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Big Banks Finally Restructuring?

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Big Banks Finally Restructuring?
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Wall Street's most selective employer may need to revamp its screening process following what appears to be an internal cheating scandal.

Regarded as one of the “100 Best Places to Work” by Fortune magazine, Goldman Sachs (NYSE:GS) has always enjoyed a vast pool of applicants to sift through. As you may know, though, they are notoriously picky. Last year, they received nearly 270,000 applicants, but only 3 percent of these applicants were ultimately hired by the firm.

It’s easier for a well-qualified applicant to get into Harvard.

The question remains, though: Has Goldman Sachs been too lax about who they accept into their firm?

If selected, applicants attend Goldman Sachs University where they study a multitude of disciplines related to their field. Applicants are expected to complete basic training and compliance exams throughout their tutelage.

According to industry insiders, the tests are used to gauge participants’ grasp of the material demonstrated throughout their daily training.

"[Besides] saving time, there's no real incentive to cheat on these tests because typically it's just to get a certification of 'hours' for internal compliance training, so your score doesn't matter, and if you don't pass, you can take it again. And I don't think a bank would fire anyone over that." said David Archer, a director at Circle Square Talent in London, a recruiting firm within the banking industry.

firedExams like these have long been regarded as tedious and monotonous by people within the banking industry.

Nevertheless, twenty analysts from various offices around the globe have been fired (or are in the process of being fired) for the infraction. Last month, JPMorgan Chase (NYSE:JPM) fired 10 employees for a similar offense.

"This conduct was not just a clear violation of the rules, but completely inconsistent with the values we foster at the firm," said Sebastian Howell, a spokesman for Goldman Sachs.

More Bank Reorganization

bankGoldman is actually not the only megabank who is in the process of reorganizing their employee structure. Germany’s Deutsche Bank (NYSE:DB) is similarly pursuing a big corporate shake-up, but rather than firing unscrupulous junior analysts, the firm is actually replacing a group of its highest-ranking executives.

After new regulatory rules were instituted and the bank suffered under expensive settlements and litigation costs in the last few years, the need to slash costs and dismiss ineffective leadership became clear. Deutsche Bank’s overhaul will involve simplifying its committee structure by reducing the number of management board committees from 16 to 6 and eliminating its 19-member executive committee entirely.

Among those leaving their executive positions are Chief Operating Officer (COO) Henry Ritchotte; former Chief Financial Officer (CFO) Stefan Krause; former senior banker Michael Faissola; and Colin Fan, the co-leader of the bank’s investment banking and trading unit. The changes being pursued by new CEO John Cryan represent the biggest overhaul of the bank’s leadership in at least a decade. Cryan was previously an executive at rival bank UBS.

deutsche_bankIn just one instance from June of this year that illustrates Deutsche Bank’s problems, a junior trader mistakenly wired $6 billion to a hedge fund client in the U.S. in what is commonly known as a “fat finger” error—a case of mistakenly inputting figures, usually on the high end (like adding an extra zero or two). The incident occurred when the trader’s supervisor was on summer vacation, and there are no indications from Deutsche Bank about whether the individual in question still works at the company.


The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.

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