Day in the Life--Middle Office (Risk)

Congrats, you've made it into finance...in the middle office. What is the middle office? Definitions vary, but think risk management, certain accounting roles, corporate treasury--broadly speaking, you interact with the business divisions on externally-related (i.e. client, funding) topics, but don't directly interact with the client. Most importantly, you don't make the firm money.

That's besides the point--better explanations are elsewhere. What does the middle office actually do?
Here's a day in my life (specifically, credit risk management as an analyst/associate).

6:20 am- Rise. My office isn't in NYC , but we work the hours. MO roles can be elsewhere to save the firm $$$ on compensation and rent.

7:05 am- Out the door, and either biking or taking the bus (psh subway, you think this is NYC?)

7:15 am- Arrive at the office. Building looks gorgeous, but the inside is the same as any open-plan office. We even have lockers for our stuff--who knew a BB was so like middle school? Then again, it's middle office. Also keep cereal in the locker (like everyone) since the milk is free. Ever wonder what goes into SG&A expense?

7:15-8:15am- Catch up on the news and the companies I cover. I'm in credit risk, so each day starts with me scanning SNL, WSJ, Bloomberg etc. for news on mergers, bankruptcies, and especially rating agency actions (our contracts with counterparties often have rating-based breaks). If something occurs (Moody's writes an analysis of a sector, Crappy Bank Inc. defaults, Muppets & Co. defrauds clients...) I write a summary post and email the rest of my credit team (i.e. corporates/banks/funds/leveraged fin group) in my office and in NYC. If it's good, it gets posted to the MDs, and if you're really golden, they write back "thx"...or a list of 25 questions...

8:15-9:15am- Generally the first meeting of the day is slotted in here. Planning for our monthly credit review meetings, or for some change in our rating methodology, or a rearrangement of our portfolios.

9:15-9:30am--Starbucks, because our coffee in the office is ________.

9:30-11:30am- Review writing, part 1: We operate on a monthly review cycle--each analyst covers several hundred counterparties (not like equity research!) that are sorted by industry and/or geography. So a corporates group will have an analyst for TMT, for airlines/transport, for resources; financials will have insurance analysts, emerging markets coverage, munis may or may not be thrown in here; some firms may also split off their funds coverage from FIs while others include it.

11:30-12:30- Lunch! Not everything about MO is bad. IBD may get the pay and prestige, but we get hour-long lunches most days (at least if you're productive). Christmas is over though, so no more 2hr sushi lunches with sake...

12:30-4:00pm- Reviews, part 2. There may also be more meetings on side projects--credit risk tends to get pulled into some interesting firmwide projects since the higher-ups like a range of views. So it could be on tax policy, regulatory strategy, the Fed's latest diktats...it's a nice break from the more tedious review writing.

4:00pm- is it a Friday? Go home, since your VPs left at 3:45. Is it not a Friday? Is the MD gone? Leave 5 min after the VPs; yes, facetime matters here too.

5:00pm- Facetime only matters so much. GO HOME. Seriously--the VPs don't care after this point.

Unless your work isn't done, in which case you stay late.
Or you have a call with an Asian office.

6:30pm--if you're finishing up that team call with Tokyo/HK/SG, send some pings to your team about dinner. Order dinner--make sure to also get lunch for tomorrow. Our dinner $$$ is the same as NYC's, but goes a lot farther. Time it so you're done eating by 8:05. Leave.

8:10pm- No one is here. Literally not even the cleaners; they left at 7:45

10-10:30pm- Bed. This city isn't known for its nightlife. Seriously.

Conclusion: While not for everyone (myself included in the long term), it's a good place to get your foot in the door; it's also rather like a corporate finance job in that you have manageable work hours at the cost of (comparatively) mediocre pay. You also have job security--turnover is high due to meh pay (but morale is pretty good), while those who stay can make VP simply through attrition.

Comments (42)

Jan 4, 2017

What is the pay range for an analyst or associate role?

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Jan 4, 2017

Analyst: 55-65k depending on experience (yearly step increases)

Associate: 70-85k, maybe a bit more from bonuses in good years.

However, cost of living is anout half that of NYC...you cant rent a 1br in a decent place for under 1k/mo

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Jan 4, 2017

That seems really low for an analyst role...

Jan 4, 2017

To give a bit of a larger sample size, here are the numbers I have gathered through my network in my current city (see name). Note that these are all in and include mid-bucket bonus.

Analyst - 70k-90k
Associate - 85k-145k

The associate range is so wide due to the varied backgrounds of the employees. Many come from other fields, while others are from MBA programs. Promotion cycles seem to be quicker than FO just as a side note.

