Insights into the Capital Management Field

Insights into the Capital Management Field

The field of finance is essential to the growth of our globalized economy and the advancement of the developed world. It also bears the reputation of being very technical and complicated. Perhaps for this reason, it can be intimidating for many university BBA graduates looking to break into the finance field. Contrary to popular beliefs, it is important to note that there is a vast array of jobs available in this highly demanded field. Investment Society has created this blog to expose some of these opportunities and shed light upon the various areas of finance you may want to explore.

We will be conducting interviews that primarily focus on one area of finance and provide insight on how to break into these jobs. The interviewees are experienced professionals with years of experience in the industry. We hope to be able to convey some of their great advice to you as you explore the world of finance and what it has to offer. They will be able to provide tips on how to tailor your resume, ace those interviews, and impress everyone in the workplace. Ultimately, we hope to answer any questions you may have as you traverse the path to your career goal.

Insights into the Capital Management Field

In light of the recent financial crisis, the Capital Management field has become an area of increasing importance. The Investment Society team recently sat down with Jean-Francois Leclerc, a Senior Manager of Capital Optimization at the Bank of Montreal (BMO), to provide our members with exclusive insights regarding the field of Capital Management. With years of experience under his belt, he has been tasked with the implementation of large projects and initiatives that would ultimately streamline BMO’s capital structure. Throughout this interview, Leclerc shared how he attained such success in the finance industry and what he does on a daily basis. He also will be answering some of the common questions you all have: Is a great GPA paramount to success in the field? What kind of educational background is needed? What can a university student start doing today to secure opportunities in Capital Management? Investment Society brings you the inside scoop answering questions you have regarding this exclusive field. Happy Reading, Investment Society

Q: The area of Capital Management has gained substantial prominence since the 2008 financial crisis. What made you want to go into Capital Management?
A: Capital Management did get more visibility over the last decade with the introduction of Basel II, the financial crisis, and then Basel III. When I first started in Capital Management, I had no idea what it was! But since college, I have had an interest in Risk Management. So, by taking courses in Risk Management, I was aware of the existence of the regulatory capital rules for banks and I also learned Basel II. Therefore, when I saw the phrase “Basel II” in an analyst position’s job description, I decided to apply for it. It was honestly by pure accident and personally, it was the Risk Management part that got my attention.

Q: So… You started out as an Analyst at BMO. Would it be possible for you to walk us through a typical day for an Analyst?
A: Sure, most Analyst positions consist of a lot of data manipulations. Generally, an Analyst is responsible for building or maintaining models, and generating forecasting tools for the bank and its various lines of business. While it might get repetitive after a while, the distinction between a mediocre Analyst and a good Analyst is that a good Analyst will understand what the numbers mean and bring value to the reports. Once an Analyst has mastered their tools, like Excel and Access, they should be discussing with the report users on [methods of enhancing] the report to match their needs.

Q: Thanks for the good advice. Well now that you’re a Senior Manager, we’re sure that your job and responsibilities are a lot different; can you tell us what you currently do on a daily basis?
A: Right now, my job involves managing a lot of different projects. I have the flexibility to choose my own projects so I can really define what I do every day. My day generally includes:
  • Work on policy issues, such as commenting and assessing the impact of new capital rules
  • The solitary work of rule interpretation
  • Assisting my front office business partners in designing certain transactions to ensure that they are adapted to the regulatory framework
  • Lead work teams to review our business practices and to find ways to better utilize our capital
When the project has gotten the green light, I would manage the interaction with the different stakeholders to make sure all necessary areas, such as Risk Management, Accounting, Legal, are involved. There is a lot of relationship building because most of the people I work with do not report to me so we need to work together without having a direct line of report—kind of like a cross-functional team.

Q: So now that we know what you do on a daily basis, can you give us a brief explanation of the differences between Capital Management, Risk Management and Capital Optimization?
A: Sure, the first thing is to understand what Capital Management is. For banks, Capital Management is mainly there to absorb losses from borrowers that are defaulting on their loan. Since the amount of capital that a bank holds is dictated by a mix of its regulators and its own view of the risk it undertakes; the more risky you are, the more capital you want to have to absorb their potential losses.

On the other hand, Risk Management analyzes how much capital the bank needs to hold. They will quantify how much risk the bank takes and then, for a given level of confidence, [decide] how much capital is needed. So you can think about it as if the capital supply is managed by Capital Management, and the capital demand, what is actually causing the need to have capital, is managed by Risk Management.

Now, what we do in Capital Optimization is really project driven to [make] sure that we’re using our capital in the most efficient way. Whenever there’s a discrepancy between what is required by the rules, we can often offload to make sure we’re using our capital the most efficient way, such as transferring the risk to a third party through securitization.

Q: (*Scratching my head*) Oh boy, that was a lot of really informative stuff! So what skills or educational backgrounds are required to excel in this industry in general?
A: Well, in depth knowledge of regulatory capital rules is a must but this will be developed over years of working in the field. For recent graduates, basic skills in Risk Management, Accounting, and Corporate Finance are definitely required. You don’t have to be an expert but you should be able to understand conceptually what those three fields entail and ideally specialize in one of them. You should also be able to understand property of default, loss given default, and [other] Risk Management concepts so you can go into those conversations with your partners in Risk Management. In terms of the technical skills, you would mostly be dealing with Excel and Access so knowledge of VBA would be useful.

