As of yesterday, anyone working in a support role in an investment bank in the City of London has good reason to feel apprehensive.
Citing the need to reduce its 'fixed cost base to a lower “break even point", Credit Suisse is shunting 1,800 of its 4,200 support jobs out of the City of London. That's 43% of the total. That's a lot.
If other banks do the same, jobs in London's finance industry could be in for a battering. Nearly 65% of Credit Suisse's London staff work in support roles. The CityUK said there were 143,600 people working across banking in London in the first half of 2015. If all banks employ support staff in the same ratio as Credit Suisse and they choose to follow Credit Suisse's strategy for lowering their 'break even points', the implication is that 40,000 jobs could go.
Klaus Woeste, a partner at EY who specializes in helping banks manage changes stemming from regulatory and structural pressures, predicts that rival banks will be doing the same as Credit Suisse, and soon. "I would expect similar announcements to come from other banks in the course of the next year," says Woeste. "There's a lot of pressure to cut costs and upgrade systems in order to improve margins."
Further cost cutting will hit operations staff who are already demoralized and exhausted. One recruiter, who works with banking operations and support staff in London, says it's not uncommon to find people in operations who've been analysts for an entire decade. "There are people sitting in operations jobs in London who haven't had a pay rise for three years and whose bonuses have been cut to £1k," he says. After five years in an operations job, he claims it's common to earn £55k. In the front office, analysts earn 40% more than that in year one.
"It’s an ongoing theme in operations – you’re expected to work longer and longer hours with fewer and fewer resources and the chance of a bonus at the end of year is minimal," says one managing director in an operations role. "We keep getting the short end of the straw."
Some support jobs are safer than others. Credit Suisse said yesterday that 2,400 of its London support roles will always have to be based in the City because they require 'co-location' alongside front office staff. Which jobs are these? A quick look at who Credit Suisse is hiring in London now suggests that senior risk managers, business controllers, programme managers and advisory lawyers all need to be close to revenue generators. Meanwhile, jobs for junior risk analysts, data analysts, and financial controllers are being advertised at the bank's lower cost Polish office. The executive assistant to the EMEA head of compliance will even be based in Poland, offering support remotely. Poland is clearly the place to be - 146 of Credit Suisse's shared services vacancies are located there, compared to 48 in London.
Matt Rowe, head of operations at recruitment firm Eximius, says the shortage of operations jobs in London is nothing new. "This has been going on for years. In 2010, around 70% of the jobs I was filling in London were in operations. Now those jobs have been off-shored or near-shored and 80% of the jobs I fill are in the middle office."
On one reading, Credit Suisse's movement of jobs out of the City of London is long overdue. Although the bank has had its 'Wroclaw Center of Excellence' in Poland since 2007, recruiters say it's been slow to make the most of it. Other banks are said to be further advanced with the near-shoring and offshoring process: J.P. Morgan has Bournemouth and Glasgow; Morgan Stanley has Glasgow; Deutsche Bank has Birmingham; Bank of America Merrill Lynch has Chester; Citi has Dublin and Belfast; UBS (also) has Poland and Goldman Sachs has recently begun moving technology jobs to Warsaw, although has long been locating support roles in Mumbai and Salt Lake City.
"Credit Suisse has been slow," says the recruiter. "It's one of the few banks still to have a large settlements function in London."
If other banks have taken remedial action already, that 40,000 number may be too high. Maybe the job cuts have already happened?
The risk, however, is that a growing number of London-based middle office jobs in risk and compliance functions will be the next to be optimized and off-shored. Woeste thinks this is coming: "There was a wave of reactionary compliance and risk recruitment in the City a few years ago, but over time, banks will need to cut costs."
Credit Suisse's Wroclaw job advertisements suggest middle office jobs are already being moved out of London: 36 of its vacancies in Poland are for junior compliance-related roles; 86 are related to risk.
Where does this leave support staff in London? One recruiter says he's already receiving CVs from Credit Suisse's settlements division: "They'll have to find new jobs on the buy-side or at brokers and custodians. These jobs no longer exist in banks in the City."
Longer term, recruiters and insiders say remaining employed is all about adding value or seeking out jobs that can't be shifted away for regulatory reasons. "If you’re working in reconciliations on vanilla products, this can be done anywhere," cautions one operations professional. "I used to work in cash management with hedging – this is complex and needs to be close to the front office. Similarly, trade support and anything regulatory-related will most likely stay in London.”
Rowe says a lot of operations staff also shift into contract roles, particularly those associated with programme and change management. These can pay around £700 a day and look like a good bet as banks restructure. However, Credit Suisse has also declared its intention of cutting back on contractors.
Overall, some think the Swiss Bank's London plans are too ambitious: "They've said they're going to cut all these people in London, but frankly I don't see how they can without causing chaos," says another recruiter. "I'd be surprised if all these cuts go ahead."
Photo credit: Texas Eagle