Credit Suisse cuts show decline of the European bank trading floor

Wed Mar 23, 2016 5:27pm EDT
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By Anjuli Davies and Jamie McGeever

LONDON (Reuters) - Credit Suisse's announcement on Wednesday that it will lay off thousands more employees from its trading operations shows how much ground Europe's big banks are losing to U.S. rivals in financial market trading.

The 2,000 job cuts at the Swiss bank follow 4,000 announced as recently as January, and come at the end of what Chief Executive Tidjane Thiam said was one of the worst first quarters for trading on record.

Banks have been on a massive cost-cutting drive since the 2008 global financial crisis as tighter regulations have limited their ability, and willingness, to act as market makers in fixed income markets.

But U.S. banks have adapted to the new environment faster than European rivals, both because regulators forced them to boost capital levels earlier and thanks to being in the world's largest and most lucrative market for fees.

Most of the attrition at European banks has been in fixed income, currencies and commodities (FICC) trading, where revenue has plunged and U.S. banks have taken the lead.

In 2007, revenue from FICC at the eight biggest European banks was $48 billion, ahead of the $38 billion made by the five biggest U.S. banks, according to data analytics firm Tricumen.

Last year, European banks grossed $26 billion from FICC while the U.S. banks made $43 billion, the data showed, meaning Europe's 26 percent advantage has swung to a 40 percent deficit.

The new regulations make trading in fixed income, currencies and commodities more expensive, forcing some banks, especially those in Europe, to exit certain business lines entirely.   Continued...

A Swiss bank Credit Suisse sign is pictured in Geneva, Switzerland, March 11, 2016.  REUTERS/Denis Balibouse