Goldman plans hiring spree to fix lapses after increased US Fed scrutiny

NEW YORK – A fresh bout of US regulatory scrutiny is setting off a hiring spree at Goldman Sachs as the company’s leaders seek to remediate issues raised by banking supervisors.

The Wall Street firm is enlisting several hundred new employees to help address concerns from the authorities including the United States Federal Reserve, according to people with knowledge of the matter. The back-office hiring binge comes even as the firm cuts executives from money-making ranks amid a slump in business.

“We are not permitted to comment on any supervisory matters related to our regulators,” a company spokesman said in a statement. “Therefore, we are not able to comment on these reports.”

Although regulators routinely question large financial firms, Goldman executives privately describe growing pressure from the Fed over the past year. If left unsatisfied, supervisors can impose increasingly formal and potentially onerous measures behind the scenes to force banks to overhaul operations and procedures.

Many big financial firms contend with such actions out of view, but in more severe cases, these can spiral into public orders. Goldman has been dealing with a confidential measure imposed by the Fed that predates the current increase in scrutiny, one source said. That may add to the pressure on managers to resolve concerns.

It is unclear what deficiencies the firm is seeking to address, now that it has largely abandoned an effort to build up a consumer bank that was said to have set off questions from the Fed in 2022. The scrutiny has touched areas outside that unit, some of the sources said.

While some managers blame the firm’s failed retail foray for inviting regulatory attention, chief executive officer David Solomon has told colleagues it reflects a generally tougher regulatory climate for the industry at large.

The blow-up of investment firm Archegos Capital Management in 2021 also set off a prolonged look at how Wall Street banks handle counterparty credit risks. In addition, Goldman has disclosed it is cooperating with the Consumer Financial Protection Bureau and other governmental bodies, which are examining how it ran its credit card business.

Goldman’s new hiring push is the first tangible fallout to emerge from regulators’ heightened interest in the firm, which Bloomberg reported last September.

It is especially notable during a year in which the company is reacting to a market slowdown by shrinking headcount – cutting thousands of jobs in a series of culls. The bank’s earnings are down 35 per cent to midyear after posting a 48 per cent drop in 2022.

It can take a while to overhaul compliance departments to regulators’ satisfaction. The current CEOs of Wells Fargo and Citigroup both came into their posts on a mission to appease regulators – and are still at it years later.

Wall Street executives often note that such projects require significant portions of their attention, cutting into time that could be used to hone strategies or compete for more business. BLOOMBERG