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Legal jobs at banks – hoping no news is good news
Posted 17/10/2007 by Deal Comment
The year’s most popular threat by banking associates wanting a pay rise is that they will leave for an investment bank. These are institutions that are desperate to get hold of them and will pay through the nose to secure lawyers as employees - or so the theory goes.
The past two months have put such claims to the test. Tremors in the credit markets have seen banking giants including UBS, Citi, Merrill Lynch and Lehman Brothers announce profit downgrades over the past few weeks ahead of their quarterly results.
Now there is the threat of redundancy for in-house lawyers, while the banks’ ability to hire will be significantly hit.
UBS has said it plans to axe 1,500 jobs worldwide before the end of the year, including 350 in London. Rumours also abound of job cuts in Merrill Lynch’s fixed income department.
Legal Week has since asked most of the major investment banks in London whether any redundancies would hit their legal team - and has been largely greeted with a wall of silence. Citi and Credit Suisse denied to comment on the issue at all. Deutsche Bank, an institution on a recruitment roll in legal earlier in the year, confirmed a general hiring freeze is in place, although it stresses that no existing positions will be cut.
The UK’s biggest victim of the market downturn so far, Northern Rock, is stoically clinging on to its employees across the board and denied that any compulsory redundancies were on the cards, though obviously that could quickly change.
Merrill Lynch said it was “not aware” of any legal redundancies as yet and had not announced a hiring freeze, although it is understood its results - which will be released in a couple of weeks - could affect that stance.
Goldman Sachs and Lehman were the only banks to confirm that they were not contemplating redundancies or imposing hiring freezes in legal. Since these are two of the most coveted legal employers in banking, that will be welcome news to uneasy corporate counsel.
In-house recruiters have also become more optimistic, saying that they believe significant job losses in legal are unlikely and that much of the hiring freezes relate to a reticence to water down the bonus pot by hiring new recruits in the last quarter of the year.
One in-house counsel at a major US bank went as far as to say that any front-office redundancies would not make a “blind bit of difference” to the headcount in legal since compliance and legal support are not generally in the firing line at a time when banks want to tighten risk management.
Another causes for relief are signs that the recent string of profit downgrades has had the perverse effect of calming markets, by raising confidence that the scale of banks’ crunch-related losses are finally being disclosed.
Even so, in-house lawyers at those institutions are likely to be feeling a little unsettled right now - and City lawyers’ threats to join them are unlikely to hold water for a while yet.
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Comments
I am glad Banking Partner did not disclose his/her name as he/she might have found himself/herself short of instructions if he/she is of the view that the lawyers who move in-house as lawyers are less likely to be the stars! That is a highly simplistic analysis. What about the view now held by many that the successful partners in law firms now are not good lawyers at all but good salespeople! Another highly simplistic analysis? The truth is that the lawyers who move into business roles have totally different personal skill sets to lawyers who move to legal departments. They are not better or worse - they just have a different skill set and different strengths (usually- not always) - not to mention different goals. I agree with the article that lawyers in investment banks are feeling a bit unsettled right now. This is because they realise that their bonuses are going to be flat or even down on last year's bonus. Also, if you are a very mediocre performer, you might find yourself with a lower bonus than last year or if you are very unlucky - redundant. However, the good news is that most lawyers in banks are much more secure in their positions than the bankers. ps -I am not disclosing my name either as "Banking Partner" might be a client of my firm!! although I suspect it is unlikely....
Posted by Headhunter and ex lawyer | 18/10/2007
This is an article about corporate counsel by our corporate counsel correspondent. As to whether front-office, commercial roles are at risk once lawyers cross the floor, that question has already been answered: yes they are.
Posted by Legal Week | 18/10/2007
I think the author has missed the point a little, as has much of the legal press for some time. The really good banking lawyers have been leaving to join banks not as in-house lawyers but as transaction managers (i.e. commercial, non-legal roles) as investment banks suddenly realised that lawyers were actually rather good at running deals.The brutal truth is that those who have joined banks as in-house lawyers are less likely to be the stars than the lawyers who joined banks in non-legal roles. And it is the stars that firms miss the most.
So the issue is less about how the credit crunch affects legal teams but how it affects deal teams. While no banks are admitting to hiring freezes I think that if you ask most City banking departments you will find their attrition rates have dropped markedly since June. Which suggests that whatever the banks say they have stopped hiring. And if they have stopped hiring people who earn fees then they will almost certainly have also stopped hiring non-fee earners - i.e. in-house lawyers.
Posted by A Banking Partner | 18/10/2007