There is an alarming trend that is making life increasingly difficult for bankers who have lost their jobs. Many are going on six months of unemployment and in some cases even longer. Even prudent savers are running out of options, and many are turning to temporary professional positions. There is one catch, however. In an increasing number of cases, the protracted unemployment has led to stretching out bill payments, and even worse, and has impacted negatively on their credit ratings. Consequently some are being turned down from bank jobs, even temporary ones, because of poor credit scores. The banks’ philosophy is that if one cannot manage their own finances how can they be trusted in a bank to manage the finances of others, and employers are worried about insurance coverage if something should go wrong. It is a regrettable downward spiral and perhaps a time for banks to reevaluate their policies.
Archive for January, 2010
Was last year as bad as everyone thinks? Yes and no. The serious changes came with the mergers, lines of business closures and interventions. When all is said and done it was like a glancing blow. Only three banks locally were intervened and in all cases there were limited layoffs. There were a few banks whose parent company was sold and a couple of banks threw in the towel with increased compliance costs and client dissatisfaction. But all in all there were not not massive layoffs, some upgrading, but most of the people made redundant have found something new. Others were forced into premature retirement. For those people 2009 was a disaster and their pain has been felt. Hiring freezes were on almost across the board. On the other hand, good producers continued to be sought after and so were experts in control and compliance functions. Exceptions were made and those people hired. In spite of what was perceived to be a glut of people in the job hunt, finding the right person became no easier. In total, relatively few changes, many less layoffs than perceived and most hunkered down waiting for the right opportunity to come along.
Which brings us to this year… What’s in store for hiring in this financial world? Basically, if you can bring in business you are in demand. Banks are under pressure to increase earnings. They can’t do it simply by cutting costs and squeezing more out of existing staff. In this market, there is a limited amount of plain vanilla business to go around so domestic banks are looking for different flavors such as SBA loans, asset based loans, trade finance and lots of CBI loans, even real estate loans, starting with fresh valuations. Wealth management likewise is under production pressure even with the toxic legislation and heavy handed compliance. This is causing refocusing and attracting different players, especially in the less structured and less regulated segments of the industry. Support jobs are slower to, but will follow while many are being revamped by technology. Every salesperson touts their offering of better service; therefore efficiencies must follow, even if the work is being done in India. Hiring is evident across the board and the inventory of displaced workers is fast evaporating so there are better things on the horizon in the local job market. The further good news is that with increased labor demands comes higher compensation; a welcome relief on the back of the very flat year that we have just emerged from.
Besides, no one has secretaries nowadays. There was a time when a consultant was another term for an unemployed banker. The stigma has been removed and interim professionals have become an important factor in the work force. In fact, there is a whole new category of workers, the “Permanent Temporary Worker”. Temporary employment is a good way to stay in the work environment, redirect one’s career and keep the cash flow coming. The department of labor estimates there will be 121 million mobile workers in 2011. Over 25% of the work force in the US will consist of temporary workers. With companies looking to cut back on expenses, this will only increase as benefits are becoming increasingly expensive and increasingly mobile – 401′s, Cobra and the like. It is also a good way for employers to cover the irregular gaps in business regeneration. This is why temp hires are a, if not the, leading indicator in job hires and job growth. You may want to consider a temporary professional to solve the needs in special asset restructure, wealth management and even credit analysis. On the flip side, individuals might refocus their job search to cover one of these types of specific skills as a temporary employee as the market rebuilds.
There are several options in hiring interim professionals. If you hire directly, one has to be careful that this is not perceived as dodging providing benefits. You run the risk of a department of Labor violation if you issue a 1099 payment schedule and you have control over those hired. Who controls the workday is the critical factor in determining if one is an employee (W-2) or a consultant (1099). If you hire through an agency, be sure to check whether they pay via a W-2 basis or 1099, as the latter many exclude the temp from coverage under workman’s compensation and the temp agency’s liability insurance. In the 1099 fashion the individual is a consultant for the temp agency, and not its employee, as they would be if hired under a withholding basis. Agencies do this to make a bigger spread at the expense of the temp, and put the employer at risk if a liability should occur.
Panama is hot. Not only the climate but the economy is being bolstered on several fronts.The Canal is being widened, a metro system is being built and construction continues unabatedly. They are even building two off shore islands. Panama is looking very attractive to bank’s looking to service their clients without feeling like they are under a microscope, as Panama’s compliance regulations are solid, but not heavy-handed. What about the “tax haven” stigma?
