Key business schools have seen a return to interest in finance courses

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With first year packages in the region of $150,000 (€159,000), MBA holders are expensive employees. However, price has not dampened investment banks' ardour. Most recruiters report that MBA hires will increase again this year. The simple fact is that banks are looking for more people at associate level.

Derek Walker, head of MBA recruitment at Merrill Lynch, explains: 'There are parts of the business that now require more people with experience than they did in the past.'

MBA holders' usefulness is spreading and they are increasingly being placed in functions such as trading, private wealth management, equity research, and e-business.

Last year, this preference for MBAs turned to panic at the sight of targeted students choosing entrepreneurial dot-coms over finance. Hefty pay hikes and a new willingness to contemplate candidates from a broader range of schools were the result.

In Europe, at least, this may have been overreaction. Both Insead and London Business School (LBS) report that the proportion of students taking positions in finance was unchanged last year. Things are likely to stay that way.

'The anxiety is over. There is a distinct feeling of back to banking,' reports Janet Dobson, head of finance courses at the London Business School.

Last year's panic may yet have an enduring legacy. Having cast their net further afield, some banks will have come across high-quality students in previously untargeted schools. Many recruiters now have a flexible approach to the younger and less experienced MBA holders produced by schools such as Oxford University's Said School.

However, holding an MBA is still no guarantee of admission to select circles of investment bankers. Estimates suggest that banks offer around 300 MBA places a year in London, a figure easily exceeded by the 5,000 full time MBA students in the UK alone. At banks such as Morgan Stanley Dean Witter, applicants outnumber places by as much as 17 to one.

The right MBA course is, nevertheless, unequalled as a vehicle for advancement there are currently around 40 MBA alumni from Insead, the top French business school, working for Goldman Sachs in London. Recent Insead graduates are predominantly associates.

The majority of those graduating in the early 1990s are now managing directors and directors.

It is the US banks, such as Goldman Sachs, that have blazed the trail for the MBA in Europe, but the course is unlikely to become as hot here as it is on the other side of the Atlantic. 'To say that you need an MBA to advance in investment banking is not quite true. In Europe some people who come in as analysts progress perfectly well without having taken the course,' says Walker at Merrill Lynch.

In the US the MBA is a prerequisite to advancement. Graduates are hired on short-term contracts at the age of 21 or 22 and are expected to take the course after two years.

However, in Europe the education system precludes such expectations. In Germany top students graduate at 27 and almost invariably go on to take a PhD until they are 30 or 31.

On this side of the Atlantic, it is therefore to career changers perhaps that an MBA offers the greatest benefits.

Banks seeking to boost experienced hires are being forced to look outside existing pools of candidates. Someone from industry with the right MBA is an alluring combination of ground-level experience and strategic know-how.

Moreover, banks see the MBA, which can cost its holder as much as 20,000 (€31,200) in course fees alone, as a sign that the candidate is ambitious. Nadia Capy, marketing manager in campus recruitment at Deutsche Bank, says: 'It is a very good way of showing that you are committed to changing the direction of your career.'

It is for this reason that MBAs are popular among traders seeking to broaden their horizons. But for anyone already employed in financial services and not contemplating changing the direction of their career, the advantages of the course can be less clear, making the choice highly subjective.

'Some people that are already in banking take an MBA for reasons of personal fulfilment,' suggests Richard Akhtar at ABN Amro.