Top Banks Urged to Refrain from Compulsory Lay-Offs

Trade unions and works councils are working to avoid a wave of compulsory redundancies at Germany's leading banks.

Germany's four leading banks – Deutsche, HVB Group, Dresdner and Commerzbank – are planning to cut a total of 30,000 jobs, 17,000 of them in Germany.

But moves are afoot by workforce representatives to ensure that compulsory redundancies are ruled out.

Germany's largest trade union, Verdi, which represents workers in service industries, plans to use the upcoming round of wage negotiations for the banking industry as a forum for talks about employment in the sector.

Hinrich Feddersen, a member of Verdi's national executive council, said some of the measures that would be proposed would be a gradual reduction in the working week from the current 39 hours, the introduction of a right to career development and to go over to part-time working, and a reduction in overtime.

Workforce representatives at the big four banks criticized the way the institutes had responded to the crisis sparked off by the events of September 11. They said they had acted over-hastily and introduced excessively harsh austerity programs.

At the same time, Feddersen conceded that there's a ongoing process of structural adaptation at work in Germany's banking sector and that this process will involve job losses.

Trade unions estimate that the total number employed in Germany's banking sector will have fallen by 100,000 within the next 5–7 years, meaning that one in ten jobs will have been cut.

Germany's major banks are currently in their most profound crisis since the 1970s. The economic downturn and falling prices on the stock markets have cut into earnings dramatically, pushing some institutes into red figures. And the country's largest bank is far from immune to the effects of the downturn.

Analysts at BHF are expecting Deutsche Bank's results for full-year 2001 to show a 50% decline in net earnings from the 2.8 billion euros seen in 2000.

But it's Commerzbank, the smallest of the big four, that will be hit hardest, according to the BHF analysts. They are expecting the net earnings of 1.3 billion euros seen in 2000 to turn into a net loss of 164 million euros.

Experts see this downturn in results leading to further lay-offs. And only a few days ago, Deutsche chief Rolf Breuer said in an interview that consolidation in the sector is overdue and that when it comes, it will inevitably lead to more job cuts.

Deutsche in December announced that it plans to institute 2,100 job cuts over and above the 7,100 that it has already announced.

The areas affected by the latest cuts are its Private Client & Asset Management and Investment Banking businesses.

Commerzbank, meanwhile, has said it plans by 2003 to cut 3.400 jobs – around 9% of the group total – over and above the 1,700 posts that have fallen vacant and won't be filled owing to a recruitment stop imposed in July 2001.

In December, it reached an agreement with the works council that will enable compulsory redundancies to be avoided.

According to analysts at BHF Bank, the cost-cutting programs, including job losses, will enable the big German banks to produce a cut in annual administration costs for the first time in years.

Analysts see an improvement in cost efficiency as the best way to raise profitability to the high levels attained by some of the major European competitors.

But the BHF analysts warn that if German banks don't find a way of raising their stock-market value, they'll find it very hard to play a leading role in the consolidation of Europe's banking industry. Some are in danger of becoming takeover targets, the analysts warn.