Continued cuts in bank staff

Download article in original language : FI9803156NFI.DOC

Finnish banks experienced a severe crisis of profitability during the recession at the beginning of the 1990s. In 1997, the number of employees had been cut by half compared with the peak in the late 1980s, and the cuts are continuing in early 1998 at the same time as "internationalisation" is proceeding.

A crisis in Finnish banking during the difficult recession of the early 1990s led to structural changes in the banking business, with banks merging and splitting into more rational business units. Before the recession, when the financial markets were regulated, the banks could function under quite sheltered circumstances, but after market liberalisation came a period of strong credit expansion, increasing of market shares, and risk-taking in property investment. When the bubble of the so-called "casino economy" burst (through a crash in the value of real estate and stocks), this resulted in a weakening of the solvency of almost every bank and state support was seen as the only way out. Nearby every bank had to turn to the state "cash desk", and altogether they withdrew about FIM 50,000 million.

In order to improve profitability, an extensive reduction of the banking network has been necessary, along with staff cuts. Compared with the peak year of 1989, when Finnish banks had 54,000 employees, nearly half the workforce had lost their jobs by 1997, when there were just over 29,000 left. The banking network has shrunk by 2,000 branch offices during the 1990s, and only 1,600 offices have survived.

Profitability has also been improved by the drastic fall in the costs of information processing with the rapid development of information technology. At the same time, the costs of employing bank staff have risen. Banking services are now being planned so that expensive and unprofitable labour can be replaced by self-service. Service fees have been raised in order to improve the equivalence in costs, which has led to a customer flow away from the cash desks and towards the increasing number of automatic cash dispensers and bill payers, as well as increased use of the Internet.

Today the banks are making substantial profits but they are still being prepared for the future through further staff cuts. Currently, the development seems to be towards multinational mergers motivated by the hardening international competition - the merger of the Finnish Merita and the Swedish Nordbanken, which took effect from 1998 and resulted in the biggest bank in the Nordic countries, is an example. Answering the competitive challenge requires bigger units so that the threat from, for instance, elsewhere in western Europe can be averted. However, the rationalisation of overlapping functions following mergers often leads to lay-offs.

In early 1998, the bank groups have recently announced new reorganisations which mean that the numbers of workers will diminish by about 4,000 during the next three years. The chair of the Finnish Bank Employees' Union (Suomen Pankkitoimihenkilöliitto, PTL), Christina Holmlund, says: "The development cannot be resisted. Our main method is to negotiate. However, the problem is the absence of a counterpart - the Bank Employers' Association [Pankkialan Työnantajaliitto, PATO] is avoiding responsibility". She considers it regrettable that negotiations in the banks that are dismissing workers can, it is claimed, only be started through strike action.

A PATO official, Jyrki Kiviharju, states that the only role of the employers' association is collective bargaining and maintaining peace in the labour market: "We cannot interfere with the rationalisation programmes of the banks." He adds that the employers must prepare for the future by means of lay-offs. For instance, use of the Internet will increase, which will reduce the need for labour.

Useful? Interesting? Tell us what you think. Hide comments

Eurofound welcomes feedback and updates on this regulation

Tilføj kommentar