Where?

Centralised operations centres, head offices, City.

Employers?

All the major banks, investment banks and building societies.

Where does the role fit in?

The business of banking is lending money. This is a risky thing to do if you don’t know someone (although it’s sometimes even more risky if you do know someone!).

In 2007 reckless lending by banks — in the UK and, especially, in the USA — attracted a lot of attention in the media. However, the basic fact is that it is not in the best interest of banks to lend money to people who can’t pay it back. The money a bank loses on one defaulting loan will wipe out the profit from many dozens of others that are repaid in the proper way. Banks therefore need a way of checking that people are who they say they are, and of calculating how likely they are to be able to pay back any loan they are given. This is the role of credit risk staff.

Credit risk staff assess the creditworthiness of customers and satisfy the bank that they can repay. The bank’s credit risk teams will often also manage the process of recovering the money loaned if problems occur.

What you do

There are two very distinct forms of credit risk, and the type of role varies greatly between the two:

• Retail - here credit risk is tied to decisions made in branches and call centres. It is a game of large numbers, using technology to assist in assessing a customer’s ability to fund a loan. A lot of this is done using credit risk systems developed by the banks to predict future behaviour, and a lot of data is supplied by third-party credit agencies, such as Experian and Equifax. The process used is credit scoring, in which factors such as a person’s income, credit history, employment history, age, etc, are all taken into account to come up with a score that dictates how much they can be lent, and for how long.
• Wholesale and Corporate - where companies are borrowing money (either directly from the bank or via the issue of a bond, which is a tradable form of loan), the sums can be very large indeed. Banks in this market employ credit risk analysts to establish that the companies to which they lend are likely to repay the loan and keep up interest payments. This is a very complex business, and well paid.   Again, external data is used - this time from third-party credit-rating agencies such as Standard & Poors and Moody’s. The process takes into account the history of a company and its performance, the general state of the industry in which it operates, and so on. This gives the company a credit rating that determines not so much how much it can borrow, but what risk premium should be charged to cover the risk: the riskier the corporate borrower, the more interest they have to pay. It should be noted that the big insurance and fund management groups will also employ people in this area to ensure that the bonds they buy are safe.

Within credit risk, there is a whole range of potential jobs, including:

• credit scoring
• credit analyst
• credit manager
• credit risk management
• credit controller
• collections manager
• debt collector

These are very different types of job. For example, a credit assistant’s main occupation will be to take loan applications from frontline staff and credit-check the customer concerned. This involves collecting information from the customer via the sales person, checking the customer via a credit reference agency, and then running the information through the bank’s own credit approval system. Increasingly, much of this process has been automated; frontline staff selling a loan to a retail customer or a small business effectively run the credit check themselves. However, there are always exceptions, and the credit department is still large and important in the process.

Credit analysts in the City work closely with corporate finance and with the dealing room, giving advice on a firm’s creditworthiness or the price of a bond. Sometimes - for example, when interest rates move or a currency suddenly fluctuates - the credit analysts will be under a lot of pressure to explain very quickly indeed to both the bank and its customers what the implications may be.

Risk management

Less operationally involved, sitting above all the scorers and analysts, the head of credit risk will be a part of a bank’s risk team. Their responsibility is not so much to worry about individual customers but to oversee the total risk to the bank. If a bank has loaned £10 billion to UK property companies, for example, the head of credit risk and his or her boss, the head of risk, will review the level of risk, and they may decide to reduce the bank’s total exposure in that area in favour of lending elsewhere. Here, we are entering the realm of higher mathematics and, as a result, this is seen as one of the most important decision-making centres in the bank.

What you need to get the job

Some jobs in credit risk are support roles in operational centres - for example, helping the business banking team to run credit checks. Other roles report to the board and use advanced modelling programmes to assess risk.

Above all, credit risk requires accuracy and numeracy, and you must expect to face reasonably stringent maths and English requirements.

For credit risk management and credit analysts’ jobs, both in the large retail banks and in the City, a good degree (minimum 2:1) in a subject with a quantitative element would be expected.

Qualifications and career progression

The ifs School of Finance has risk and credit built into almost all its major courses. Many people joining a bank will be expected to take a qualification covering the working either of the retail markets or the business and corporate markets. Programmes such as the Professional Certificate in Banking (PCertB®) and the ifs degree programmes all put credit risk at their core.

In addition, the ifs works with a number of banks to develop bespoke programmes and qualifications for credit risk management, such as the Certificate and Diploma in Retail Credit for employees of the Royal Bank of Scotland.

A number of Masters degrees in risk management are also available, and some people will wish to take these to show their intent to develop a career in this area.

Income

These can vary greatly, as there are so many different operational roles. The following is only a guide.

Starting salaries

These vary by role, but are in the region of:

£13,000 - £20,000 for a credit assistant in the credit support call centre.

£15,000 - £25,000 for a corporate credit analyst.

Career incomes

These also vary according to the role, but can be quite substantial:

£20,000 - £35,000 Consumer predictive modeller

£25,000 - £60,000 Credit manager

£30,000 - £70,000 Credit analyst

£50,000 -£100,000 Head of credit

£150,000+ head of risk — plus very large bonus packages

Many banks will offer a 'large town allowance' for people who need to live in expensive areas or to commute. Where this is paid outside London, it will be around £1,000-2,000. In London expect an extra £2,000-3,000.

Of course, banks and insurers also offer good packages of pensions and other benefits. These may not be of much interest to you now but in the future they will be important.