TAXPAYER-backed Royal Bank of Scotland today announced around 3,500 job losses over the next three years in a bid to downsize its investment banking arm.
The move at Global Banking and Markets (GBM), which has employees in Stoke, Manchester, Edinburgh and London, follows Government pressure for the 83% state-owned bank to pull back from its ambitions to be a global investment player.
GBM, which employs 18,900 worldwide, deals with a range of financial services such as debt advice, equity trading and mergers and acquisitions.
Its range of work with companies and governments spans from refinancing contracts for Anglian Water, Gatwick Airport and Tesco to debt issues for Finland.
The job losses come amid reports that John Hourican, the head of GBM who will continue to oversee the restructuring of the business, is in line to pick up £4 million in long-term incentive shares that he was awarded in 2009.
The latest round of job cuts come on top of 2,000 losses announced by the bank last summer. The new losses will mean nearly 11,000 posts have been cut at GBM from the pre-banking crisis headcount of 24,000.
RBS said the strategy was designed to help move toward the ring-fencing requirements outlined by the Independent Commission on Banking and adopted by the Government last year.
The recommendation called for banks to ring-fence their retail, or high street, operations from their riskier investment banking divisions.
David Fleming, Unite national officer, said RBS’s decision to reduce the headcount at GBM was “staggering”.
“It is a disgrace that while on a daily basis stories are emerging about the massive bonuses at the top of the bank, increasing numbers of jobs are being cut from amongst the hard-working staff,” he said.
Meanwhile, the bank said it would restructure GBM and cash management division Global Transaction Services (GTS), by splitting the businesses into two new divisions - Markets and International Banking.
The changes include considering the sale or closure of its cash equities, equity capital markets and mergers and acquisitions businesses, which had income of around £220 million in the nine months to September and are currently unprofitable.
The bank also said it was considering the sale of its corporate broking arm, renowned City broker Hoare Govett, which offers independent market advice to 100 listed companies, including 11 of the FTSE 100 index.
Hoare Govett was acquired in RBS’s disastrous £48 billion joint bid for Dutch bank ABN Amro in 2007.
GBM has suffered recently as market turbulence, driven by global recession fears, hit income - however, the division still recorded income of £1.1 billion in the three months to September 30.
RBS said it aims to reduce its balance sheet from £420 billion at the end of June to around £300 billion over the three-year period.
Chancellor George Osborne recently said the bank could “go further” in its reforms and would shift its business strategy towards personal banking, small businesses and corporate banking in the UK.
While the downsizing of GBM satisfies Mr Osborne’s desire for RBS to scale back riskier activities, the revelation that Mr Hourican is set to receive a hefty performance-related payout will embarrass the Prime Minister who last weekend promised a crackdown on executive pay.
A binding vote for shareholders on executive salaries formed part of a proposal unveiled by David Cameron for a Government blitz on pay and bonuses in the City.
Last month, a long-awaited Financial Services Authority report said RBS was brought to its knees by “multiple poor decisions” and its “gamble” on buying ABN Amro.
The FSA blamed deficiencies in the management and culture at RBS prior to its £45.5 billion bailout and called for tougher rules to make bankers more accountable for their actions.