What are the issues facing foreign banks in the UK? - Interview question
I know there are some UK based people on here and I have an interview with a UK bank here in NYC and was asked to prepare for this question. Its a strange one. Anyone have any idea? Anyone from the UK care to provide some help? Would really appreciate it.
Thanks!
EDIT: Posted in the job thread too as I desperately need some help in this. I've done some research but most of the stuff I found is generic and stuff I already knew. Really want this gig so any pointers are appreciated.
Are we talking investment banking specifically or banking as a whole. Many issues, you can hit on capital requirements, RWAs, Basel 3 etc General banking - regulation! Regulation!! And more regulation!!! Not saying you have to pick sides if you support it or not, just seems like they may be stories you can tell around this.
Thanks! Regulations was the first thing on my list but not sure how to be specific as its a large area.
When you mean a UK bank as in Lloyds or RBS?
Yeah.
Wondering what to do with all the euros deposited by french people into new current accounts.
transaction tax
Could you go into a bit more detail? Thanks
Very much depends on the bank eg is it a lloyds/rbs or a Barclays type bank.
Also are we talking about the bank overall or specifically it's ibd?
Sorry, I should have been more clear. The question was kind of broad so I assume it involves retail and investment banking. I wont mention the bank but its one of your typical UK banks but their US office.
Ok. A really specific answer would be to say that the undercapitalisation of the banks coupled with Basel 3 restrictions on what counts towards tier 1 capital is likely to significantly affect the profitability of a number of previously key areas.
For those banks in particular, couple this with significant pressure from the UK government to push more money (and therefore capital) in to the real economy I.e. personal loans and in particular small and medium sized business loans which are about to get hammered by their Bar 3 risk weightings could have a dramatic effect on ROE.
Essentially banks are being forced to allocate capital inefficiently from their prospective to products such as SME loans which have a lower ROE in a time of capital scarcity.....
Hope that helps.
on the IB side, I would say that pay restraint due to government ownership coupled with the dramatic Impact on moral has already had significant impacts on talent drain and therefore there are huge risks on the human capital side too....
Also you MUST read the Hmt response to the independent banking commission. Just google it - for some reason I can't post links!
Wouldnt most of the stuff noted be generic and applicable to all banking industries? Basel III will be implemented everywhere.
I would love something specific or to be pointed in the direction of something specific.
You'll face higher liquidity costs and costs of funding in general due to the fact that you're using basically overseas capital to invest in U.S. markets. Also, since you have little to no retail presence in the U.S., you'll have higher RWA and can't take on as much balance sheet risk as your domestic counterparts.
Another important thing to note is that you won't likely win lead arranger/mandates over domestic banks due to the U.S. fears of the Eurozone crisis. No investor will want to invest in a Euro bank when they can earn the same return for less risk here - this also leads to your U.K. bank having to give more favorable rates to win business, leading to lower fees across the board.
You might also want to check out EVA, it's a big issue for a lot of Euro banks and you basically just see economic profit eroded to the point where sometimes taking on a deal generates negative EVA due to the operating and liquidity costs involved.
Its hard to be specific without knowing the bank in particular (not suggesting you name the bank) for example UBS - Reduce RWA and get basel 3 compliant Barclays - too big to fail (more uk regulation, split/segregate banking units, sword of damocles etc) RBS - see comment from above poster, tight margins, same return more risk(euro exposure)
Most major banks face similar problems more or less, the severity depends on the bank in question. So its ok to go with a general topic more suited to your bank.
What are the main issues facing foreign banks in the UK? (Originally Posted: 02/25/2013)
I know there are some UK based people on here and I have an interview with a UK bank here in NYC and was asked to prepare for this question. Its a strange one. Anyone have any idea? Anyone from the UK care to provide some help? Would really appreciate it.
Thanks!
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