By Max Colchester
LONDON-- Royal Bank of Scotland Group PLC is planning to cut hundreds of jobs in its U.S. trading businesses over the next few months as it seeks to slim down its operations to prepare for tough new U.S. regulations, according to people familiar with the matter.
The cuts, which are set to take place over the next 18 months, could result in the loss of up to 400 jobs across the U.S. business, these people said. The bank, 80%-owned by the British government, is scaling back its trading operations at its Stamford, Conn., headquarters as part a wider push to cut costs and refocus on its home U.K. market.
RBS is partly exiting its mortgage-trading business and its distressed-loan-trading business, these people said. As part of that, it plans to cut about two- thirds of the jobs in its asset-backed products business by 2015, these people said. The bank will continue to focus on its rates, currency and global-transaction operations, these people said. RBS's U.S. business employs a total of about 2,400 people.
The bank is scrambling to cut assets in the U.S. ahead of planned rules that will force foreign banks to thicken their capital cushions, face yearly stress tests and be subject to more-rigorous oversight from the Federal Reserve. The more-stringent capital rules, part of the Dodd-Frank financial-overhaul law, will apply to foreign banks with at least $50 billion in assets in their U.S. units. RBS intends to cut about $10 billion in risk-weighted assets by the beginning of next year so that it can get below the $50 billion threshold, these people said.
"As the financial-services industry continues to evolve, so must RBS's U.S. Corporate & Institutional Banking business," a spokesman for the bank said. "Our ultimate goals are to enhance our client focus and connectivity, simplify our operating model, mitigate risk and reduce cost."
Several foreign banks are bracing for the incoming rules, most notably Barclays PLC and Deutsche Bank. The British bank recently presented a plan to cut its global investment banking assets in half and slice 7,000 investment bank jobs over the next few years.
Earlier this year RBS announced a plan to cut about GBP5 billion ($8.3 billion) in costs over the next four years and overhaul its internal operations to better focus on its U.K. retail and corporate clients. As part of this, RBS has said it would reconsider relationships with U.S.-centric clients that don't do business globally.
As it moves away from foreign markets, RBS has accelerated a move to sell its U.S. retail business, RBS Citizens Financial Group Inc. RBS is preparing to sell shares of Citizens through an initial public offering in the second half of 2014. RBS has said it planned to fully exit from its stake by the end of 2016.
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