Lanka sovereign ratings advisor cuts 3,500 jobs,
close unprofitable businesses

One of Sri Lanka’s three sovereign ratings advisors is slashing 3,500 jobs across its investment banking unit in a bid to avert risk.

Royal Bank of Scotland, the lender that is 83 percent owned by the British government, is to cut around 3,500 jobs as it sells and shrinks its investment bank, the Telegraph, UK, reported.

Royal Bank of Scotland, along with HSBC and Bank of America Merrill Lynch, were appointed by the government of Sri Lanka mid 2010 to advice it on improving sovereign debt ratings for a four year period.

The bank said in a statement last Thursday that it was considering sale or closure or its cash equities, corporate broking, equity capital markets, and mergers and acquisitions businesses.

These businesses had income of £220m in first three quarters of 2011 and are currently unprofitable, RBS said.

Stephen Hester, the chief executive, said: "It is clear that, particularly in the wholesale banking arena, significant new pressures have emerged. Our goal from these changes is to be more focused for customers, more conservatively funded, more efficient and with better, more stable returns for shareholders overall."

The lender will reorganise its wholesale business into "markets" and "international banking", scrapping its former global banking and markets business (GBM).

It aims to cut the balance sheet of its former GBM business by £120bn to £300bn over the next three years.

John Hourican, the former GBM chief executive who is in line to pick up £4m in long-term incentive shares that he was awarded in 2009, will head the two businesses.

George Osborne last month told the bank to shrink its investment banking arm further to become less risky, despite it being halved in size over the past three years.

The jobs cuts will take place over three years and be split between the UK and operations abroad.

The bank reduced its headcount by 2,000 last year. It has cut around 30,000 jobs since being bailed out by the government.

Hoare Govett, one of the oldest and most distinguished names in British corporate broking, could be a casualty of the changes. The business was bought as part of its disastrous purchase of parts of Dutch bank ABN Amro in 2007.

The markets division, which comprises the bank’s main trading activities, will focus on the bank’s traditional strengths of debt, currency and money markets.

The wholesale banking division will provide services for the bank’s biggest clients, including corporate advisory services, cash management and payments services.

GBM employs 18,900 worldwide.

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