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By Steve Slater
LONDON, March 16 (Reuters) - Once modest of pay and profile,risk experts are being reborn as rock stars of the banking world- their status and salaries soaring as regulators forcefinancial institutions to clean up.
Industry-wide investigations into alleged exchange ratemanipulation, trading scandals at UBS, Societe Generale andJPMorgan and HSBC's $1.9 billion fine for lax money-launderingrules have upped the ante for banks already under pressure tocurb reckless behaviour that led to the financial crisis.
Now watchdogs and central banks want to see a clear line ofresponsibility for the avoidance of such fiascos in the future,and as a result, the position of chief risk officer (CRO) hasjumped up the ranks. Many CROs now sit alongside the financedirector as second in importance behind the chief executive.
"The role of the CRO has become broader, higher profile andmore influential," said Anne Murphy, head of UK financialservices for executive recruitment firm Odgers Berndtson.
In turn, salaries have soared. Pay in risk-related jobs rose6 percent in 2013 and rocketed 19 percent for those who movedfirms, according to a report by recruitment firm BarclaySimpson.
HSBC chief risk officer Marc Moses joined thebank's board at the start of 2014, alongside the chairman, chiefexecutive and finance director, and could be paid 6 millionpounds ($10 million) this year. Chief Executive Stuart Gulliver,who could be paid 11.4 million this year, says pre-crisis, thebank's CRO would not have made it into the top 50 earners.
At Spain's Santander the top risk executive MatiasRodriguez Inciarte was its second-highest paid director lastyear, getting 4.7 million euros.
Those numbers, says Murphy, are "recognition that it's a bigjob. There aren't many people who have the skills and abilitiesto do it well, combined with the increase in seniority andresponsibility."
WIDE REMIT
Chief risk officers ensure that where potential dangersexist, they are monitored and kept in check. That can range frommeasuring how likely loans are to be paid back, how risky banks'positions in financial markets might be, and what potentiallosses may be incurred from fraudulent activities.
However after the financial crisis of 2007-2008 this alreadywide remit has become larger still, and its parameters moreclearly policed.
CROs must ensure banks abide by tougher regulations aroundthe world, hammered out by governments that had to use publicfunds to keep many of them from sinking under the burden of badloans resulting from excessive borrowing, risky investments anda lack of transparency.
The new rules demand that banks take fewer risks, assessloans more closely and hold more accessible capital as a bufferagainst bad bets.
Many CROs are now also responsible for ensuring cybersecurity and spotting terror financing and money laundering -so-called compliance functions that previously often fell underthe remit of a bank's legal division.
The scale of the new CRO job is reflected in the amount oftime such concerns occupy at board level. Santander said itsboard spent 30 percent of its time last year on risk management,and Barclays' board has spent 35-40 percent of its time ongovernance and risk issues in the last two years.
As a result some CROs are being invited to join the board,another notch for their status and pay packets.
Juan Colombas, chief risk officer at Lloyds Banking Group since the start of 2011, joined its board in November2013 and is one of only three executive directors. He could earn4.4 million pounds this year.
ACCOUNTABILITY
The job of CRO comes with its own risk/reward equation: itsnew elevated status also brings far more accountability.
Following the introduction of new post-crisis legislationin Britain, for example, these bankers can now be sent to prisonif found guilty of the new charge of reckless misconduct leadingto bank failure.
"Whereas before it was a slightly techy and bookish type ofjob, now risk is incredibly diverse and carries a huge amountmore responsibility if you are running the department, and therepercussions for the chief risk officer are profound," saidMark Garnier, a British lawmaker who was part of a panel thatlast year proposed changes to make individuals at banks moreaccountable.
However the jump in pay and profile means that the job isnonetheless likely to tempt more candidates to fill what iscurrently a small pool of specialists.
Headhunters say the rising status of top risk managers couldsee it become a popular path for ambitious executives who nowsee it as a route to the CEO's chair.
