FDIC Finds Only 4% Shrinkage
The banking industry has been cutting staff in recent years, but the pace is slower than many industry observers had expected.
According to employment figures compiled by the Federal Deposit Insurance Corp., the number of employees at federally insured commercial banks has dropped by about 60,000 in the past five years to 1,486,159 at the end of 1991, only 4% fewer employees today than in 1987.
That shrinkage is well behind the 15% to 20% reductions that observers say the banking industry needs in order to be competitive in coming years.
Given that some of the largest mergers are already reporting significant employee reductions, bankers say the FDIC numbers suggest a reshuffling of employment rather than an overall reduction. This leads some observers to question whether the industry is actually getting leaner.
"My gut reaction to the [employment] numbers is that they should be much higher," said Gary Peters, a senior vice president and director of human resources for West One Bancorp., Boise, Idaho.
Swapping in the Picture
"There has been a lot of streamlining going on, but there has also been a lot of employee swapping, which has a pretty large effect on the global numbers."
Mr. Peters pointed out that since thrifts do not report to the FDIC, the employment numbers could be misleading.
As commercial banks acquire smaller savings institutions, they are bringing new groups of employees into the commercial bank fold. This development may partially explain why the FDIC's employment reduction figures are not more significant, he said.
Yet despite this statistical quirk, many observers believe the numbers are still low, given that the number of commercial banks has dropped by 14% in the last five years.
"In the restructuring, we're seeing an awful lot of people offered other jobs within the bank," said Tara Little, a spokeswoman for the American Bankers Association's human resources executive committee. "A lot of money goes into training employees, and we're finding that bankers are reluctant to let people go if they don't have to."
According to Mr. Peters, a bank in the process of consolidating is most likely to eliminate administrative positions.
This means that areas such as data processing, advertising, and legal can typically expect to lose 30% to 50% of their staff.
Many of these workers - though clearly not all of them - have been able to wind up landing jobs with one of their former employers' rivals.
For example, about 50 technology employees who were laid off as a result of Fleet Financial Group Inc.'s consolidation effort have landed at New England rival Bank of Boston Corp., according to Michael Zucchini, Fleet's chief information officer.
"It's important to note that these people are not being fired for cause, but laid off," Mr. Zucchini said. "That says the vast majority of them are competent, well-trained workers who are often likely to be picked up by another financial institution in the same region."
As two of the nation's largest banking consolidation efforts - Chemical Banking Corp. and BankAmecica Corp. - begin to take hold, that theory is expected to be rigorously tested.
Observers say that the year-end 1992 employment figures will be the true test of whether banking cosolidation was reached its expected goals.