By Rachel Louise Ensign, Liz Hoffman and Justin Baer 

U.S. banks are preparing for a worsening coronavirus outbreak by laying plans to move staffers to back-office sites, limiting contact with clients who have been abroad and curbing employee travel.

Morgan Stanley, whose New York City stock-trading floor is the country's busiest, is preparing a backup site in suburban Westchester County. JPMorgan Chase & Co. has nixed all nonessential international trips. Goldman Sachs Group Inc. is canceling some conferences and evaluating powering up a parallel trading floor in Greenwich, Conn.

Not since the Sept. 11, 2011, terrorist attacks have Wall Street banks faced a logistical challenge like the one potentially posed by a coronavirus outbreak in the U.S. Sustained quarantines and widespread business closures would hit credit-card and corporate-lending businesses. Further interest-rate cuts, which the Federal Reserve may use to shore up the economy, would crimp profits.

"If planes are not flying in and out of China, if hotels are not being filled -- which they're not at the moment -- and if the supply chains are being impacted which I suspect they are, there's going to be some impact," Visa Inc. Chief Executive Officer Alfred Kelly said last month.

While technology has made it possible for many to work from home, the multiple screens and compliance systems installed on Wall Street trading floors can't be easily replicated on a laptop. And investment banking is still a face-to-face business, drummed up by weeks on the road.

Financial firms have drawn up elaborate contingency plans in recent years that they hope will allow them to keep operating smoothly. Just a few weeks ago, Bank of New York Mellon Corp. ran a drill temporarily shutting down its downtown Manhattan headquarters, an executive said.

Despite the market meltdown, trading floors at many banks remain calm. One salesperson said increased activity meant it was a bit noisier than usual, but nothing compared with the 2010 flash crash or the weeks leading up to the 2008 collapse of Lehman Brothers.

Banks and brokers have opened backup facilities throughout the world in recent years. Many are required by their regulators to plan and test for various scenarios, said Glenn Schorr, an analyst with Evercore ISI. Significant improvements in computing power and telecommunications networks also have made working remotely a possibility for many more employees.

One key obstacle for firms will be how they contend with rules on recording phone calls and other communications related to specific transactions when traders aren't working from their usual desk, one bank executive said. Industry officials are urging regulators to consider relaxing these surveillance rules in the event that employees are forced to work from home, this executive said.

Officials at the Securities Industry and Financial Markets Association, an industry trade group, have raised the surveillance issue in discussions with the Securities and Exchange Commission, along with other potential challenges Wall Street would face during a wide-scale evacuation of U.S. trading floors.

"We are providing information to them for them to consider," said Kenneth Bentsen, Sifma's president and CEO. "We haven't made a formal request."

In some ways, the job of girding against pandemic has gotten simpler. The advent of electronic exchanges, trading algorithms and other technological advances on the markets have steadily shrunk the number of employees on trading floors on Wall Street and elsewhere. And many who remain are in roles that can be performed adequately in remote locations.

With the addition of software engineers, compliance staff and other in-demand positions, the securities industry's total New York City workforce rose to 180,300 last year from 165,900 in 2003, according to the New York State Department of Labor. But the number of employees classified by the department as brokers -- or those who serve as intermediaries between buyers and sellers -- has dropped to 53,300 from 73,000 in the same period.

The 12 biggest global investment banks employed 26% fewer equity traders, salespeople and analysts at the end of 2019 than they did in 2010, according to industry-data firm Coalition Ltd. Front-office staff on bond-trading desks have tumbled 42% over the same period, according to Coalition.

That said, the task of limiting health risks is far reaching. Like other large companies, lenders are limiting employee exposure to countries where the virus has taken hold. Morgan Stanley's upcoming annual Hong Kong summit will be virtual, while Citigroup Inc. and Bank of America Corp. have restricted employee travel to Asia and Italy.

Goldman's private bankers are canceling meetings with clients who have been to virus hot spots, according to clients. Registered attendees of several upcoming Goldman conferences received emails asking them to stay home if they recently visited specific parts of Asia and Italy.

A sign at the front desk of the bank's downtown Manhattan headquarters asks visitors who have recently returned from mainland China -- or been in contact with someone who has -- to reschedule.

--Julia-Ambra Verlaine and David Benoit contributed to this article.

Write to Rachel Louise Ensign at rachel.ensign@wsj.com, Liz Hoffman at liz.hoffman@wsj.com and Justin Baer at justin.baer@wsj.com

 

(END) Dow Jones Newswires

March 01, 2020 10:41 ET (15:41 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.
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