By Steve Slater
LONDON, March 16 Once modest of pay and profile,
risk experts are being reborn as rock stars of the banking world
- their status and salaries soaring as regulators force
financial institutions to clean up.
Industry-wide investigations into alleged exchange rate
manipulation, trading scandals at UBS, Societe Generale and
JPMorgan and HSBC's $1.9 billion fine for lax money-laundering
rules have upped the ante for banks already under pressure to
curb reckless behaviour that led to the financial crisis.
Now watchdogs and central banks want to see a clear line of
responsibility for the avoidance of such fiascos in the future,
and as a result, the position of chief risk officer (CRO) has
jumped up the ranks. Many CROs now sit alongside the finance
director as second in importance behind the chief executive.
"The role of the CRO has become broader, higher profile and
more influential," said Anne Murphy, head of UK financial
services for executive recruitment firm Odgers Berndtson.
In turn, salaries have soared. Pay in risk-related jobs rose
6 percent in 2013 and rocketed 19 percent for those who moved
firms, according to a report by recruitment firm Barclay
HSBC chief risk officer Marc Moses joined the
bank's board at the start of 2014, alongside the chairman, chief
executive and finance director, and could be paid 6 million
pounds ($10 million) this year. Chief Executive Stuart Gulliver,
who could be paid 11.4 million this year, says pre-crisis, the
bank's CRO would not have made it into the top 50 earners.
At Spain's Santander the top risk executive Matias
Rodriguez Inciarte was its second-highest paid director last
year, getting 4.7 million euros.
Those numbers, says Murphy, are "recognition that it's a big
job. There aren't many people who have the skills and abilities
to do it well, combined with the increase in seniority and
Chief risk officers ensure that where potential dangers
exist, they are monitored and kept in check. That can range from
measuring how likely loans are to be paid back, how risky banks'
positions in financial markets might be, and what potential
losses may be incurred from fraudulent activities.
However after the financial crisis of 2007-2008 this already
wide remit has become larger still, and its parameters more
CROs must ensure banks abide by tougher regulations around
the world, hammered out by governments that had to use public
funds to keep many of them from sinking under the burden of bad
loans resulting from excessive borrowing, risky investments and
a lack of transparency.
The new rules demand that banks take fewer risks, assess
loans more closely and hold more accessible capital as a buffer
against bad bets.
Many CROs are now also responsible for ensuring cyber
security and spotting terror financing and money laundering -
so-called compliance functions that previously often fell under
the remit of a bank's legal division.
The scale of the new CRO job is reflected in the amount of
time such concerns occupy at board level. Santander said its
board spent 30 percent of its time last year on risk management,
and Barclays' board has spent 35-40 percent of its time on
governance and risk issues in the last two years.
As a result some CROs are being invited to join the board,
another notch for their status and pay packets.
Juan Colombas, chief risk officer at Lloyds Banking Group
since the start of 2011, joined its board in November
2013 and is one of only three executive directors. He could earn
4.4 million pounds this year.
The job of CRO comes with its own risk/reward equation: its
new elevated status also brings far more accountability.
Following the introduction of new post-crisis legislation
in Britain, for example, these bankers can now be sent to prison
if found guilty of the new charge of reckless misconduct leading
to bank failure.
"Whereas before it was a slightly techy and bookish type of
job, now risk is incredibly diverse and carries a huge amount
more responsibility if you are running the department, and the
repercussions for the chief risk officer are profound," said
Mark Garnier, a British lawmaker who was part of a panel that
last year proposed changes to make individuals at banks more
However the jump in pay and profile means that the job is
nonetheless likely to tempt more candidates to fill what is
currently a small pool of specialists.
Headhunters say the rising status of top risk managers could
see it become a popular path for ambitious executives who now
see it as a route to the CEO's chair.