However horrible financial services layoffs have been on Wall Street and in London, pain there has been fairly muted compared to what will come soon to bankers working in Cyprus.
When the Cypriot government first presented its plan for levying a tax on bank deposits over the weekend, it presented the move as a good thing for the island's financial services professionals. The government said the tax would save 8,000 Cypriot financial services jobs as the country's two main banks - Cyprus Popular Bank PCL and Bank of Cyprus PCL - were saved from going under.
This is starting to look like wishful thinking. A run on Cypriot banks remains a distinct possibility when banks reopen on Tuesday. Cypriot banking jobs may not have been safeguarded after all.
In what now looks like a mistimed report written last December, PricewaterhouseCoopers feted the island's financial services sector as a major contributor to the Cypriot economy. In 2011, PWC said 18,100 people worked in the financial services industry in Cyprus. This was only 5% of the total Cypriot workforce and half the number of people in the tourism sector, but PWC pointed out that financial services jobs are better paid than tourism jobs. Financial services jobs in Cyprus have also been growing (slowly) - 2,100 financial services jobs were created in Cyprus between 2001 and 2011. The finance sector was creating, "highly skilled jobs," for "young talent" in Cyprus, said PWC.
Not any more.
The Cypriot banking levy isn't a done deal. The Cypriot Parliament still has to vote on the proposal tomorrow at 4pm. In the meantime, the deal is being quickly tweaked to ease the pain on small depositors. Under the latest proposal, deposits of less than €100k will reportedly be taxed at 3%, deposits of €100k-to €500k would be taxed at 10%, and deposits of €500k would reportedly be taxed at 15%.
If the levy goes ahead, large depositors will think carefully about keeping money in Cyprus in future. €68bn of the deposits in the Cypriot banking system are from Russian and Ukranian companies according to Breaking Views. Analysts at Barclays said 31% of deposits in the Cypriot banking system came from these 'non-financial corporations' in 2013. The table below, from PWC's report shows that 4,900 people working in Cypriot financial services deal with 'international clients.' These people now have good reason to be very fearful for their jobs indeed.
It's a Bank Holiday today in Cyprus and the Cyprus-based authors of PWC's report weren't available to talk to us. However, Gina Le Prevost, chief executive of Geneva-based recruitment firm AP Executive, which has offices in both Nicosia and Limassol, said there's a variety of Russia and English speaking private client relationship bankers working on the island, along with a lot of people working for corporate trusts. "You also have a lot of FX businesses, with multi-lingual FX salespeople and a big corporate law sector there," she said.
The potential implosion of the Cypriot banking sector could be read as a warning for other countries which have become over-reliant on and over-exposed to financial services. The industry accounts for 8.9% of Cypriot GDP according to PWC, up from 4.9% in 1995 and 6.9% in 2001. In the UK, George Osborne puts financial services' contribution closer to 10% of UK GDP. Cyprus's inability to bailout its banking sector also reflects Cypriot banks' relative enormity: Cypriot bank assets are equivalent to 800% of Cypriot GDP, making a domestically funded bailout unaffordable. In this sense, Cyprus is on a par with Ireland, where banking assets are equivalent to around 760% of GDP according to figures from the European Banking Federation (in the UK, it's more like 520%, in Switzerland it's 550%).
In retrospect, the push to grow the Cypriot banking industry looks misguided. Cypriot banking jobs that disappear in the months to come are unlikely to come back, ever. All that will remain of the Cypriot banking past will unfortunately be a massive debt - which as the chart below (from Barclays) shows, will be more onerous than that borne by any other EU country to date. In future, policy makers promoting highly-paid highly-skilled banking jobs may wonder whether it's really worth it.