How Will the Basel III Accord Affect the Banks?

On September 12th 2010, the Basel Committee endorsed the next piece of their master plan. Having originally released details on July 26th 2010, the Basel III Accord was revealed and aspired to once again make the banking system safer by putting measures in place to avoid a repeat of the “worst recession in over 100 years” (Ed Balls, Shadow Chancellor).

The Basel II Accord was originally introduced in June 2004 to ensure that savers’ money was protected and that banks had a bit of a cushion to absorb unexpected shortfall from the potential inability to repay loans. Basel III was constructed using the same three-pillared framework, but was developed following the credit crunch. It strengthens the bank’s capital requirements and introduces new regulatory requirements on liquidity.

Basel III looks to define new capital target ratios, or the amount of ‘ready’ capital a bank must have. Other changes include the increase in transparency, quality and consistency of the capital base. The new regulation states that banks must have available capital equivalent to 4.5% of assets. There is an additional requirement of 2.5% which is in place to withstand future stress.

The second major change from Basel II is the additional strengthening of the capital framework’s risk coverage. This includes strengthening the capital requirements for counterparty credit exposures, by raising the capital buffers to allow for these exposures. All the changes are in a bid by the committee to encourage the banks to raise their own capital buffer in times of a good economy, so they can be called upon in more troubled times.

Following the crisis of 2009, the banks are now working much closer with the regulators to ensure that it is not repeated. But, in reality, how will the banks and their recruitment processes be affected by the introduction of the Basel III Accord?

The long-term benefits speak for themselves: an estimated net benefit for European banks of 30% of GDP, equivalent to 10 trillion Euros. This prediction by UK economists comes on the back of the sizeable buffers that the new Basel mandates all major banks have at their disposal.

Having said this, the short and medium-term problems cannot be ignored. While the big banks are no longer ‘able to fail’, the IT implications and integration costs and resources threaten to drive down the financial sector’s profits.
 
Although the capital requirements are being introduced gradually, the scale of the change that banks will have to go through cannot be underestimated. Barclays are in the process of raising £3.3bn in order to cover the costs of Basel III – some of which will be used to cover the capital requirements, but a large amount will be spent on retraining and recruiting qualified staff. 

The next piece in the Basel jigsaw will surely lead to increased hiring levels to accomodate the changes.


Oliver Gale is a Change Management Consultant for Marks Sattin.

Corporate Advisory

Looking back on 2010, the general trend witnessed across advisory services was one of an unpredictable market. The pressures of a global downturn, a General Election and bad weather inevitably meant that businesses moved cautiously; 2010 was most definitely a year of peaks and troughs.

Towards the end of 2010, and certainly within the first quarter of 2011, confidence in the market has improved. There has been increased activity within corporate recovery, insolvency, forensic accounting and corporate finance. A fresh excitement seems to have entered the market and this has had a huge impact on recruitment.

Forensic clients are definitely feeling optimistic about this year, although 2010 was a reasonable year within the London Forensic world. There were, of course, points in the year when activity was concentrated on pitching for new work and initial investigations, but the decision to litigate was being held back. This was coupled with the fact that a number of government agencies were holding back work until the new fiscal year. Although this would have ordinarily caused caution, it was balanced by the fact that financial services work increased.

Moving into 2011, we continue to see clients recruiting for increased FS and Fraud work. There seems to be an appetite for AML, FS and Fraud experts alongside the usual Forensic, Valuations and Investigations applicants. Clients have reported that there is a lot more litigation work happening. A good sign that the market is becoming busier is that some clients have been proactively recruiting recently qualified auditors to train within Forensic Accounting.

The Insolvency and Restructuring world saw peaks of activity. There was a marked increase within the restructuring world; some teams were working to full capacity last year. Towards the second half of the year there seemed to be a lot of lender led, Business Review and restructuring work. This has of course meant we have seen an increased need for experienced restructuring candidates.

Clients have recently been recruiting at all levels; from newly qualified to director level. The insolvency world had some very busy periods in London but there seems to be a lot less trading administration work. November and December were quieter than usual.