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Jan 4, 2017

@bankstar It is--but my firm historically underpays, "because of the name."

They're not wrong--could likely fill seats at half the pay.

Jan 4, 2017
bankstar:

That seems really low for an analyst role...

It does seem low. Some BB credit risk analysts start in the high 60's.

Jan 18, 2017

How are bonuses/ relocation pay for 1st year analysts/ etc.?

Jan 4, 2017

For contrast, I'm in Credit risk and 90% of my focus is on lev fin deal approvals, getting knee deep in CIMs, QOEs, market reports, calls with management, research and discussions with the deal approvers. As the work is transactional, the content of any given day is very unpredictable. On the other hand, the hours aren't as demanding as front office and I still get to the gym during the day or in the early evening, own most of my evenings and also very rarely work on weekends. As the role is focused very heavily on transaction approval and a lot less on portfolio management, it makes the pace and dynamics like a diet version of my old job as a transactional banker in IB.

EDIT: I usually get into the office around 8.45am, mainly because it's only a 20 minute door to door trip from home and my dogs usually wake me up, alarm clock-like, around 720am for a walk. 9am would be perfectly acceptable.

Those who can, do. Those who can't, post threads about how to do it on WSO.

    • 2
Jan 4, 2017

Hey can I message you? I have a question about risk positions.

Jan 4, 2017

Thanks for the contrast--a portion of my broader credit team has a role like yours. They interact with the traders/IBD, and then after the initial deal sign-off/onboarding they'll hand it off to us for the annual review and off-cycle updates.

I'd love to switch to the more transactional work, but my current role is excellent training in the fundamentals. (And yes, our NYC team gets in at 9...or later).

Jan 5, 2017

Sounds like a fun job. Middle offices roles like that can be a pretty good gig from what I've seen, and offer a solid path to high level positions in the firm if you want to climb the ladder.

Jan 4, 2017

@SSits - If you don't mind sharing, how does compensation progress as you become more senior in Risk?

Jan 4, 2017
seville:

@SSits - If you don't mind sharing, how does compensation progress as you become more senior in Risk?

I have no idea. I lateraled from front office and was grandfathered on my front office salary. Bonus comp is much the same $-wise, but there's a bit of a story behind that and it's likely that bonus is generally lower than in front office.

@mswoonc - post your question here. If I can answer it easily, I will.

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Jan 4, 2017

Great documentation of the daily grind. It definitely isn't a bad gig for those searching for work-life balance.

Jan 4, 2017

I worked at a smaller franchise than the BB banks out there, but for me the work in BO/MO was very process driven. There's these things called 'standing instructions' that get created based on the needs of the FO servicing their client. So, essentially what happens is that the systems built around the bank's functions have to tie up all of the bank and regulatory protocols to ensure proper functioning of bank products and to be in compliance with all of the rules created for risk management purposes, and then record and make available the ability to access and sometimes edit this information based on demand.

The tasks require very very remedial skill levels, like reading, basic office communication, etc., and sometimes simple number crunching depending on whether you work in a specific product vertical, or in certain more general service verticals. I had a friend in MO at a bank under a FI product line that was working on reconciliations, so that person did receive lots of training to ensure knowledge of the FI products, and how they get traded on a daily basis (t+1, 2, 3, for example or the life-cycle).

So, yes the work is extremely repetitive, but varies based on the market or specific client requirements. Generally, I think it's a little more stable because I know that banks with heavy S&T departments and other IB functions during the crisis of 2008 were downsizing those teams, but were still hiring BO/MO function people in order to be able to continue servicing existing customers, despite not earning new business. Additionally, people working in these areas are definitely much older, so they're very boring given that they are more established and simply looking for some stability with their home life. Many of them seemed to take the job when they needed something that paid better or because they lost their job from a previous situation. Young kids like WSO users that end up there are often times very focused on landing a career in FO finance but found it hard to accomplish this right away, given the competitive nature of FO finance jobs.

The last point of the previous paragraph is why everyone is so biased against the BO/MO jobs out there. No one here wanted to work in the BO but found it as a quick job to take out of school while focusing on getting that FO finance gig. I know that's how things were for myself and many other people around my age whom I worked with. But for coworkers who were much older, a lot of them never even heard about IB or knew what all of that entailed. Many of them were just happy to have a job, and were looking to maintain that. It's dignified work, really easy, and pays a livable salary, especially if you're married and don't live in NYC, which you don't have to given that hours are very light.

