Bank Layoff Storm
Beginning in July 2019, a wave of layoffs swept Germany and Italy, and even reached North America. Who is the hand behind?
1 Negative Interest Rate and It’s Negative Impact
Decision makers of European Central Bank believed that negative interest will be a booster for Euro area countries’ economy, since any money deposited in the bank will be charged for certain interest,there would be more direct investments in the market. This policy had been implemented since 2014. However, most people understood basic interest theory, eventually, they regarded this policy as a symbol of gloomy economic future, the confidence of market was undermined.
Before we see the positive effects of this controversial policy, bad news came first. Winter came to bank industry. Negative interest seriously reduced the profit of most commercial banks, a large number of bank staffs were laid off.
Situations were worse in the United Kingdom and Germany. More than 86% bank layoffs were from Eurozone countries which had implemented negative rate policy, according to Bloomberg.
In order to reduce the unexpected impact of negative interest rates on banks, the European Central Bank announced a tiered interest rate system to cut the cost for certain commercial banks under its system. However, the effect of this new policy was minimal.
Even worse, the layoff hurricane landed in Japan. Mizuho Financial Group was planning to reduce 19,000 employees by end of 2026, followed by Sumitomo Mitsui Financial Group with a number of 5,000 layoffs this year, and Mitsubishi UFJ Bank with a number of 10,000, by end of 2023.
2 Get Ready for Uncertainty
Morgan Stanley, unlike his European counterparts, was not bothered by negative rate policy. It had a bumper year with stock risen more than 15%, far more than expected.
Unfortunately, on 10th of December, Morgan Stanley announced that they would cut off 1,500 employees, which is 2.5% of its total number of employees worldwide. Ironically, as Nasdaq News reported on 13, December，Moody‘s just affirmed Morgan Stanley’s MS issuer as well as senior unsecured debt rating to A3, to reflect their outstanding financial performance.
Although the latest round of job cut was mainly restricted to technical department, to facilitate its artificial and online business, a general goal to deal with upcoming profit shrink and higher credit spread is a more acceptable explanation for Morgan Stanley’s big disarmament.
The British “Financial Times” believed that was Morgan Stanley’s “planning” for market uncertainty next year.
Trade and political uncertainty, slowing economic growth as well as the government reactions are the major concerns for James Gorman, CEO of Morgan Stanley. He expressed his concens were right after the third quarter financial report was released.
Risk factors such as global trade tensions are huge blow to confidence of enterprises and investors, dragging the economic more. Jamie Dimon, Chairman and Chief Executive Officer of JP Morgan Chase Group, also told the International Financial News reporter, these were his major concerns at this moment. Morgan Stanley was not the only one feeling the market uncertainty.