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U.S. bankers victims of RBS’s math problem

Given the more fertile business environment, many Asian and European banks are adding headcount in the U.S. while thinning the herd at home. Just look at Deutsche Bank and Nomura. Royal Bank of Scotland, on the other hand, has decided to take its ball and go home.

RBS will cut as many as 400 U.S. jobs over the next 18 months as it scales back its once-impressive trading business, according to multiple media reports. Employees based in Stanford, Connecticut, the home to its biggest trading floor, will likely take the brunt of the punishment.

The moves come at interesting time for the state-owned bank, which is languishing through a lengthy reprivatizing effort. RBS is coming off a decent first quarter, with its trading performance being one of the highlights (at least when compared to other banks). However, RBS also saw its attempt to increase its bonus cap blocked before the plan even made it to shareholders.

Frankly though, neither bit of news has much of anything to do with the impending cuts. RBS is responding to new U.S. regulations that affect foreign banks with over $50 billion in assets. Rather than increase their capital requirements and agree to other stringent oversights, RBS is simply slipping below the $50 billion threshold. It will cut roughly $10 billion in risk-weighted assets by the beginning of next year, according to the Wall Street Journal.

Units that will be most affected by the cuts include the bank’s mortgage trading and its distressed loan trading businesses. RBS will also “optimize” its interest rates trading business, according to the Financial Times, which surely means job losses.

This will likely be a tough pill to swallow for some RBS bankers here in the states. It’s one thing to lose your job due to your performance or that of the bank. It’s another when your employer is simply trying to limbo under a relatively arbitrary asset figure.

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AUTHORBeecher Tuttle US Editor

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