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Global Bankers Throw Out Dealmaking Basics in Age of Outbreak

Bloomberg logoBloomberg 2/27/2020 Benjamin Robertson, Cathy Chan and Michelle F. Davis
Attendees use their smartphone devices in the convention halls between sessions on day two of the 28th World Economic Forum (WEF) on Africa in Cape Town, South Africa, on Thursday, Sept. 5, 2019. The World Economic Forum on Africa meeting runs from 4-6 September. © Bloomberg Attendees use their smartphone devices in the convention halls between sessions on day two of the 28th World Economic Forum (WEF) on Africa in Cape Town, South Africa, on Thursday, Sept. 5, 2019. The World Economic Forum on Africa meeting runs from 4-6 September.

(Bloomberg) -- It sounds like advice for averting Wall Street deals: Don’t travel. Don’t meet clients. Don’t even shake hands.

Yet those instructions are now flowing through the global financial industry as the coronavirus spreads. On a growing number of continents, banking and investing professionals are preparing for the possibility they will soon be working from home. Industry conferences for drumming up business are thinning out, moving online or facing cancellation. Sales of some new securities are sputtering.

Behind the scenes, bank leaders are dusting off regulatory plans for keeping “critical operations” open through a potential pandemic. Some describe things like how far apart to move traders along desks, or how many may work remotely. Bank branches may be able to keep their counters open, thanks to the bulletproof glass meant to stop robberies.

Financial firms that normally take pride in touching industries around the world are realizing they will be on all the front lines if governments fail to contain the virus. As outbreaks worsen in parts of Asia and pop up across Europe, bankers from top financial hubs to midsize cities are trying to reinvent on the fly how they’ll do business, anticipate how central banks may react, and assess their clients’ preparedness and potential needs.

a person standing in front of a building: An attendee browses a smartphone device in convention halls between sessions on day two of the 28th World Economic Forum (WEF) on Africa in Cape Town, South Africa, on Thursday, Sept. 5, 2019. The World Economic Forum on Africa meeting runs from 4-6 September. © Bloomberg An attendee browses a smartphone device in convention halls between sessions on day two of the 28th World Economic Forum (WEF) on Africa in Cape Town, South Africa, on Thursday, Sept. 5, 2019. The World Economic Forum on Africa meeting runs from 4-6 September.

“I’ve spent the last two days in front of customers and I’ve gotten 10 different views on what’s gonna happen -- from ‘buckle down, this is gonna be a six-month period of time’ to ‘this is an overreaction,’” said Ted Swimmer, head of capital markets at Citizens Bank. “I just don’t think there’s a playbook for what these things are.”

Read a QuickTake: What it means if the coronavirus becomes pandemic

Venture capitalists are taking precautions. Sequoia Capital elected to relocate an annual meeting that had been planned for New Delhi, said a person familiar with the matter. The new locale is in Half Moon Bay, California, about a 30-minute drive from the firm’s headquarters. The change was previously reported by the Wall Street Journal. Andreessen Horowitz, another top VC firm in Silicon Valley, recently posted a sign at its offices discouraging handshakes, citing the virus.

Of course, executives working in Europe and the U.S. are just now confronting a situation that took shape in cities around China almost a month ago. In hubs like Hong Kong, denizens of the financial industry are all too familiar with working from home while their kids pass time in the background.

Now, in a growing number of countries across Asia, firms are discouraging travel and starting to take more drastic measures. In South Korea, where authorities are trying to contain the largest outbreak outside China, Credit Suisse Group AG has begun to split workers among different locations to ensure business can continue.

Precautions are also mounting in Europe. Commercial real estate firm Cushman & Wakefield said Wednesday that it decided to sit out the prominent MIPIM real estate conference in the French resort town of Cannes next month over safety concerns tied to the virus. Meanwhile in Berlin, the world’s largest private equity and venture capital conference continued this week as a somewhat muted affair, rife with dark humor and hand sanitizer. A few big names never showed, and neither did some attendees from Italy, the continent’s worst-hit country.

In fact, a growing number of banks have banned travel to certain Italian cities including the financial hub of Milan. Goldman Sachs Group Inc., Deutsche Bank AG, Credit Suisse, UBS Group AG and Morgan Stanley are among those enacting at least some limits on travel in the country or encouraging employees to postpone visits.

Read more: Global investment banks curb Italy travel on virus scare

U.S. regulators require banks to have a pandemic plan that allows them to keep critical operations going even if a large number of employees fall ill or have to care for family members. Regulators warn that a severe pandemic could lead to as much as 40% of staff being absent and that outbreaks can come in multiple waves that last months.

Across the industry, firms are signaling that the virus has the potential to create significant disruptions in the coming year. Global behemoth Citigroup Inc., merger advisory shop Evercore Inc. and private-equity giant KKR & Co. all mentioned the virus as a risk in annual regulatory filings this month.

Already, key financial-industry businesses are taking hits. Debt issuance in the $2.6 trillion international bond market, a key source of income for investment banks, came to a virtual standstill Wednesday as Wall Street faced its third straight day without any offerings and Europe’s bankers had their first day of 2020 without a deal.

The silver linings aren’t that bright.

Asked this week what the coronavirus might mean for FTI Consulting Inc., Chief Executive Officer Steven Gunby told analysts that “nobody knows” how it will play out but that the most important thing now is to check in with employees in affected regions and ensure they are ready.

Still, he added, “given the strong bankruptcy practice we have, if the economy had a downturn, we’ve got some parts of our business that would go up.”

--With assistance from Jenny Surane, Sarah McBride, Jan-Henrik Förster, Nicholas Comfort, Rachel McGovern and Shahien Nasiripour.

To contact the reporters on this story: Benjamin Robertson in london at brobertson29@bloomberg.net;Cathy Chan in Hong Kong at kchan14@bloomberg.net;Michelle F. Davis in New York at mdavis194@bloomberg.net

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, David Scheer, Dan Reichl

For more articles like this, please visit us at bloomberg.com

©2020 Bloomberg L.P.

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