Q: But would a general undergraduate degree be enough though? A: This is a difficult question to answer because everyone’s different. I would say a good background in Risk Management is important but most positions in Risk Management would require a post-graduate degree. In terms of program choices, there is no specific [university level] program for Capital Management as it is a multidisciplinary field that would [involve] Risk Management, Accounting, and Finance. The truth is, wherever you go, there’ll never be a job that is perfectly matched with your diploma. However, you’ll always be learning and expanding your area of expertise. So as long as you have your core strengths, you can add on other learnt abilities to help bring value to your job.

Q: Ah, that’s a great way of thinking, (*nod*) so what is the traditional method of breaking into the Capital Management industry? Or what are the backgrounds of your team members?
A: Just seeing the group at BMO, I don’t think anyone came from Risk Management. BMO’s Capital Management team benefits from the great diversity of its member’s background [which varies] from Accounting to Treasury Management. My personal bias would be [for] Risk Management just because of the importance of the capital demand in Capital Management.

Q: What are some things a university student can do right now to prepare for a career in Capital Management?
A: I think choosing the right courses is important and developing some networks through internship to meet the right people.

Q: Speaking of meeting the right people, we’ve all heard that it’s about who you know, but if you don’t know anyone, how can you get started?
A: I truly don’t think that the people who are a part of Investment Society don’t know anyone! People who think they don’t know people are just not thinking hard enough. You have summer jobs and teachers that can help, and even if your summer job is a teller at a branch, you can always ask to be introduced to other people. I don’t know anyone at the bank who would say no to an informational interview. It is easy to ask people to spend an hour to discuss their work. Also, when you have an e-mail address that ends in a university domain, you can use that to send emails to industry professionals or alumni asking for a one-on-one. That’s how you build your connections.

Q: Awesome! I guess we should provide your email address at the bottom of this webpage... Ok, jokes aside, personally, what is something you look for in a resume?
A: I think that other than the hard skills, there is the importance of showing a success profile. The extracurricular activities that you’ve done in college can be a stamp of success to show that you’ve engaged in a lot of projects and were a leader. In terms of the importance of having a Masters, you can definitely better position yourself for a job if you had a thesis or working paper that specialized in Capital Management. When I did my Masters, my research paper was on “The Influence of Capital Level on Risk Spreads for Canadian Banks.” I added the title of my thesis on my resume so they knew I was interested in Capital Management.

Q: That’s smart! So speaking of school and Masters, a question we always get is how important is our GPA?
A: While the hard skills and academic excellence are only a part of it, the personality and the soft skills are just as important as your grades. Grades are only a portion of it which can be compensated by leadership and interpersonal skills.

Q: For an analyst, would you say technical skills or soft skills are more important?
A: I would say it’s 50/50. It’s true that an analyst must use a lot of hard skills to do reports, however, those hard skills can be taught. Where someone will be differentiated by being better than the rest is having those soft skills, through effective communication and being able to build relationships with whom you’re building the reports for. A good analyst will understand the user’s needs by having picked up the phone to ask them instead of just giving them a report filled with irrelevant information – quality over quantity.

Q: Now let’s say a student has created an excellent resume and perhaps they got a job interview, how should they prepare for it?
A: I would say just be aware of what’s happening today by reading the Financial Times or Bloomberg News. If you’re applying for a job, you need to show that you’re curious enough to take the initiative to know what’s going on. It would also be useful to know the many technical terms, have a general understanding of Basel, the capital rules and what Capital Management is all about. Actually, our annual report has a special section on Capital Management and there is nothing better in an interview than having an interviewee who is very knowledgeable about the corporation. They don’t have to know all the technical details but they need to show that they’ve done their homework before coming to the interview. For us, I would say that anyone coming to an interview should read the Capital Management section in our annual report.

Q: And last but not least, would you say your job provides an opportunity for consistent challenge or do you see the onset of a routine?
A: I definitely feel challenged. Capital Management has been evolving at a rapid pace over the last decade and is also expected to change over the next few years. As such, there are always new projects and new ways to look at things. There is not a week that goes by without having something related [to Capital Management] on the first two pages of the Financial Times!

Q: Thank you so much for your time JF!

We sincerely thank Jean-François Leclerc for taking the time to sit down with us and give Investment Society the opportunity to relay his sincere insights and experiences to our members. We also thank you, the readers, for expressing an interest in our publications and our interview segment. We hope you have benefitted from this discussion and enjoyed learning about Capital Management.

Remember, you are always part of the conversation! Reach out to us at with any questions you would like covered in our next interview. Also, share this interview with your friends and comment on Investment Society’s facebook page.

On that note, we hope you have a great day! Check back here on the IS website under the publications section for the latest interview.

Disclaimer: Please note that the following interview is not with the Corporation, Bank of Montreal, but with a Senior Manager within the bank. All opinions expressed in this interview are solely those of the interviewee in his private capacity and do not in any way represent the views of the Bank of Montreal.