"Loser terrorists" & "bad hombres"

"Typical candidates are those who attended a top-tier academic institution"
-Most job applications

    • 1
Jan 4, 2017

middle means back.

    • 12
Jan 4, 2017

So I've worked on a number of trading desk from BNP, BNY, BlackRock, Vanguard... Now I'm currently at BMO. I've been speaking to a bank in the midwest for a risk position on their MBS desk... As far as Market Risk.. What are the Top 3, 5 or 10... most important things I need to know? Is it VaR, Statistics, Regulations, Stress Testing... As far as that goes... What do you recommend so I can have a grasp going in?

Jan 4, 2017
mswoonc:

So I've worked on a number of trading desk from BNP, BNY, BlackRock, Vanguard... Now I'm currently at BMO. I've been speaking to a bank in the midwest for a risk position on their MBS desk... As far as Market Risk.. What are the Top 3, 5 or 10... most important things I need to know? Is it VaR, Statistics, Regulations, Stress Testing... As far as that goes... What do you recommend so I can have a grasp going in?

Risk is a broad church. I have no great understanding of market risk.

Those who can, do. Those who can't, post threads about how to do it on WSO.

    • 2
Jan 5, 2017

Know the greeks really well, the market risk people here work with them all the time. VaR is important too.

Jan 5, 2017

Well I've worked on the vol desk so my greeks knowledge is solid but its only for non-linear products... what if its fixed income products?

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Jan 5, 2017

Thanks for this. My bank is similar, though the credit risk people are all in major cities. Those of us who write credit proposals are more FO and interact with clients, while the people who review the proposals are solidly MO and likely cover a much larger group of companies because there's less of them.

"There's nothing you can do if you're too scared to try." - Nickel Creek

Jan 7, 2017

What kind of companies do you cover if you don't mind mentioning?

Best Response
Jan 8, 2017

The term "credit risk" is really broad and covers a variety of different roles, some FO and others MO.

(1) The underwriting and portfolio management function of corporate & commercial banking is part of credit risk of some banks.
-These groups underwrite & structure bank loans to middle market companies and large corporates.
-In addition new loan origination these groups also manage a portfolio of loans to there clients.
-This is considered a FO role given the client interaction involved in structuring these credit facilities and involved due diligence & portfolio management

(2) Credit Approvers. This includes credit officers who approve the above transactions in which a bank committees money.

(3) Various counter party / credit risk and capital markets approvers. This includes what SSits does.
-Approving DCM and Syndicated / Leverage finance engagements where the bank bears marketing / distribution risk. This would include a "fully underwritten" transaction where say a bank commits to lend $X to a client to assure certainty of execution and quicker access to funds but will then syndicate a portion of this to other institutions on the bank end. Given bank may be stuck holding more than it intends and bears marketing/execution risk, approval is required from the risk side. There are also other various investment grade and leverage finance approval committees for various capital markets engagements.

(4) Counterparty credit risk - approving risk associated with other financial counter parties, market making activities, fronting exposure for other banks, broker-dealer activities, etc. Most similar to the type of role described by OP

Out of all of these roles I would say (2) and (3) carry the most seniority and are tied to approving various transactions. These are not considered FO roles and from my understanding carry a greater fixed compensation component (salary) rather than variable comp. The only FO group on the risk side in my understanding is the underwriting / structuring / portfolio management team (various names at various banks) as these individuals are viewed as product partners for Corporate / Coverage Bankers (or relationship managers in commercial banking terminology) and are the subject matter experts on underwriting & structuring such transactions to meet bank's risk appetite (approvers 2&3 above) and the clients needs. Professionals in these groups will attend bank meetings associated with the transaction and other types of due diligence sessions and typically have a point of contact within the company they can call on to field any questions on how the company is performing, etc. This is also a non-revenue generating role as coverage gets the credit for bringing these deals in.

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Jan 8, 2017
B2Banker:

The term "credit risk" is really broad and covers a variety of different roles, some FO and others MO.

(1) The underwriting and portfolio management function of corporate & commercial banking is part of credit risk of some banks.-These groups underwrite & structure bank loans to middle market companies and large corporates.-In addition new loan origination these groups also manage a portfolio of loans to there clients.-This is considered a FO role given the client interaction involved in structuring these credit facilities and involved due diligence & portfolio management

(2) Credit Approvers. This includes credit officers who approve the above transactions in which a bank committees money.