The first quarter of 2011 indicates that the insolvency world is picking up. A number of firms have been busy in investigations and formal insolvency. It is felt that with the Tax Year end and the quieter-than-expected Christmas results in the retail market, the formal insolvency world will be busier this year.

All indicators suggest that clients are preparing for a busy 2011 – we have already seen firms recruiting across the board.



Shaila Verma is an Executive Consultant within the Marks Sattin Practice Division, specialising in Qualified Corporate Advisory Recruitment. She has successfully recruited for senior appointments both in C&I and Public Practice and has over 10 years’ financial recruitment experience.

What’s the Going Rate for Freelance Accountants?

Freelance accountancy rates are squeezed while finance remains an attractive sector for freelancers and temps.

Twice a year I get to crunch all the numbers that come out of all the data we hold on our systems for umbrella contractors. The trends that are uncovered always throw up some useful stats and lead to some interesting conversations around the office.

The findings have shown that the average hourly rate for umbrella contractors has fallen in the last 12 months from £34.41 to £33.12; however, contractors over 35 are typically £10 an hour better off than their younger counterparts.

The accountancy sector remains an attractive sector for contractors, temps and freelancers; the average hourly rate remained slightly above average at £33.16. However, this time last year the average hourly rate for accountancy temps working via an umbrella company was £35.36. So freelance accountancy professionals are feeling the squeeze just like everyone else.

The study also found that:

• Greater London and the South East remain the best places to contract in the UK based on hourly rates, with both regions seeing slight increases. Rates in Greater London have risen from £36.16 to £36.88 and in the South East from £36.64 to £36.74.
• The lowest average rates can be found in the East Midlands (£25.81) followed by Northern Ireland (£27.25) and the North West (£28.64).
• The Oil industry enjoys the highest average hourly rate at £90 followed by Construction (£59.50), Finance (£48.37) and Healthcare (£45).

In contrast to the rest of the UK’s labour markets, the study suggests that rates do get better with age for freelancers. The average rate in the 25 to 33 year-old category is £28.68, compared to £37.09 for 35 to 44 year-olds and £37.21 for those aged 45 to 54.

You can attribute the drop in rates to the state of the UK economy; however, it’s hard to explain why there’s a gender gap in umbrella contracting. Many industry commentators often put it down (rightly or wrongly) to factors such as women taking a break from their career to have children. I’m not so sure this stands up in the profession and it definitely doesn’t in contracting. Surely a hirer is engaging a contractor because they have a specific skill set and the going rate for that skill set is market led?

The age difference is perhaps more straightforward. The older a contractor, the more experience they have and this is reflected in the rates they can command as they secure more senior roles. So unlike the rest of UK Plcs, age appears to be a benefit for professional accountancy freelancers and contractors.

I firmly believe that freelancers have a massive contribution to make to the UK’s economic recovery. Over the last two months we’ve seen an increase in the number of contractors making enquiries with us, so prospects are picking up.


Rob Crossland is the Chief executive of the Parasol family of companies, which also includes ClearSky Accounting, and provides umbrella PAYE services to over 9,000 freelancers in the UK.

Just How Good or Bad is the Accountancy Job Market?

There is conflicting media evidence concerning the state of the UK job market. On the one hand, there are job losses in the public sector, but there are also promising signs that many new jobs are being created.

In my experience, there is now much more movement in the job market. People who have stayed in their jobs during the downturn are now feeling more confident about making a career move. This game of ‘musical chairs’ is creating many new opportunities for well-qualified accountancy and finance professionals.
          
My professional clients are securing new jobs more quickly than other occupations, as organisations have focused on cutting costs, increasing efficiencies and re-structuring their borrowings. Government spending cuts, including the knock-on effects in the education and health sectors, should sharpen demand for capable accountants.

I have always maintained that the government statistics and the data produced by recruitment consultants is misleading; some jobs can be found within the ‘hidden job market’ and can be accessed through networking. Many jobs lost in the banking, financial services and fund management sectors have been quietly replaced over the past three years.

