The financial industry prepares itself for coronavirus pandemic
Working from home, keeping employees at a distance from each other, forgoing conferences and business travel — the list goes on
London/Hong KongNew York — It sounds like advice for averting Wall Street deals: Don’t travel. Don’t meet clients. Don’t even shake hands.
Yet those instructions are now flowing through the global financial industry as the coronavirus spreads. On a growing number of continents, banking and investing professionals are preparing for the possibility that they will soon be working from home. Industry conferences for drumming up business are thinning out, moving online or facing cancellation. Sales of some new securities are sputtering.
Behind the scenes, bank leaders are dusting off regulatory plans for keeping “critical operations” open through a potential pandemic. Some describe things such as how far apart to move traders along desks, or how many may work remotely. Bank branches may be able to keep their counters open, thanks to the bulletproof glass meant to stop robberies.
Financial firms that normally take pride in touching industries around the world are realising they will be on all the front lines if governments fail to contain the virus. As outbreaks worsen in parts of Asia and pop up across Europe, bankers from top financial hubs to mid-size cities are trying to re-invent on the fly how they’ll do business, anticipate how central banks may react, and assess their clients’ preparedness and potential needs.
“I’ve spent the last two days in front of customers and I’ve gotten 10 different views on what’s gonna happen, from ‘buckle down, this is gonna be a six-month period of time’ to ‘this is an overreaction’,” said Ted Swimmer, head of capital markets at Citizens Bank. “I just don’t think there’s a playbook for what these things are.”
Attendees at a derivatives conference in Frankfurt, where Deutsche Bank CFO James von Moltke spoke, had their body temperature measured by an infrared camera to check for symptoms. The organisers, a unit of Deutsche Börse, noted that guests who traveled from China are obliged to respect a two-week quarantine
Venture capitalists are also taking precautions. Sequoia Capital elected to relocate an annual meeting that had been planned for New Delhi, said a person familiar with the matter. The new locale is in Half Moon Bay, California, about a 30-minute drive from the firm’s headquarters. The change was previously reported by the Wall Street Journal.
Andreessen Horowitz, another top venture capital firm in Silicon Valley, recently posted a sign at its offices discouraging handshakes, citing the virus.
Of course, executives working in Europe and the US are only now confronting a situation that took shape in cities around China almost a month ago. In hubs such as Hong Kong, denizens of the financial industry are all too familiar with working from home while their kids pass time in the background.
Now, in a growing number of countries across Asia, firms are banning non-essential travel and starting to take more drastic measures. In South Korea, where authorities are trying to contain the largest outbreak outside China, banks including UBS Group and Citigroup have begun to split workers among different locations to ensure business can continue.
US regulators require banks to have a pandemic plan that allows them to keep critical operations going even if a large number of employees fall ill
Precautions are also mounting in Europe. Commercial real estate firm Cushman & Wakefield said on Wednesday that it decided to sit out the prominent MIPIM real estate conference in the French resort town of Cannes next month over safety concerns tied to the virus.
Meanwhile in Berlin, the world’s largest private equity and venture capital conference continued this week as a somewhat muted affair, rife with dark humor and hand sanitiser. A few big names didn’t show, and neither did some attendees from Italy, the continent’s worst-hit country.
In fact, a growing number of banks have banned travel to certain Italian cities including the financial hub of Milan. Goldman Sachs, Deutsche Bank, Credit Suisse, UBS and Morgan Stanley are among those enacting at least some limits on travel in the country or encouraging employees to postpone visits.
US regulators require banks to have a pandemic plan that allows them to keep critical operations going even if a large number of employees fall ill or have to care for family members. Regulators warn that a severe pandemic could lead to as much as 40% of staff being absent and that outbreaks can come in multiple waves that last months.
Across the industry, firms are signaling that the virus has the potential to create significant disruptions in the coming year. Global behemoth Citigroup, merger advisory shop Evercore, and private-equity giant KKR all mentioned the virus as a risk in annual regulatory filings this month.
Standard Chartered, the UK bank that gets the majority of its earnings from Asia, said on Thursday that the virus will erode revenue growth in 2020, and that it will no longer meet a key profitability goal for next year.
Already, key financial industry businesses are taking hits. Debt issuance in the $2.6-trillion international bond market, a key source of income for investment banks, came to a virtual standstill on Wednesday as Wall Street faced its third straight day without any high-grade bond offerings and Europe’s bankers had their first day of 2020 without a deal.
The silver linings aren’t that bright.
Asked this week what the coronavirus might mean for FTI Consulting, CEO Steven Gunby told analysts that “nobody knows” how it will play out but that the most important thing now is to check in with employees in affected regions and ensure they are ready.
Still, he added, “given the strong bankruptcy practice we have, if the economy had a downturn, we’ve got some parts of our business that would go up”.