(3) Various counter party / credit risk and capital markets approvers. This includes what SSits does.-Approving DCM and Syndicated / Leverage finance engagements where the bank bears marketing / distribution risk. This would include a "fully underwritten" transaction where say a bank commits to lend $X to a client to assure certainty of execution and quicker access to funds but will then syndicate a portion of this to other institutions on the bank end. Given bank may be stuck holding more than it intends and bears marketing/execution risk, approval is required from the risk side. There are also other various investment grade and leverage finance approval committees for various capital markets engagements.

(4) Counterparty credit risk - approving risk associated with other financial counter parties, market making activities, fronting exposure for other banks, broker-dealer activities, etc. Most similar to the type of role described by OP

Out of all of these roles I would say (2) and (3) carry the most seniority and are tied to approving various transactions. These are not considered FO roles and from my understanding carry a greater fixed compensation component (salary) rather than variable comp. The only FO group on the risk side in my understanding is the underwriting / structuring / portfolio management team (various names at various banks) as these individuals are viewed as product partners for Corporate / Coverage Bankers (or relationship managers in commercial banking terminology) and are the subject matter experts on underwriting & structuring such transactions to meet bank's risk appetite (approvers 2&3 above) and the clients needs. Professionals in these groups will attend bank meetings associated with the transaction and other types of due diligence sessions and typically have a point of contact within the company they can call on to field any questions on how the company is performing, etc. This is also a non-revenue generating role as coverage gets the credit for bringing these deals in.

Wanted to touch on comp again if you don't mind. So how do bonuses vary across (1) and (2)? For both corporate and commercial banking. Clearly underwriting/portfolio management is a non-revenue generating role, yet it is considered front office. Does comp reflect a front office role?

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Jan 8, 2017

Depends on the bank and if you are part of corporate or commercial banking. Best comp is at banks where your group is part of "corporate and investment banking" division.

Corporate Banking:
An1: 60-85k base salary (know BBs that start you at 60-65k and others that pay base thats inline with IBD).
-Typically pay will increase by 5-10k per year. Bonus range is wide and depends on the bank but most common is 20-30%. You have some shops that pay 30%+, mainly the NYC banks. JPM/Citi pay much higher bonuses (I believe its in excess of 40%). Pay increases by 5-10k per year depending on structure.
As1: 100-125k again depends on the bank.
-VP: 120-150k base
Salary ranges really vary widely depending on the bank, it is much less uniform than IBD where everyone would make 70k (now 85k) as a first year. Takes ~6 years to make VP (3 yrs as analyst & associate).

You work very closely with syndicated finance and IBD coverage and get solid client interaction as you move up through the ranks.

Commercial Banking:
-Usually not following IBD structure and variety of titles are used "Underwriter", "Portfolio Manger", "Credit Analyst", among others. Base salary typically starts in the 60-65k. Annual pay increases are more inflation adjustments (think 2-5% per year). Bonuses are on the lower end of 15-20%. Bigger pay increases come with promotions (~10%+). For color, I know someone thats been working in commercial banking for ~7 years that makes about 100k base + 20% bonus and has been offered a few lateral moves for a 25% increase in base.
-You typically make around 100-120k base at the VP level (takes 6-7 years to hit this, could be as early as 5 for top performers or those changing banks every few years) and bonus of 20-25%, hours are 9-5/6.
-Career progression is slower than in corporate banking and less linear/defined.

Look at WSO database and my older posts on this topic, lots of good info out there.

Do not have a lot of color on credit approvers given they are all 15-20 years older than me so can't be having comp discussion with them but wouldn't be surprised if they are pulling in 200-250k+ all-in (higher on the corporate side). This role would have less of a variable comp component as its a non-revenue generating role and is all about maintaining asset quality / underwriting discipline.

    • 4
Jan 8, 2017

Analyst in corporate banking. This is 100% correct as far as I can tell, except that "credit analyst" and "portfolio manager" are also used in corporate banking.

"There's nothing you can do if you're too scared to try." - Nickel Creek

Jan 8, 2017

Agree, each bank has slightly different naming conventions and they are all pretty intuitive to those in the industry. Back when I was in school and I saw a "portfolio management" posting I thought it was for an AM role until reading the job description.

To add to the confusion, some banks have a "Credit Officer" title which is basically a credit approver for transactions (doesn't do the underwriting / structuring) but decides if bank will do the deal on a risk-based approval authority scale. Other banks have a title called "Credit Products Officer" which is basically a VP/Director/MD level Portfolio Manager that manages a portfolio of credits, is primary credit contact for those relationships, and leads the underwriting/structuring/portfolio management process and has junior support under them.

