Mellon to Slash Tokyo Staff As Part of a Global Retreat
Mellon Bank Corp. will sharply reduce its Tokyo operations next month, becoming the latest U.S. bank to retrench in Japan.
A Mellon spokesman said the cutback will be part of a broader reduction in the bank's international operations.
"We do not intend to be a major player in global banking," the spokesman said.
The Unit's Focuses
The Tokyo unit focused principally on securities and foreign exchange trading, lending, and letters of credit.
Mellon will cut its staff in Tokyo from 25 to three or four and reduce its operation from a full-fledged branch to a representative office. The bank is also in the process of shutting down its Hong Kong branch, the spokesman added.
Since last year, Continental Bank Corp., Chase Manhattan Corp., Bank of Boston Corp., and First Interstate Corp., have also slashed their operations in Japan in the face of rising costs and poor earnings.
Continental Bank has cut its staff to 30 from 125, and Bank of Boston to 35 from 55. First Interstate has shut down trading in foreign exchange and securities in Tokyo.
A Chase spokeswoman did not comment on news reports that the bank has imposed a 30% pay cut on some 50 workers in Japan, but she confirmed that the bank had shut down its Osaka branch and moved operations to Tokyo.
As a result of the cutbacks, disgruntled employees and former employees have filed a rash of lawsuits claiming that Continental and Chase violated the country's labor laws.
Continental Confirms Suits
A Chase spokesman was unavailable for comment on the lawsuits, but Continental confirmed that several former employees had filed suit against the bank in Japan.
Few U.S. banks have been making money in Japan in recent years. According to figures released by Japan's Ministry of Finance, Citibank, the biggest U.S. player in Japan, lost $158 million last year, Bank of America lost $24 million, and Continental $26 million.
Bankers said the high cost of doing business in Japan, coupled with a slump in business and low earnings at U.S. banks, are behind the pullout.
"Tokyo is an expensive place to operate, and business is down," said Kevin Mulvaney, international banking group executive at Bank of Boston.
U.S. banks have run into especially costly problems with their trading operations. Many built up their operations too late to profit from heavy bond and foreign exchange volumes in the mid and late 1980s.
"A lot of the banks built up treasury rooms in Tokyo in the go-go '80, just before the recession came along and competition got fiercer," Mr. Mulvaney said. "They are finding that they have to put up with roller-coaster revenues or pull back to specialized niches."