Credit Suisse is just the latest in what is now a roll-call of international banks to relocate back-office roles from Singapore to cheaper locations. The need to save money as deal-flow falls and the Republic becomes more expensive is driving the trend. But it isn’t the only reason.
Dozens of Credit Suisse jobs are going to India and Poland as part of a cost-cutting regime designed to address a slump in investment banking revenues. Non-client facing roles, such as IT, trade confirmations and product control, are most vulnerable.
Credit Suisse was one of the first banks to establish a significant operations hub in Singapore more than 10 years ago and it helped pave the way for others. But the bank and country have become a victim of their own success. Offshoring of back-office roles from the West to Singapore, particularly between 2005 and 2007, helped to increase fixed costs such as salaries and even real estate, says Craig Brewer, director, Hudson, Singapore. “Pay in particular skyrocketed in that period for operations and technology roles in investment banking.”
Annie Yap, managing director, AYP Associates adds: “Despite relatively low taxes, the immense hiring competition in Singapore has created an even larger discrepancy in compensation between Singapore and countries like India and some European markets.”
Offshoring out of Singapore started to gain momentum about two years ago, says Kyle Blockley, director, KS Consulting. “Singapore has become a financial hub in one decade, which has been great for its growth, but detrimental for costs. Staffing is one of banks’ biggest expenses, so it's to be expected that they search for cheaper locations.”
Cost cutting has fuelled the rise of Asian back-office centres in India and the Philippines, and to a lesser extent China and Malaysia. Banks – including ANZ, Barclays, Deutsche Bank, Goldman Sachs, Morgan Stanley, RBS, Standard Chartered and UBS – have relocated operations positions into emerging markets. RBS, for example, has shifted roles from Singapore and Hong Kong to India. Morgan Stanley last month moved about 80 back-office jobs from Singapore to India and Hungary. Non-client facing jobs at the junior or mid level are typically the most transferable.
India and the Philippines are now more attractive destinations because they have expanded their talent pools. Brewer says: “They are becoming recognised financial centres, so more graduates and junior staff are available. And these people increasingly prefer to stay put rather than move to somewhere like Singapore where the cost of living is much higher. Many Indian candidates in particular are moving home after gaining experience in Singapore.”
Yet cost and location alone don’t explain the disappearing jobs. As banks continue to want to base more support staff in Asia, Brewer says Singapore has almost reached its capacity to house them. The increasing focus on risk management is playing a part, too. “Having all or a significant amount of your IT staff, for example, in just one location is not an effective operational-risk and business-continuity strategy.”
Aside from a handful of senior managers, whose skills are in short supply in emerging markets, banks don’t usually transfer existing employees into offshored jobs. And returnee Indians aside, pay cuts put off most people from wanting to move in the first place. Credit Suisse is understood to have redeployed affected staff internally in Singapore or made them redundant.
Yap adds: “Should the cost of relocating Singapore employees be almost as high as keeping them here, it would make no sense for Credit Suisse to consider doing so. Cost reduction will derive from hiring locals from where the jobs are relocated to.”
Singapore is not about to disappear as a back- and middle-office centre. Many client-facing or highly technical roles, including some in risk management, are staying put. “I am also seeing some of the gaps that were created when functions were moved offshore being filled up by more high-value jobs,” says a recruiter who asked not to be named. “It’s simply swapping headcount from one location to another. A low-value position moves from Singapore to India, while a more senior one moves from London to Singapore.”