Fears of new 'golden circle' as firms send in free staff to banks
INSOLVENCY and property firms have been sending 'free' staff into banks so they can build relationships and gain expertise that will help their firms win business, the Irish Independent has learnt.
An investigation into the banks reveals that Ulster Bank, and at least one other foreign- owned bank, have been taking in 'free' specialists, following a model commonly used in Britain.
The professional services staff have their salaries paid by their 'home' companies so the bank gets to increase its headcount without adding any costs, an important consideration in these cash-strapped times.
As well as gaining expertise, the secondees can also gain an insight into how banks operate and can befriend bank staff with a view to getting future business from them.
Companies known to have provided free staff in this way include accountancy outfits KPMG and Grant Thornton. Other accountancy firms and some property firms are also understood to have furnished staff, along with legal firms.
The number of staff given by individual companies is very small -- typically one or two at any given time, for periods that usually last around six months but can last more than a year.
The arrangements may give rise to fears of the creation of a new 'golden circle', where work gets awarded based on personal contacts instead of knowledge. However, industry sources vehemently deny this.
"There's no conflict," said one source. "You're not going to get banks putting an extra firm into receivership just to give us work, but this town is a village, it's all about personal relationships. This gets you on quote lists -- the price has to be right as well."
Another source insists that secondment is a "normal part" of professional life, which can greatly enhance the expertise of the person involved and can aid the bank. "Both sides can win," said one source. "There's nothing new here."
Sources at the bailed-out banks insist they have not used free staff and have no plans to, despite the obvious cost savings.
The way bailed-out banks are organised makes them less attractive for professional services firms.
Banks with centralised recovery units, such as Ulster Bank's Global Restructuring Group, are most attractive since the secondee will be at the heart of a lot of relevant action. Irish banks tend to have less centralised units, so the benefits are fewer.
Smaller professional services firms feel they are unfairly disadvantaged by the situation since they don't have the resources to provide staff for free in the way their larger competitors do.
Free secondments have been increasingly used internationally since the financial crisis hit. Reports in Britain as far back as 2009 claimed as much as 25pc of legal departments in banks were staffed by free secondees from top-tier firms.