THE announcement that Credit Suisse is to cut 2,000 jobs follows an accelerating trend of redundancies in the banking industry, with some commentators speculating the total job losses across the sector could total over 50,000 this year.
Many will arise as banks reassess business models in the light of changes to the economic climate and the extra burdens imposed by regulators in the form of capital requirements.
But the brunt of cuts will be felt in the investment banking divisions where optimism of an early recovery has diminished.
This sudden change in business conditions is characteristic of investment banking and explains why remuneration in the sector has tended to rely on large performance-related bonuses rather than fixing the base rate of pay at a higher level.
By imposing the strictest rules on bonuses in the world, European policy makers may have scored some easy political points but they have seriously eroded flexibility, causing banks to raise basic salaries to retain and attract top performing employees.
Given the pan-European desire for growth, it is perverse that we are enacting legislation that fails to safeguard the economic contribution of Europe’s financial centres and could put member states at a long term competitive disadvantage.
That is why, as part of a long-term research programme, the City of London Corporation and TheCityUK commissioned Europe Economics to produce a report for the International Regulatory Strategy Group (IRSG) – “The Value of Europe’s International Financial Centres to the EU economy” – detailing the benefits for individuals, businesses and governments throughout the EU of having international financial centres based within the borders of the Union.
It is often claimed that the UK adopts an isolationist approach to European affairs. By focusing on eight major financial centres – Amsterdam, Dublin, Frankfurt, London, Luxemburg, Madrid, Milan and Paris – this research positions London as one part of a much larger network.
The statistics contained in this report make clear that the cluster of internationally-facing financial centres based in the EU is hugely beneficial to the 27 individual member states and to the Union as a whole.
European policy-makers must bear these benefits in mind and ensure that all future regulation is underpinned by a desire to support and promote this vital industry and its role in the broader European economy.
Stuart Fraser is the Policy Chairman at the City of London Corporation