The top banks in the United States have been quietly cutting 20,000 employees throughout 2023, and more job losses are coming, according to CNBC. The layoffs on Wall Street are a worrisome sign of the continuing broader economic challenges facing the U.S. As the Federal Reserve raised interest rates and withdrew all quantitative easing policies to combat inflation, job losses were factored into the plan. Fed chair Jerome Powell acknowledged Americans would feel “some pain.”
Wall Street strives when investment banking, dealmaking, initial public offerings, mergers and acquisitions, trading and asset management are robust. These sectors have been hit hard by the decline in market activity, which has led to the culling of jobs on Wall Street this year.
Why The Cuts
Financial services firms are slashing headcount due to the anticipated continual slower growth, high interest rates and fears of a possible recession next year. There’s an expectation that artificial intelligence, automation and other emerging technologies will ultimately improve efficiencies and reduce costs, as high-priced bankers and traders won’t be needed as they were in the past.
Investment banks are dealing with increased regulatory scrutiny, making it more costly due to enhanced compliance costs. Similar to the tech sector, gaining access to cheap money was easy and spent, in part, in the hiring boom of bankers, brokers, traders, compliance officers and wealth managers.
The Layoffs
Citigroup let go of dozens of people within its investment banking division last November. The bank is preparing for more job cuts as part of a structural revamp targeted to remove complexity. Support staff in compliance and risk management are among the most likely to lose their jobs as the bank begins its sweeping reorganization. Morgan Stanley initiated 1,600 job cuts in December 2022.
Banking giant Capital One eliminated around 1,100 jobs in its technology department earlier this year. Around the same time, Goldman Sachs began laying off as many as 3,200 well-paid, white-collar workers. BlackRock, one of the largest money managers in the world, announced it would lay off around 500 professionals. Coinbase, a publicly traded cryptocurrency exchange, slashed 950 positions in its third round of layoffs within a year. Bank of New York Mellon, one of the oldest financial institutions in America, cut about 3% of its workforce, representing approximately 1,500 jobs.
Wells Fargo also announced job cuts in January with a preemptive move to pivot away from the mortgage business. Although the bank let go of nearly 50,000 employees in the past three years, the firm still plans to reduce additional headcount.
In April, high-end investment bank Lazard, said it would cut around 10% of its workforce in 2023. After losing over $100 billion, around half of its deposits, First Republic was acquired by JPMorgan from the Federal Deposit Insurance Corporation. After the acquisition, 1,000 employees were made redundant at the collapsed lender in May. JPMorgan also cut about 500 jobs that spring across its departments. Around the same time, Signature Bank laid off 400 workers.
Following its merger with Swiss rival Credit Suisse, UBS announced plans for a massive layoff of up to 30% of the workforce, as many as 36K jobs worldwide.
Credit Suisse and PNC Bank are undergoing headcount reductions this fall. Charles Schwab, the brokerage and trading firm, plans to slash positions this year and into 2024 by taking “incremental actions to streamline its operations.”
Source: Forbes