To access the best jobs and to give yourself more choice in the opportunities open to you, you should use a combination of job-hunting tactics. It is worth considering which organisations you would most like to work for and create a target list of these. You should of course look at specialist job sites like GAAPweb, but also keep an eye on your target employers. 

Use recruitment consultants wisely, by being clear on what you want and what you can offer. Although some employers are side-stepping recruitment consultants, many continue to use them for specialist hires because they relieve them of the burden of sifting large numbers of candidates and give them more reassurance than taking a direct hire.

The job market remains solid for those who are prepared to look a little harder.



Simon Broomer is a Senior Consultant at CareerBalance Ltd.

The Effect of UK Visa Restrictions on British Business

The Highly Skilled Migrant Programme and its subsequent points-based replacement, the Tier 1 (General), has always provided a route for UK businesses to access the best international talent.

However, on 23rd November 2010, Home Secretary Theresa May announced that the Tier 1 (General) route will be closed effective of April 2011 in an attempt to place a limit on non-EU economic migration to the UK. A temporary cap is already in place. Replacing the Tier 1 is the ‘Exceptional Talent’ Visa, which will provide space for just 1000 individuals from a Science, Cultural or Sporting background, unlikely to stretch to Accountancy or Finance. The next best option for skilled overseas candidates is to apply for a Tier 2 Visa which will require them to gain sponsorship and a job offer from a UK company, or the Tier 5 which will limit their stay to 2 years. Even then Tier 2 Visas have been limited to 20,700 places per year themselves.

Many critics believe that these kinds of restrictions are particularly harmful when the state of the UK economy is still vulnerable and skills shortages are very much apparent. Businesses are particularly worried about losing key staff due to difficulties renewing their visas. A recent survey from the Chartered Institute of Personnel and Development (CIPD) and KPMG revealed that 17 per cent of UK employers have been unable to recruit non-EU migrant workers due to the temporary UK immigration cap. According to these figures, more than 52 per cent of the people moving to the UK with visas came from outside the EU.

The cap will have differing implications. Multinational institutions will find some peace of mind in that there are no restrictions imposed on intercompany transfers. Smaller companies and many public sector institutions such as the NHS, with 30% of their workforce born overseas, will not find this a possibility. Universities may have to cut jobs due to a fall in international enrolments and loss in fees. Monash University had to cut 300 academic jobs on the back of changes in immigration regulation in Australia in late 2010. Companies with sponsorship certificates set aside will sees these cut which may be detrimental with the proliferation of BRIC economies and greater emerging market talent.

Recruitment companies will be increasingly required to supply outstanding candidates as the demand for migrant workers increases and supply invariably drops. Certain finance contract markets such as Product Control, which is characterised by a high turnover of international professionals in particular, may see a rise in rates in order to secure international contractors from a smaller pool of talent. In general, agencies will need to keep better track of highly-skilled candidates, not just from abroad but from home as well.

Restrictions are likely to free up more jobs for British Citizens, but will this be at the cost of sourcing the best candidate for the job?



Craig Klessa is a Consultant for Product Control at Marks Sattin.

Reaching the Top is all in the Maths

Finance is fast becoming the route to the top – that’s the clear message from the findings of our annual FTSE 100 CEO Tracker. Over the past 4 years, we have been looking at the career progression of serving Chief Executive Officers (CEOs) within the FTSE 100 Index. This year, the findings reveal that nearly half (49 per cent) have financial backgrounds, compared to 31 per cent in 2008, indicating a stronger focus on sound financial management post-recession. 

This trend for financial leaders looks set to grow. Over the past year, six of the nine (67 per cent) appointed FTSE 100 CEOs have financial backgrounds, including Andrew Harrison of Whitbread and Nicandro Durant of British American Tobacco.

These findings suggest that as the economy continues to improve, there is increasing demand for leaders who can navigate what remains a challenging operating environment.

But let’s take a closer look. To begin with, the downturn gave the number crunchers the opportunity to shine. During this time, many finance leaders held key roles at the decision-making table, helping organisations remain as efficient, effective and profitable as possible. This allowed many finance professionals to gain prominence and demonstrate their leadership skills to the wider business.

