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3,500 jobs to be cut at Royal Bank of Scotland

January 12, 2016

finance

 

The Royal Bank of Scotland announced today that they will be making cuts to the tune of another 3,500 jobs over the next three years,  in an attempt to cut back the investment banking division of the company, to focus more on core business and reduce risk.

This announcement will see them move from investment banking to a focus on trading foreign exchange and bonds and assisting larger companies with finance management.

Instead of a ‘Global Banking and Markets’ division, Royal Bank of Scotland will establish a ‘Markets’ business and a separate ‘International Banking’ operation.

The market seems to have responded well to the news, and  RBS’s share price rose 6.8% in morning trading, outstripping other banks and larger companies on the FTSE 100 index.  The market had some warning however, as these changes were alluded to earlier in the year. Chancellor George Osborne announce these changes in strategy late last year, in December 2015:

Investment banking will continue to support RBS’s corporate lending business but RBS will make further significant reductions in the investment bank, scaling back riskier activities that are heavy users of capital or funding.

RBS have said that the restructuring is also part of an attempt to prepare for the new UK regulations requiring banks to separate their core operations from their riskier activities, such as investment  banking.  They will be looking to cut the amount the bank borrows and lends by 120bn, aiming for a goal of £300bn (from £420bn) within three years.

Robert Peston of the BBC says of the news:

The overall aim is to improve profits and reduce risks…Which matters to most of us, since taxpayers are sitting on losses of £26bn on the £45.5bn they invested in RBS to rescue it.

Royal Bank of Scotland is no owned 83% by the taxpayers,  since they invested money to save the bank.  Since the financial crisis began in 2011, RBS have seen a loss of almost 30,000 jobs, 22,000 of which were based in the UK.

 Do you have an opinion on the latest round of cuts? Let us know in the comments below!

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