At the Saint Petersburg Education Committee meeting in May 2016, there was a discussion around banking as a potential emerging area for actuarial education. It was agreed to establish an interest group that would report back to the International Actuarial Association (IAA) Cape Town committee meetings. The members of the interest group are Andrew Gladwin (South Africa, chair), Louis Doiron (Canada), Khadija Gasimova (Azerbaijan) and Phillip Everett (Australia).
The IAA also has recently established a Banking Working Group that reports to the Scientific Committee—a further indication of the recognition of banking as a practice area.
The interest group members held an initial discussion about the roles actuaries can play in banking. It was then agreed to send out a short survey to the Education Committee, organized by the IAA office. The responses of the survey were then collated and are discussed in this article.
Roles Actuaries Can Play in Banking
In discussing the roles actuaries can play in banking, the following high-level points were noted by the interest group.
- The nature of the actuarial training, in terms of understanding economics, finance, asset-liability management, modeling and credit risk, should provide a skill set that can be very useful to banks.
- In addition, the professional skills of an actuary may be very useful in an industry that does not always have the best public reputation.
- On the other hand, the actuarial profession does not have a monopoly on the quantitative skills needed in banking, and other professions/courses may provide a stronger background. Actuaries will need to “prove themselves” in this field.
- Data analytics will be an important skill for actuaries in banking.
It was noted that a number of actuaries were employed by banks around the world, but often for the insurance sections of a bank, in traditional insurance roles. However, there were actuaries and actuarial students employed by banks in specific bank roles, especially in South Africa and Australia. These roles include:
- Capital management and Basel-related returns
- Broader balance sheet management
- Risk management, including credit risk and operational risks
- Asset-liability management—especially the mismatch between asset and liability terms
- Credit scoring of applicants
- Data analytics—especially for up-sell planning
- Work around mergers and acquisition, including risks and pricing (for investment and merchant banks)
- Any work that requires both financial acumen and the assessment and valuation of long-term risks
- Product development and pricing
Survey Questions and Responses
A short survey was set up with the following questions.
- How many fully qualified actuaries in your association work in banking? (Please provide approximate ranges if you do not have the exact details. Note this would include actuaries working in specific banking roles, as opposed to an insurance subsidiary of a bank.)
- How many students (studying to become fully qualified actuaries) in your association work in banking? (Please provide approximate ranges if you do not have the exact details. Note this would include actuaries working in specific banking roles, as opposed to an insurance subsidiary of a bank.)
- Do you have a working group, task force or interest group in banking as part of your actuarial association? If so, please provide brief details of this group.
- Have you provided any education opportunities in banking, including CPD events? If so, please provide brief details around these educational opportunities.
- What would your association’s view be on the following statements?
- Actuaries can add value to banking institutions.
- Banking is a potential future practice area that a significant number of actuaries could be involved in.
There were 27 responses to the survey, including most but not all of the larger full member associations, and with reasonable representation from the major regions. The main conclusions from the responses are:
- There are significant numbers of fully qualified actuaries working in banking (in specific banking roles) in the United Kingdom, Spain, South Africa, Australia, Germany, Mexico and France. For other countries, there were very few or no actuaries in this field, although some countries indicated difficulty in tracking where their members work.
- The previous point also applies to students studying to qualify as actuaries, although it was indicated that it was often even harder to track where students work.
- In the United Kingdom and Italy, the profession is in the process of setting up interest groups/working groups in banking.
- South Africa and Australia have established banking practice committees.
- In Canada and Ireland, there is no separate banking committee, but banking is discussed as part of emerging practices and wider fields groups.
- In Germany, the investment practice committee has links to banking.
- Aside from the associations already mentioned, none had specific structures looking at banking.
- In South Africa, a banking course has been part of the actuarial syllabus as an optional route to qualification since 2015. The annual daylong seminar in banking is now established.
- Australia has held two banking seminars in the last two years. The Australian Institute of Actuaries is looking to introduce a banking course as part of its qualification.
- Germany and Ireland have held a few banking seminars.
- Otherwise, there seem to be a limited number of education/continuing professional development (CPD) opportunities in banking among other actuarial societies.
- As a response to the proposition that actuaries can add value to banking institutions, 25 associations agreed with the statement, and many indicated strong agreement. There was one response of maybe, and one indicated that banking was not a focus area.
- As a response to the proposition that banking is a future potential practice area for actuaries, 22 agreed, again with many indicating strong agreement, and South Africa noting that it was already a current practice area. Five of the responses were less sure, with the time needed to establish the profession in the area cited by one as a possible constraint.
Conclusion and Next Steps
The results of the survey indicate that banking is an important future practice area in which actuaries can add value. In Australia and South Africa, it is already an established practice area, while some other countries have set up CPD opportunities and structures looking at banking. The new IAA syllabus has been set up in a way that should facilitate more basic knowledge around banking and the roles of banks in the economy. This could encourage more actuaries and student actuaries to practice in this area.
It may be useful for countries with more established practice, such as South Africa and Australia, to share educational and CPD resources, and to look into setting up a formal or informal global practicing group.