The Royal Bank of Scotland (RBS) is planning to cease issuing all structured retail investor products and exit the equity derivatives area as well as peripheral market-making activities, according to a memo seen by SRP from the bank's co-CEOs of markets, Peter Nielsen and Suneel Kamlani.
"This strategy is the result of a comprehensive review and is fully endorsed by the RBS group board," it read. "Implementation will begin immediately subject to consultation with our social partners as appropriate. Consultation was launched yesterday in the UK and Europe, the Middle East and Africa (EMEA), with other regions to follow."
The news follows the announcement yesterday that Stephen Hester will be stepping down as the group's chief executive later this year. The new RBS markets business will concentrate its resources on "our strongest products and services, ensuring we are well positioned to support our global client franchise and succeed in a changing regulatory environment."
Nielsen and Kamlani said that the decisions taken will enable the bank to protect and invest in its core fixed income capabilities across rates, foreign exchange, asset backed products and credit and debt capital markets.
"We excel in these areas and we have genuine global reach, scale and customer relevance," they said. "We have every intention of maintaining our presence as a global flow powerhouse in these markets."
The UK bank will also de-emphasise some of the "more complex structured products that are capital intensive or costly to run." RBS will also consolidate risk management in 'key financial centres' and will decrease the amount of equity used in its business through a reduction in risk-weighted assets to £80bn to 'tackle' its cost base.
"Our aim is to streamline the business, reduce complexity, mitigate operational risk and improve the way in which we manage our activities front-to-back," said the chiefs.
RBS will cut 2,000 jobs during the next 18 months, representing a 20% reduction in staff in its investment bank. The cuts are expected to be spread worldwide, although the bank declined to comment on the number of staff in the investment products and equity derivatives (IP&ED) business that will be made redundant. Since 2008, the bank has cut 41,000 jobs.
"Throughout the review process we have had to make tough decisions about the number of people needed to make this new strategy a success," read the statement. "Regrettably, there will be job losses in areas that we are exiting or streamlining and it may take some time before we can provide clarity to those affected. We remain committed to providing you with as much information as we can, as soon as we can."
RBS began to restructure its IP&ED franchise in October 2012 following a review of the restructuring of its investment banking activities, and entered an individual consultation process with the staff directly affected by the headcount reduction in November 2012.
Since then, a number of high profile bankers in its IP&ED division have left the bank including the global head of e-commerce Matthew Wong; the global head of investor products and equity derivatives Christian Erb; and other senior executives such as Max Nelte, head of equity for Asia Pacific and index structuring; Bernard Rogier, head of structured equity pricing and payout development for EMEA; and Ahmad Chaudry, a director in the institutional solutions and advisory division.
At a country level, RBS let go David Lake, head of equity derivatives and structured products sales for the UK and Ireland, alongside Zak de Mariveles, managing director for equity derivative sales in the UK, and Linsey Cobban, a director in structured products sales for the UK and Ireland; as well as David McIlwain, director of investor products structuring in the US; and Jean-Paul van Oudheusden, head of IP&ED for Benelux in Amsterdam.
SRP confirmed that the bank will remain “committed” to delivering on its existing obligations to customers and that many of the job changes will happen this year and it is expected that redundancies will be largely completed by the end of 2014.
SRP could not establish if the global head of investor product sales and markets retail distribution Beat von Gunten will remain at the bank, but confirmed that Martin van Pjieterson, global head of derivative products & solutions and counterparty exposure management, will manage the run-off IP&ED business which sits within RBS' Derivative Products & Solutions and Counterparty Exposure Management division.
RBS will continue to provide structured investor products to institutional clients
RBS declined to comment.