Banking system ‘safe’ says Downing Street – but job losses loom at Credit Suisse

Britain’s banking system remains “safe”, Downing Street insisted on Monday amid turmoil on the FTSE100 following the emergency rescue deal for Credit Suisse.

“As the Bank of England has said, we believe the banking system remains safe and well capitalised,” said a spokesman for the prime minister Rishi Sunak. “We have a strong regulatory system.”

The FTSE 100 dropped by almost 2 per cent to its lowest since November, dragged down largely by bank stocks, but later recovered to positive territory.

It reflected worries over the stability of banks after the Swiss authorities agreed for UBS to buy out stricken rival Credit Suisse. Standard Chartered and Barclays were among banks to witness a drop in share value.

Meanwhile there are fears the rescue deal will lead to job losses at UK offices of Credit Suisse.

UBS said it plans to run down the firm’s investment bank division as part of its merger plans, but stressed it is “too early to say” exactly how staff across the regions will be affected.

Credit Suisse employs around 5,500 people in the UK, based in London’s Canary Wharf, which includes investment bankers, wealth and asset managers, as well as staff across teams such as technology, risk and compliance.

UBS has about 6,200 people in the UK with offices in London, Birmingham, Manchester, Leeds, Newcastle and Edinburgh.

The former chief executive of UBS in the UK, Mark Yallop, said he thinks job losses will be “inevitable” as a result of the merger and chopping down the investment bank.

He said on Monday: “The two firms together employ about 120,000 staff, of which about 11,000 sit in London, and I think it’s inevitable that a merger of this sort will result in some further job losses.

“I would imagine those would be concentrated in the risky investment banking business at Credit Suisse which is partly the cause of the problems the firm is experiencing.”

But UBS chairman Colm Kelleher told a news conference in Berne that any impact on workers will be carried out in a “rational way”.

“As regards job cuts, it’s just too early to say. We are clearly cognisant of Swiss societal and economic factors,” he said.

“We will be considerate employers but we need to do this in a rational way, thoughtfully, when we’ve sat down and analysed what we need to do.”

Credit Suisse was already in the midst of a big turnaround plan which included cutting around 9,000 jobs from its global workforce of more than 45,000 over the next three years.

It would mean it was set to lose about 10 per cent of its investment bankers in Europe even before the takeover was agreed.

Gary Greenwood, an equity research analyst for Shore Capital Markets, said: “We have said for a while that we believe the UK banks could not be in a stronger position to withstand the current economic downturn and we stand by this view.

“Following more than a decade of regulatory tightening, their balance sheets are in excellent shape with strong capital, funding and liquidity, and asset bases that are now much lower risk.

“As such, we do not believe the UK banking systems or any of the major UK banks are in imminent danger of collapse.”