Another cold wind blasted through Wall Street today as Credit Suisse and HSBC became the latest in the list of banks to announce that they are slashing jobs.
Credit Suisse said it will axe more than 2,000 jobs, most of them in investment banking, representing a 4% cut of its total workforce. HSBC is planning to cut 10,000 jobs.
They join the ranks of UBS, which announced this week that it could slash up to 5,000 jobs, State Street which is cutting 850 jobs, and Goldman Sachs.
But it didn’t have to be this way, some say. While the sluggish economy has stunted client activity and therefore bank profits, financial firms made a slew of critical mistakes as they emerged from the depths of the financial crisis, suggests Douglas McIntyre in 24wallst.com.
“The first mistakes banks made is that they did not cleanse their balance sheets enough of mortgage-related securities and credit loans that they had taken on in the first half of the last decade. Institutions like Bank of America continued to take charges for mortgages that have lost much of their value.
Money center banks have been sued and are pressured by government authorities to make good on mortgage-backed securities they sold to institutional investors without warning they might be highly risky instruments. It would have been painful to make admissions of their mistakes a year ago, but the silence of these banks will become expensive as legal actions against them grow.”
Other crucial errors include not cutting costs enough in 2009, on the belief that a recovery would be speedy and permanent. Instead, it has been a disappointing one.
On the shoulders of the financial crisis, UBS made a concession to public opinion in Switzerland, and said it would no longer pay its bankers massive bonuses that encourage them to take excessive risk.
But as Anita Greil points out in the Wall Street Journal’s The Source, as soon as the financial crisis appeared to be over, rival banks unsurprisingly started luring UBS rainmakers away by offering them attractive bonuses.
In fact, UBS has recently been dealing with an exodus of departures, including global co-head of M&A, Cary Kochman, and a slew of other senior bankers who left the Swiss bank to head to greener pastures (and bonuses).
From the Source:
“Unable to match, UBS instead raised the fixed components of its bankers’wages. This too, is taking its toll now because UBS can’t adjust salaries quickly as revenue falls. So while operating income declined 22% in the second quarter from last year, expenses fell only 16%.”
Now, the industry is paying for their post-financial crisis mistakes and heads are rolling. And of course, the first ones to pay are the banks’ employees.Melanie Rodier has worked as a print and broadcast journalist for over 10 years, covering business and finance, general news, and film trade news. Prior to joining Wall Street & Technology in April 2007, Melanie lived in Paris, where she worked for the International Herald ... View Full Bio