Financial institutions hired compliance and mortgage servicing employees to help meet the demands associated with implementing the 2010 Dodd-Frank Act, but in the face of a slowing economy, banks have had to cut back on staff.
Richard Bove, an analyst at Rochdale Securities, said that the cuts are in response to shifts within the industry. Bove also said that, as new trading and risk requirements take effect, these jobs are unlikely to return to the financial sector, Businessweek reports.
“Is the business model for the banks permanently broken?” Bove said, according to Businessweek. “Not permanently broken but permanently damaged.”
By the second quarter of 2012, banks had lost more than 62,000 jobs since Lehman Brothers Holdings, Inc., went bankrupt in 2008.
Goldman Sachs has eliminated 3,200 jobs in 12 months through June and announced earlier this month that the bank plans to cut another 20 to 30 positions in its sales and trading departments. Citigroup, America’s third-largest bank, will cut more than 1,500 securities positions by the end of the year, and Morgan Stanley plans to cut about 700 jobs in the second half of the year.
“The banking industry is just a reflection of the economy in which it operates, [which], you really can’t outperform,” Robert P. Kelly, the former chairman and CEO at Bank of New York Mellon Corp., said, Businessweek reports.
Kelly said that he anticipated that the economy would be recovering and growing at a much faster rate.
“This is the slowest recovery I have ever experienced, and I think that would be true for anyone working today,” Kelly said, according to Businessweek. “Some of these changes that we’re witnessing aren’t just short-term cyclical, they’re medium-term, and they do require different responses than perhaps 10 years ago.”
Roy Smith, a finance professor at New York University’s Stern School of Business and a former partner at Goldman Sachs, said that banks also expected a greater economic recovery but are now faced with an increased regulatory burden.
“The structural problems are going to require that they change their business models,” Smith said, Businessweek reports. “That doesn’t mean they won’t come back, but they will come back thinner.”