Panama is not a “tax haven” country. It’s tax structure is territorial in that only income earned in Panama by residents is taxable in Panama. The OECD countries, and others, choose to disapprove of this arrangement on the unspoken grounds that this gives Panama a tax advantage over the G20 by drawing banking assets from foreigners to this venue where the interest is not taxable putting the OECD countries at a disadvantage.
For Panama to shed the stigma of being (wrongly) considered a tax haven and come closer to a trade promotion agreement with the US, it must reach agreements with the most aggrieved countries in terms of double taxation agreements that permit Panamanian taxes, if any, to be taken as a credit in other jurisdictions. Panama has no such agreements today. It is also necessary to protect especially those Panamanian business sectors that have special tax status or tax exemption on profits such as the Colon Free Trade Zone and other special duty free processing zones. Panama wishes to make clear that because special entities have special tax status, this does not make Panama a tax haven. One of the factors working against Panama’s beneficial tax rate structure is a subjective one: the EU countries in particular press for an increase in income tax rates to equalize or level a perceived disparity between Panama’s rates and EU rates to make the so-called tax havens less attractive to their nationals for tax avoidance purposes.
According to the OECD, countries are divided among those that have substantially implemented the internationally agreed tax standards (white list countries), those countries that have committed but have not yet substantially implemented and “other financial centers” (grey list countries), and those that have made no progress in implementing the internationally agreed tax standards (black list countries).
Panama’s economy grew by 2.4% in 2009 and it is expected to keep growing with the service sector comprising 80% of the growth. This includes the Panama Canal, banking, and the Colon Free Trade Zone. Panama is a good place to do business and lots of banks have it on their radar screen…so we will be keeping an eye it as well.
Diane Ashely and Joe Nader have joined Coral Gables Trust. Alejandro Pereyra has been named Executive Director of Financial Institutions for Latin America at JP Morgan. Alejandro comes from Bank of America, where he was a Senior Vice President. Luiz Carlos Couto, formerly of Standard Chartered Bank, has just arrived at Bank of America Merrill Lynch to be the Senior Vice President of Global Financial Services-Latin America. Diego Polenghi has recently come to Miami as the Director of Private Clients for Standard Chartered. Pacific National Bank has brought on board Mahesh Pattabhiraman as a Senior Commercial Lender and Alexander Acosta as the Chief Credit Officer. Christian Novy was recently hired by BLADEX in their Miami office where he will be overlooking the vendor finance area. He used to be with BPD Bank where he was a Senior Correspondent Banker. Gregory Fefferman has been named a Private Wealth Advisor for Gibraltar Bank. He had formerly been with Citi Private Bank. Andy Collazo, previously with Colonial Bank, has joined TotalBank as Bank Operations Manager.
Leaving 2009 behind, the banks are aggressively seeking to hire and grow in 2010. As weak sisters fall by the wayside, capital is being injected into banks, mostly by foreign investors, the results of which will shortly be felt by the local economy. Remaining estate problems are being isolated and addressed and banks realize they need new business going forward. New rules, compliance and adaptation are part of the game. Financial services, real estate, logistics and tourism are the engines that drive our economy and they are on the way back sooner than one might expect. Fueled by their own strong economies, and the weak dollar, Latins and Europeans are seeking to invest, especially the Brazilians. Trade Finance is booming, especially with the improvement of the Latin American economies.
Spanish banks, in particular Caja Madrid and Banco Sabadell (which have bought City National and Mellon United respectively) and the Brazilian banks led by Banco Itau are aggressively seeking to expand their presence in this market. The Canadian banks have also zeroed in on Miami as Bank of Nova Scotia reopened and office and Royal Bank of Canada has grown into one of the largest foreign banks in town. TD Bank, Canadian owned, is very active in the domestic market. UBS is back in business, EFG is a market leader and Standard Chartered is rolling out a new platform geared toward today’s banking environment. Credit Agricole, from France, has quietly been picking up the market share. Only Banco Santander, the largest foreign bank in South Florida, has pulled in their horns as a result of the Madoff exposure.
Lastly, many of the players are changing. Boutiques have sprung up to compete with the big boys, such as Merrill Lynch, now part of Bank of America, as family offices, hedge funds and independent brokerage firms. That is not to say that Merrill is not active in the market. They are, very much so, as is Wells Fargo Securities, UBS Securities, Smith Barney and Morgan Stanley also creative family offices, which may be the vehicle of the future. One cannot point to one institution or line of business. They must be taken in their totality, but one thing is for sure- they are back in business.