Viral Impact: Banks Prepare to Let Traders Work From Home
WHY YOU SHOULD CARE
The world's biggest financial hubs might empty out because of the coronavirus.
By Stephen Morris and Laura Noonan
Monday’s global market crash was tied to the sharp drop in oil prices — to the lowest levels since 1991. But major banks in the U.S. and U.K. have been preparing for a different crisis for some days now. They’re sending hundreds of staff to their U.K. and U.S. disaster recovery sites, installing big screens in traders’ homes and pushing regulators for a reprieve on trading rules so they can keep their businesses running through a coronavirus outbreak.
The efforts by big global banks including Goldman Sachs, JPMorgan Chase, Morgan Stanley and Barclays are an escalation of business continuity planning that has already prompted them to segregate staff in Asian cities at the epicenter of the coronavirus outbreak.
“We’re practicing,” says a senior executive at one large U.S. bank. “You don’t want to wake up and find that the U.S. has half a million cases and someone tells you to send everybody home.”
Investment bankers, administrators, engineers, IT specialists, human resources and senior management can all work from home with relative ease, but regulatory and technology demands make the situation more complicated for salespeople and traders.
To prevent those staff from being forced into quarantine en masse over a single coronavirus incident, banks are looking at spreading them out between head office and disaster recovery sites that have the same technical capacity as their main sites.
“It comes under our judgment — the decision has got to be made every day,” says one senior executive. “These are pretty extreme contingency plans … It’s unlikely to happen, but it’s possible.”
Goldman, JPMorgan, Morgan Stanley and Citibank have all been testing their disaster recovery sites in London and the U.S. in recent days, even as their trading businesses deal with some of the most volatile market conditions in recent times, according to people familiar with the situation.
Goldman is planning a bigger test of its Croydon facility on Thursday, where several hundred people will travel to the town about 30 minutes south of central London to make sure it is operationally ready to deal with an influx from Goldman’s city headquarters.
Senior bank executives are concerned about broadband capacity at their employees’ homes, which … could be slowed down even further if their children are also off school watching streaming services such as Netflix.
JPMorgan, which has so far been testing the technology at Basingstoke, 50 miles west of London, and sites outside its Manhattan base in Brooklyn and New Jersey, is likely to bring some traders out for live tests in the coming days.
Citi has begun testing its Lewisham facility in southeast London and a site in New Jersey, and has also been installing extra screens in some employees’ homes to make the environment closer to that of a trading floor, where they can view information from as many as eight large screens, according to two people familiar with that bank’s operations. Barclays is reviewing a plan to split its trading floor staff into three groups divided between its Canary Wharf headquarters, their homes and a back-up site at Northolt, a town 18 miles northwest of London, according to people briefed on the plans. A spokeswoman declined to comment on the specifics, but said the lender was examining multiple contingency plans to ensure operations were not interrupted.
While most banks have ample capacity for staff to access internal networks remotely, senior bank executives are concerned about broadband capacity at their employees’ homes, which is not as fast as at the banks and could be slowed down even further if their children are also off school watching streaming services such as Netflix.
Another complication is regulatory requirements to monitor traders’ written and telephone communications, particularly in Europe. “If it happens next week, we wouldn’t have sufficient [recorded lines],” said a senior executive at another large U.S. bank. “If it happens in three months’ time, we’d be organized.”
Against that backdrop, banks are pushing regulators in the U.K. and U.S. to adopt a flexible approach to rules on compliance monitoring, as well as requirements on trade verification and booking.
The Financial Conduct Authority (FCA) in the U.K. and the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) in the U.S. have so far not granted a reprieve but bankers believe it is likely to avoid market disruption. U.S. authorities have suspended some of their rules during previous calamities including granting extensions on filing deadlines during Hurricane Michael in 2018 and Hurricane Sandy in 2012.
“FINRA is closely monitoring updates from governmental authorities regarding the coronavirus, and is in ongoing conversations with securities firms and industry groups about industry preparedness and concerns,” a spokesman said.
The SEC says it is “monitoring the potential impacts on investors, issuers and other market participants closely to determine what guidance and assistance may be appropriate as events develop.” The FCA has declined to comment on potential reliefs around a coronavirus outbreak, while Citibank, Goldman, JPMorgan and Morgan Stanley all declined to comment on their business continuity planning. Bank of America did not reply to requests for comment.
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