The Importance of Equity Capital and What it Means for YOU

As you may know, regulators are requiring banks to hold more equity capital which could cause an influx of jobs in the regulatory, finance and risk space.

Equity Capital is the storage of cash and assets that banks hold in order to protect creditors in case the banks assets are liquidated. Regulating and raising the equity capital of financial institutions is necessary both for limiting the costs of distress and for improving a banks incentives to manage risk. But establishing effective capital requirements is not merely a matter of setting the required ratio high enough. It also requires a disciplined regulator, a reliable way to measure capital, and a clear understanding of the purpose of the rules. It is for these reasons that we should continue to see the banking regulatory space expanding. We are expecting to see an increase in contracting and permanent roles within the regulatory, finance and risk space

Basel 3 started to be phased in during January 2013, and will continue to run through to January 2019. The regulation is a complex series of reforms aimed at making banks stronger and more able to withstand unexpected challenges without taxpayer support. Basel 3 effectively triples the size of the capital reserves that the world’s banks must hold against losses. Banks whose capital falls within the buffer zone will face restrictions on paying dividends and discretionary bonuses.  It sets tougher capital standards which are considered critical for preventing another financial crisis. It is also noted that even before Basel 3 is fully implemented, Basel 4 may be emerging. The prospective regulation would require banks to increase their common equity capital by a further £50 billion or reduce their balance sheets by around 20 percent.

As these rules materialise and when Basel 4 does surface, banks will also need to ensure that they fully understand their capital and liquidity needs. As a result of all this, we are expecting to see an increase in contracting and permanent roles within the regulatory, finance and risk space.

If you are looking for contract roles within Operations, Compliance or Finance change in Investment Banking, Asset Management or Custody, please get in touch for a confidential conversation on 0207 092 0284 or email me on jgujral@morganmckinley.co.uk.

Victoria Walmsley's picture
Managing Director
vwalmsley@morganmckinley.co.uk