However, the downturn might not be the only driver behind this trend. The growth of the finance leader, as with accountants, may also be attributed to an increasingly stricter regulatory environment. No company likes surprises, so a greater part of a CEO’s remit is taking ultimate responsibility for regulatory issues, which were not as stringent a few years ago – a role much more suited to someone with past experience of technical accounting and finance. Furthermore, it can be reassuring, especially to shareholders, to have a leader with a core finance background who understands and can address these issues.

It is not only their fiscal skills that have made finance professionals more crucial to a company’s performance, but also their strategic insight and the communication of that to internal and external stakeholders. Commercial skills, including an understanding of how the wider business operates as well as its strategy and vision, are becoming increasingly important to a finance professional, with the finance function emerging from the backrooms and into the boardrooms.

Increasingly, CEO figures are taking a more collaborative approach and are first turning to the finance department – among others – before making any important, strategic decisions. Previously under-valued, traditionally back-office functions are becoming more important to the day-to-day running of an organisation. As a result, finance professionals have a new-found power in the business world; no longer is their role perceived as a matter of facts and figures or as the ‘go-to’ when things have already gone wrong. More and more organisations are realising how financial know-how can be a means to an end, rather than an end in itself.

Undoubtedly, a new voice is emerging from the finance function, one that has new governance and strategic responsibilities. It is more important than ever to have finance professionals capable of shouting louder about the numbers and offering real, strategic solutions to problems. For those looking to climb the career ladder, never before has the finance professional had such opportunity to stand out from the crowd.



Phil Sheridan is the managing director for Robert Half International’s UK operations where he is responsible for leading the organisation’s strategy and direction across more than 20 office locations. He is a member of numerous professional and accounting associations where he participates on steering committees and groups.

Is 2011 the Year of Eurozone Recovery?

Two years have passed since the world’s economic output reached its low-point. It was predicted by one of the UK’s largest banks at the height of the crunch that “it would not be until early 2011 that any sign of (economic) recovery would take place”. 

However, the former Prime Minister Gordon Brown commented this week: “I sense that in the first few months of 2011 we will have a major crisis in the Euro area”. With this growing pessimism, it appears that 2011 could still be a challenging year for the banking market.

The support of “Europe’s failing economies”  presents a potentially huge problem to the banking sector on several fronts. Eurozone banks have lent great financial support to ‘prop-up’ the financially weaker economies. This unsecured lending has once again greatly over-exposed many of the large European banks, at a time when there is a growing scramble to comply with stricter capital requirements.

We can only make a calculated guess, based on patterns that emerged from the global credit crunch, as to what effect the Eurozone crisis will have in recruitment terms. Considering the crunch was centred on the financial markets, it wasn’t by any stretch the financial sector that ultimately felt the hit the worst. The jobs lost in finance were around 8% – relatively low compared to jobs lost in construction and manufacturing, which were down 27% and 17% respectively.

Gordon Brown has recently supported this prediction by suggesting that a failing Eurozone would have a wider effect than just on the banks, predicting a long-term crisis could create “an unnecessary and avoidable period of low growth and high unemployment, and diminishing living standards”. 

There is also a question mark over the expansion plans of Eurozone banks, which now might be more reluctant to take any risks. The problem in particular is that “Europe has lost ground to both the US and Asia”. Therefore the risk, with stricter Visa requirements coming into force, is that Europe will no longer be the destination of choice for highly-skilled migrants, with the continent losing candidates to the US and Asia, whose economies, for now, look more stable.

The Nationalised Irish Banks have been the subject of immediate focus the last month, although from looking at the likes of RBS and Lloyds it cannot be said that nationalisation has caused a negative impact on the recruitment needs of some of the largest Nationalised European banks. Indeed, it may be the case that any nationalised Eurozone banks are forced to increase recruitment amid restructuring plans. However, with Lord Turner commenting that the FSA may claw back the pay of failed banks bosses, it creates a danger that there may be a reluctance to take roles at the highest level of financial organisations, or indeed create a culture of over cautious decision makers that weaken the long-term competitiveness of companies in fear of taking a risk too far.

