Risk Taking Traders Pushed Out of Investment Banks: Cultural Change?

The biggest banks in the world may be looking at a major shift in their opinion of once admired high risk taking traders. There have been some recent prominent departures by the market’s more freewheeling traders at firms like Barclays and Morgan Stanley. The departures involved personnel closely connected with the financial crisis era.

Between 2005 and 2007, global rates trader Jonathan Hoffman took home $65.6 million in salary and bonuses. So it was news when he left his position at Barclays to move over to Quartz. Before his tenure with Barclays, Hoffman was one of Lehman Brothers’ highest paid executives before their infamous bankruptcy.Neither Hoffman nor his new employers have released any official statement, so there is no clear story behind what prompted the high profile Hoffman to leave Barclays. It could be considered a timely exit though. Like many of its European peers, Barclays was pulling back on risk taking as regulations were hardening to safeguard against another global credit collapse.

Hoffman’s exit isn’t an isolated incident. Morgan Stanley’s head of interest rates trading, Glenn Hadden, also made a recent departure. Formerly a trader with Goldman Sachs, Hadden had a reputation as an aggressive risk taker. In 2012, Hadden was actually probed by regulators concerning 2008 US Treasury trades.

Analysts are speculating that the implementation of new financial regulations like the Volcker Rule could be primarily responsible for these departures, especially as banks are looking for more conservative routes to trading. Morgan Stanley CEO James Gorman, Hadden’s former boss, has publicly made it clear of his intent for Morgan to steer clear of risk while crediting the firm’s recent successes to its wealth management unit.

There is serious talk that these shifts in positions are likely to push executives like Hoffman and Hadden into the hedge funds market and similar areas of investment that are not primary targets of regulators.

One response to “Risk Taking Traders Pushed Out of Investment Banks: Cultural Change?

  1. Pingback: Asset under Management to Exceed $100 Trillion by 2020 | Alpha Banker·

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