Is the banking industry screwed?
The recent news that RBS is set to add to the troubled banking industry and slash a further 1,400 posts across the UK, came almost at the same time that the beleagured bank announced that £215million of its £607million bonus pool would go to investment bankers in its so-called “casino banking” division, which is widely seen as having helped in bringing the bank to its knees in the first place.
This is despite the fact that in its annual showdown with shareholders, the lender, which is now 81% owned by the taxpayer, was criticised for handing “extraordinary” packages to top staff despite huge losses and a string of scandals. RBS was, as they said, effectively handing out “rewards for failure”.
Instead, those in the firing line are largely backroom staff who had nothing to do with the disastrous decisions that almost caused the collapse of RBS under former boss Fred Goodwin. The cuts in fact affect support staff for the bank’s retail arm, including those working in communications, marketing and customer analytics. More than 40% of staff affected are based in Edinburgh, and the vast majority of the remainder in London, with some in smaller centres such as Birmingham, Manchester and Bristol.
Scarily, the current round of savage cuts bring the total for job losses at RBS to 38,900 across the UK since the bank had to be bailed out by taxpayers in 2008. This is far from a drop in the ocean and will obviously have a profound affect on the jobs market, as well as do little to change people’s perception of the banks or increase their confidence.
RBS claims that it is making necessary cuts to help refocus resources on “things that matter most” to customers, including branch refurbishments and investment in mobile and online services. However, the reality is that despite the fact that the Government has attempted to introduce measures to regulate the banking sector further and prevent a repeat of 2008, to most outside of the banking hierarchy it looks like a case of same old, same old. Whether it shows that the banking sector is “broken” is naturally up for debate, but it certainly raises the question as to whether the banks, and RBS in particular, have learnt from the 2008 collapse, and fuels speculation that it’s the bank’s rank and file that are paying for the mistakes of its more senior members.
Regarding the future of the bank, Prime Minister David Cameron has been reported as saying that the Government wants to get the bank back to a healthy condition, and argued that progress had been made.
“I think the important thing is to return this bank to health. And there’s a strategy under way, it’s made some progress in selling down surplus assets and building up positive assets,” said the Prime Minister. “I keep a very close eye on this and want to make sure progress is made as fast as possible. In terms of returning RBS to the private sector, involving people in owning this bank in a genuine way, I’m open to all ideas and proposals.”
Meanwhile, Dominic Hook of the union Unite has gone on record as heavily criticising RBS’ decision. “This is brutal and irresponsible behaviour from RBS which is almost entirely owned by the taxpayer. It is high time that the banks took social responsibilities seriously,” he said. “The industry almost caused the economy to implode in 2008 and now it is contributing to a jobs crisis.”
He said that with the bank returning to profit after it made £826million in the first quarter of the year, there was no business case ‘for cutting jobs so drastically’. Indeed, if the £607million bonus pot was used to retain bank staff, it would pay for 700 staff to stay with the bank for 40 years on annual salaries of £21,500.
Hook concluded with: “RBS argues that the restructure will make the bank more customer-focused, but a bank can’t be more customer-focused with 1,400 fewer staff.”