    • 1
Jan 8, 2017
B2Banker:

Agree, each bank has slightly different naming conventions and they are all pretty intuitive to those in the industry. Back when I was in school and I saw a "portfolio management" posting I thought it was for an AM role until reading the job description.

To add to the confusion, some banks have a "Credit Officer" title which is basically a credit approver for transactions (doesn't do the underwriting / structuring) but decides if bank will do the deal on a risk-based approval authority scale. Other banks have a title called "Credit Products Officer" which is basically a VP/Director/MD level Portfolio Manager that manages a portfolio of credits, is primary credit contact for those relationships, and leads the underwriting/structuring/portfolio management process and has junior support under them.

Sent you a PM.

    • 2
Jan 9, 2017
B2Banker:

Do not have a lot of color on credit approvers given they are all 15-20 years older than me so can't be having comp discussion with them but wouldn't be surprised if they are pulling in 200-250k+ all-in (higher on the corporate side)

Definitely higher on my side of things (PE sponsor driven underwritten LBOs for syndication). Much higher. Even for those without approval discretion.

Those who can, do. Those who can't, post threads about how to do it on WSO.

Jan 9, 2017
SSits:

B2Banker:Do not have a lot of color on credit approvers given they are all 15-20 years older than me so can't be having comp discussion with them but wouldn't be surprised if they are pulling in 200-250k+ all-in (higher on the corporate side)

Definitely higher on my side of things (PE sponsor driven underwritten LBOs for syndication). Much higher. Even for those without approval discretion.

That makes sense, the numbers I was guesstimating at mainly pertain to the commercial banking credit risks folks who are approving commitments to typical general corporate purposes revolvers / TLs. The folks presiding on the various capital markets approval committees that approve fully underwritten deals, bridge financing, etc all do very well for themselves. I have no basis to even begin guesstimating what the payout is.

Risk is definitely a good lifestyle in the sense that you are not preparing the analysis which takes the most time and those guys get it the worse since their draft has to be ready well in advance of the committee meeting for everyone to review. I remember spending plenty of late nights in the office polishing up capital market bridge approval memos going to committee the next day.

    • 2
Jan 9, 2017
B2Banker:

Risk is definitely a good lifestyle in the sense that you are not preparing the analysis which takes the most time and those guys get it the worse since their draft has to be ready well in advance of the committee meeting for everyone to review. I remember spending plenty of late nights in the office polishing up capital market bridge approval memos going to committee the next day.

That's one of the aspects I enjoy most. I get to ask the questions then leave the office for the gym, while the front office guys work overnight to produce an answer for me by the next morning.

While there's things to be learned from doing that processing work, eventually the learning curve from the processing levels out. What becomes more important is knowing what questions to ask and leaving it to the grunts to get you the answer. It's a very nice position to be in.

Those who can, do. Those who can't, post threads about how to do it on WSO.

    • 3
Jan 9, 2017

You're obviously a quality professional and I've worked with some really good risk people in roles similar to yours. On the other hand, I have also worked with a few first level approvers that are approving the more basic transactions and would find it really frustrating when they would not understand the industry, financial analysis, basic accounting, but would make comments and ask questions with such conviction that the underwriting process really became more about doing what the approver wanted to see in the document rather than doing things the correct way. Having a good credit risk professional covering your group is really key. This is not a problem so much at the committee level but comes up at the lower level as people who have stuck around for years typically get the nod to do this.

    • 1
Jan 8, 2017

Thank you--this is a really great summary of credit. +1. I'm absolutely in (4), and I work most closely with the portfolio team, which sets limits for our desks and (indirectly) IBD.

What I'll say is that we in (4) tend to have a bit more of a bird's-eye view of the firm's credit risk, so we're generally consulted/staffed on multiple strategy initiatives more than the portfolio team, which is almost entirely deal-focused. For someone interested in banking policy/regulation, I would highly recommend my role; for someone interested in the business, I'd take the portfolio/deal roles (obviously).

Jan 8, 2017

So you work 8-4 basically. Not bad.

Jan 8, 2017

Not bad at all--though in a certain sense, I'd like to work a touch more while I'm still young & independent. Then again, I go skiing every weekend at one of the country's largest ski resorts, so...

Jan 8, 2017

What kind of companies do you cover if you don't mind sharing?

Feb 4, 2017

Hey there - Has anyone done a credit risk FIG "case study" interview at a BB? Insight would be highly appreciated!

Feb 4, 2017

Risk is a broad church. Experiences will depend on the bank and the particular area of risk you're working in.

Those who can, do. Those who can't, post threads about how to do it on WSO.

Feb 4, 2017
Feb 4, 2017