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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