Read First: Jobseeker’s Guide: Front Office Banking
Building from the previous article on front office banking, we will now take a closer look at middle office banking. These are functions that are essential to the running of banks, and are often confused with the back office. The below examples are general job scopes and differ depending on different banks’ types of businesses.
Front office roles may generate the revenue and have direct contact with the client, but their motivations generally lie more with profit maximization. As the Lehman crisis has shown us, this may not be the best approach for long-term sustainability of the banks.
Thus, it is essential for risk management functions to ensure that the banks’ exposures are kept in check. These risks are not only limited to market risk (risk of trading books to financial market prices etc.). It is also important to monitor other areas, like credit (counterparty creditworthiness) and operational (for eg. contingency plans) risks.
Given the complexity of modern-day banks, processes have also gotten more complicated and require greater specialization to handle in an appropriate fashion. Front office employees typically run the deals and require much assistance from the middle office to ensure deals are accurately processed and valued.
These jobs can vary from report generations, process optimization to the maintenance of IT systems and are very crucial to the functioning of the day-to-day operations of the bank. They also include control functions – for eg. control of the banking/trading books by ensuring assets are marked to fair value accurately. By controlling and processing front office deals, the middle office also serves as a bridge between the front and back office (the second comprising settlement/accounting functions etc).
Keep In Perspective The Difference In Roles
Because the middle office is a relatively newer concept in the banking industry, the lines between different functions and whether they belong in the front or back office can vary from case to case. The clear idea here is that middle office tends to work more in supporting the revenue generating functions.
While most might glamourize front office roles (such as traders and investment bankers), the truth is that many middle office personnel are highly qualified and some functions like risk management require personnel that are able to comprehend the complexities that the front office entails. The difference is the stress/risk entailed in the job, since front office employees are constantly subjected to revenue stress as opposed to the middle office.
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