For 2011 to remain the year of recovery ultimately relies on a speedy resolution of the Eurozone crisis.



Consultant Sam Price currently works on the Banking and Capital Markets Contract Team at Marks Sattin. He places both part qualified and qualified accountants in contract positions across financial services, working with major and mid-tier investment and retail banks.

Use Interim Effectively

Despite a slight decline of 17,000 in the UK’s unemployment figures this month, with the total unemployed currently at 2.48 million, unemployment levels are still at their highest since 1994. Predictions are (or are not, depending on whose line of thinking you follow) encouraging for the long term, with the OBR forecasting an employment increase of around 900,000 by 2015; bringing us back to pre-recession levels.

However, these forecasted levels are not going to be realised overnight, and there are people who still will find themselves unemployed due to one of many potential factors. So, if you do find yourself facing the predicament of unemployment, how do you maximise your chances of getting your career back on track?

One of the biggest concerns from a potential employer’s perspective is seeing long-term inactivity on a CV. Long periods of time spent unemployed, but more significantly doing nothing, leads to questions over the individual’s drive and determination to succeed. It does not present a particularly favourable image to prospective employers. 

You need to make sure you are doing something during this time. Interim work is preferable to that show you are keeping your hand in, and it also offers the added benefit of bringing in an income. My advice would be to firstly register with a reputable agency. Meet your dedicated consultant and explain to them what you are looking for on a permanent basis, but that you are also open to the possibility of interim positions in the meantime.

One of the things to take into account when looking at interim work is the danger of ending up jumping from short-term position to short-term position, which can create a cycle that is very difficult to break. If you are considering taking on interim roles, here are my top tips on managing the transition successfully:

1.  Try to take longer-term roles, rather than a couple of weeks here and there. Maternity covers are ideal, primarily around the six-to-nine month opportunities are the ones that you really want to take. They demonstrate commitment to prospective employers and provide you the opportunity to make an impact in the organisation that you can quantify on your CV.

2.  Specialist projects are the opportunities that will really add the most value to your CV in the long term. They provide the opportunity to add to your current skill set and further develop your expertise, attracting the eye of potential employers and helping you to stand out from the crowd.

3.  Don’t take any old role for the sake of it. You still need to spend a large proportion of your day there and if you can’t tolerate it for any length of time you will move on quickly, which can reflect poorly on your CV.

4.  Demonstrate commitment. If you take on an interim role, treat it in the same way that you would a permanent one. Show the same level of focus and commitment and you stand a greater chance of seeing your contract renewed or extended, or even a permanent opportunity offered.

5.  Many more organisations are offering the temp-to-perm option at the moment. It is a good way for both parties to obtain a thorough understanding of the other prior to entering into a commitment on a permanent basis, and ideal if you are seeking a permanent position in the long term.



Dan Jones is Manager of the Accountancy & Finance Division and Head of Interim Accountancy at Alexander Lloyd, part of the South East's leading recruitment consultancy for accountants.

 

iXBRL

Avoiding tax is easier than avoiding hearing about it. During tough economic times, the headlines continue to be dominated by tax issues on a daily basis: the standard rate of VAT increasing to 20 per cent on 4 January 2011; Business Secretary, Vince Cable, choosing to float a graduate tax; £2.5bn a year levy on the banking industry in wide-ranging tax measures…to name a few.

However, there is an issue that rarely gains such front page press coverage and this is iXBRL. But is it really an issue for UK businesses?

What is iXBRL? 

XBRL (Extensible Business Reporting Language) has been in use for over 10 years and is a form of XML (Extensible Markup Language). A mark-up language is a dictionary of tags that allows a computer programme to describe the text and is a fantastic way for computers to share information. However, it is virtually illegible for humans and therefore it would be as impossible for HMRC to understand. 

The solution put in place is In-Line XBRL, which allows the production of a web page version of the financial data that both HMRC and humans are able to read and understand. Ideally, all submissions made after 31st March 2011 will be made in this format.   

