Already hog-tied and whipped daily by politicians amid the run-up to U.K. national elections, staff at all-but-nationalized Royal Bank of Scotland got more bad news Thursday.
In its latest restructuring, the reeling bank will withdraw 45 percent of capital from its global banking and markets unit, slashing costs by more than 2.5 billion ($3.6 billion) annually, according to The Wall Street Journal. Its remaining business will concentrate within the U.K. At the same time, the U.K. government ramped up its aid - and its potential equity stake - in RBS after the bank reported a 24.05 billion net loss for 2008 ($35.2 billion at the Dec. 31 exchange rate), the largest ever for a U.K.-based company.
Those cutbacks clearly augur further large-scale layoffs at RBS. But this could be a situation where - in Nikita Khrushchev's memorable phrase - the living will envy the dead. Compared with draconian restrictions on pay and everyday business activities that all RBS workers already labor under, layoff "victims" might actually be grateful - particularly if severance is involved.
No Cash Bonuses, Credit Cards, Taxis...
After taking a 70 percent stake in the bank, the government banned company credit cards for entertaining clients, and barred any reimbursement for a banker's own meals during business trips. Reimbursements for taxi and limosine rides also were banned, making public transportation mandatory at all times even for employees based in the U.S., the New York Times reported on Feb. 6.
Last week the company announced a pay freeze for its global banking and markets division (which includes most RBS employees in the U.S.) and said no employee will receive a discretionary cash bonus for 2008.
U.S. bank nationalization, however, is likely to take a less painful form, an industry headhunter says. The experience of Freddie Mac and Fannie Mae shows "it's not the cataclysm everybody thought it would be. It's livable," Jay Gaines, president of New York-based search firm Jay Gaines & Co., tells eFinancialCareers News.
The U.S. Treasury Department took control of the two mortgage giants last September. Top executive teams at both companies were replaced, but not with government bureaucrats. Based on that experience, Gaines believes the prospects of employees within a nationalized U.S. bank won't dramatically worsen as a result of nationalization.