Q: What does a head of capital markets finance do?
A: I'm responsible for the product control and financial control aspects of the Royal Bank of Scotland's global capital markets business.
I manage a team of 50 product financial controllers. Product controllers are financial analysts who support the bank's traders and structurers. They calculate the daily profitability of trading desks, and check the valuation of financial instruments, as well as providing ad hoc finance support to traders and desk managers to help them optimise the business.
Financial controllers are responsible for ensuring the bank's consolidated accounts are properly prepared. They ensure trading activities are validated and accurately represented in the general ledger, and that financial data flows smoothly through the whole finance reporting structure.
Q: How have regulations and changing accounting standards, such as Sarbanes-Oxley and IAS, impacted the role of product controllers?
A: Sarbanes-Oxley hasn't changed the role of the product controller, but it has formalised controls in the business. For example, it's applied a minimum standard for documentation. People are still doing the same job, but there's a bit more record keeping.
The introduction of International Accounting Standards (IAS) has had a more major impact. For example, IAS has changed the profitability of certain transactions, and product controllers have had to do a lot of scenario analyses to prepare for the new standards.
Q: What will be the main challenges for the product control function in 2006?
A: We expect to see continued growth in trading volumes and the extended use of exotic derivative products. Exotic derivatives are providing a challenge for product controllers year on year. The new accounting standards have made profits from exotic products difficult to recognise on the day they're traded. For example, if a new product is not actively traded, the standards would require us to consider whether we have sufficient pricing data to report the profit and we may have to defer the gain until the market becomes active.
Q: How can banks address the shortage of experienced controllers in key areas such as credit derivatives?
A: We need to be broad-minded in the areas we recruit from. It's a question of being prepared to train bright people with the necessary mathematical background from other parts of the bank or from outside the industry. We've retrained people working in other finance functions such as management reporting and internal audit.
Q: What distinguishes the good from the great in the world of product control?
A: Great product controllers use their knowledge and understanding of the businesses they support to provide services to the trading desk that go beyond the pure control function. For example, if you understand the business and its regulatory capital treatment, you can ensure trading activities are booked in a way that reduces regulatory capital charges.
Q: What are the advantages to working as a product controller in an investment bank, compared to working as an accountant in practice or industry?
A: Product control is a role that suits certain kinds of people. The main difference to working in practice or industry is the sense of urgency. Time frames in an investment bank are generally very short - revenue maximisation depends on being an early entrant to the market, and this permeates the way we work. People who like a changing environment, a new challenge on a regular basis, and enjoy working in an industry filled with a broad cross section of intelligent team-focused people will thrive.
Q: And the disadvantages?
A: It's a high pressure environment with no such thing as a lull or a quiet period. Some people might not choose to work this way.