RBS 'to overhaul investment arm'

Taxpayer-backed Royal Bank of Scotland is reportedly preparing an overhaul of its investment banking arm which could put up to 5,000 jobs at risk.

RBS, which is 83% state-owned, has launched a review into its Global Banking and Markets decision amid falling revenues and mounting regulatory pressure, the Sunday Times said.

Draft proposals, which will be influenced by the final outcome of reforms including recommendations by the Independent Commission on Banking, would see European outposts cut out of the investment banking operation and focus placed on its British and US operations.

RBS earlier this year warned up to 2,000 jobs could go as it unveiled its exposure to Greek debt and provision to cover compensation for mis-sold payment protection insurance (PPI) tipped it to a half-year loss of £794 million.

However sources have told the Sunday Times that the latest plan would increase the number of jobs at risk significantly. RBS declined to comment.

Stock market turmoil and a lack of investment deals globally are hitting investment banks across the world.

Elsewhere, new capital rules, which require banks to hold larger cash buffers to protect against potential future crises, are making it harder for banks to generate the high returns investors demand.

Meanwhile, Wall Street banking giant Goldman Sachs will unveil a dismal set of third-quarter results on Tuesday, underlining the pressures the market turbulence has had on the sector.

JP Morgan Chase has already reported a 4% decline in profits, citing the recent volatility and eurozone debt crisis as the reason behind its drop in business.

The picture is much the same at Goldman Sachs, which has already announced thousands of job cuts and where revenues are expected to have fallen by about half (54%) to 4.93 billion US dollars (£3.1 billion) compared to the second quarter.

The impact of the ugly results is likely to trigger a slashing of bankers' bonuses, according to analysts, after the bank made a commitment to ensure no more than between 35% and 45% of revenue is paid to staff - a lower proportion than any other Wall Street bank.

Source: PA