Three taxonomies are applicable to XBRL:

1. CT Computation taxonomy-  1300 mandatory tags and over 4500 possible
2. IFRS taxonomy -  1600 mandatory tags and 3400 possible
3. UK GAAP accounts taxonomy – 1350 mandatory and 4375 possible

What are the implications on UK businesses?

On face value, iXBRL seems a total overhaul of the current HMRC submission process. However, in reality the effects have really seldom been felt. Most companies, particularly in the banking sector, have outsourced iXBRL tagging to accountancy firms and specialists. On the flip side, smaller tax departments have favoured sharing the workload between them in order to manage cost effectively. Realistically, iXBRL compliance will more than likely provide short-term pain in its first year of use; beyond that there will be potential for business gains to be made.

Recruitment

Initial expectations for a recruitment drive for candidates with particular skill sets in this area have not been realised. However, across the industry there continues to be a trend for more organisations bringing tax functions in-house, and coupled with the requirement for electronic tagging, the requirement for IT literacy has also increased. 

The necessity to manage costs and meet headcount quotas has given rise to broader tax positions whereby candidates are often gaining exposure to a range of tax issues. iXBRL compliance could well form a larger part of this so-called ‘ad-hoc’, which is often highlighted on job descriptions. Therefore candidates now need to be more flexible when considering new industry positions with regards to how the role will break down. Given the current position in the UK business cycle, and Chancellor George Osborne needing to decrease the budget deficit, the importance of the skillful and flexible tax professional will continue to increase. 


James Macdonald works as a Consultant in the Tax team at Marks Sattin, placing qualified accountants and qualified taxation professionals into permanent positions in the financial services sector.

The Peaks and Troughs of Hiring Management Consultants

Management consulting is often defined as a profession that provides advice in a specific area of expertise. However, another well-established view is that management consultants are people who you pay lots of money to tell you what you already know. It is clear that as the economy changes, so do public opinions, and with them, the need for consulting.

This line of work is one of the first to react to changes in the economy and following the recent drop, the second quarter recruitment figures show a sharp increase in hiring.

According to various management consulting-focussed websites, the consulting industry is steadily accelerating and has been for the most part of the year. More specifically, financial services consulting is a huge industry in its own right and the main focus for many large firms is seeing a dramatic increase in hiring; this is a prime example of the ‘peaks and troughs’ of recruitment.

Financial services topped an consultant poll as the industry leading the way in expected acceleration of hires by consultancy firms. This view is backed up by the Big Four; according to KPMG, the biggest increase in 2010 has been in their advisory functions that “have ambitious growth targets over the next two years”, whilst PwC revealed that “consulting will be a big focus for recruitment again for 2011 with  ambitious growth targets in this area”. Keeping up with the trend, Deloitte announced that they would be recruiting “predominantly in the technology and consulting area”.

Another huge indicator of the current shape of the market are the figures being announced by a number of management consultancies themselves. One specialist financial services consultancy has made over 100 new hires since March, and is in place to continue this massive growth into next year with a further 250 planned, almost doubling in size.

The explanation behind a lot of the growth in the market is mainly a simple reflection of the financial services industry and the economy as a whole. When times are hard in a struggling economy, paying someone lots of money to tell you what you already know is the first thing cut in a bid to save capital, but hiring an experienced management consultant is often the first thing done when a business looks to recover. An MD of a city-based boutique supported this idea, stating that “there’s been so much change in financial services, a lot of it government enforced, that consultants have been having a field day”.

This can be seen as a very basic indicator of market opinion on the economy, which in turn can help to form an outlook for the rest of the recruitment industry.

So, while we are experiencing uncertain financial times at the moment, with not a day going by without another headline from Vince Cable or Mervyn King, perhaps it is not all doom and gloom. 

Often the first sign of a change in fortunes, the aggressive growth acceleration of management consultancies suggests businesses and the economy are also getting ready to grow again. As a result I would now expect the recruitment industry to follow, enjoying the ride to the next peak. 



Andrew Wilde is a Consultant in the Management Consultancy team at Marks Sattin, working across a range of industries. Andrew has a strong portfolio of clients within Financial Services, placing Principals and Senior Managers in high profile Banking, Payments and Capital Markets positions.