the most cut-throat fields where if you don’t have the chops you’ll know that loud and clear. So you’ll be fine if you’re smart and objective.