George Osborne, the Chancellor of the Exchequer has announced that the Royal Bank of Scotland (RBS) will continue significant reductions in investment banking operations.
The government, which owns an 84% stake in the bank after a bailout during the 2008 financial crisis, was reacting in parliament to recommendations in the Vickers Report which urged a separation the investment divisions of banks from high street operations. The Chancellor made it clear that he saw the RBS primarily focused on personal, small enterprise and corporate banking operations and that it would continue to cut back on the investment banking despite the division recording £10bn of profit over the last three years.
There has already been a significant reduction in investment banking operations jobs at the company. Prior to the government taking control the investment banking division employed 25,000 people. Since then, there have been cuts of around 7,000 jobs and analysts predict and least a further 5,000 positions will go in the latest reorganisation.
The conclusions of the Vickers report may see other UK investment banking jobs come under threat as financial institutions consider the recommendations. The main provisos of the report are for banks to ring fence risky investment operations so they do not impact on ordinary customers. The report also recommends banks hold a greater percentage of reserves to protect against loss making investments.
