Nowadays, almost every bank employs a two stage interview process with stage one typically a telephone interview.
HSBC uses telephone interviews extensively for both summer and grad roles (and is notorious for giving telephone interviews to a very high proportion of its applicants before cutting the numbers down drastically before assessment centres).
SocGen do the same. BarCap uses telephone interviews for all its front office roles and successful candidates are put through to the final round, Credit Suisse are known for giving brief random on-the-spot telephone interviews to candidates. Morgan Stanley have used telephone interviews for their spring internship recruitment.
All banks will use telephone interviews during first rounds in certain cases when candidates cannot attend in person.
Most telephone interviews will be competency based, and so will be marked using STAR. This stands for situation, task, action and result.
This means that when the recruiter asks you a question such as "give me a time when you worked in a team and there were difficulties you had to overcome?", you start by describing the situation behind your example, and then tell them about the task you had to complete. From there, you progress to the actions you took to complete this task (with particular emphasis on your role) and then finish off by talking about the result.
Before the call, assemble a list of past situations and tasks that you have completed which you could use to demonstrate banks' favourite competencies. Common competencies include, the ability to be able to demonstrate teamwork, leadership, problem solving, relationship building, decision making, commercial awareness and adaptability.
Additionally, as with all investment banking interviews, there is the potential for it to be technical, especially if they are front office interviews, so it is imperative to keep up with the financial markets.
Making an impression, vocally
Needless to say, during a telephone interview, the interviewer cannot see you.
Therefore, things you would usually use to express yourself, such as facial expressions and body language aren't of any help. Instead the tone, speed and content of what you are saying are more important than ever.
Be aware that it's important not to ramble when answering questions - normally you can look at the interviewer and visual cues will help you realise when they've heard enough.
You'll also need to work harder to establish a rapport with the interviewer. Make a conscious effort to smile while you're talking, don't be scared to ask questions, try to be natural - don't reel off a load of pre-rehearsed answers.
These are some of the questions I've been asked in telephone interviews:
BarCap - Sell me a biro pen.
HSBC - What qualities do leader and followers possess, and which are you?
SocGen - Describe a time when you have had to work under significant time pressure.
Morgan Stanley - Give me an example of a time where you have used your entrepreneurial skills to make money.
The author is a student who's been through numerous telephone interviews, successfully.