In 2009, when UBS paid the U.S. government $780 million in penalties for helping wealthy Americans hide money in offshore accounts, the Swiss joked that the acronym of the country’s largest bank stood for “United Bandits of Switzerland” (it actually means United Bank of Switzerland).
Now, a new explanation for the abbreviation is offered: “U’ve Been Sacked,” a twitter reference to the thousands of jobs the banking giant is cutting in a radical bid to scale down its risky trading and investment operations, and focus on the more lucrative personal banking and wealth management services. The move comes amid a $2.1 billion loss UBS posted in the third quarter of this year.
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Jokes aside, for 10,000 bank employees worldwide the loss of their job is no laughing matter. The announcement on Oct. 29 that the banking giant will lay off 15% of its 64,000-strong workforce by 2015 to reduce expenses by $3.6 billion, sparked heated reactions in the bank’s home country. “It’s scandalous that employees have to pay a price for the past mistakes made by the bank’s management,” Christian Levrat, head of Switzerland’s Social Democratic party fumed to the local media, referring to a string of scandals that the bank has been embroiled in in recent years, including a record loss of $17 billion in the U.S. subprime market, as well as a $2.3 billion loss caused by Kweku Adoboli, a former UBS trader in London currently on trial for fraud, whose rogue dealings almost sank the bank last year.
Others, however, see the layoffs as the necessary means to justify the hoped-for end. Christophe Darbellay, president of the Christian Democratic Party, told La Tribune de Geneve newspaper that when in 2008 Swiss taxpayers bailed UBS out to the tune of $60 billion after the bank piled up huge losses during the global credit crisis, “they did it so the bank could become a viable, sustainable, and profitable institution. Now that it’s trying to achieve that, we can’t force a private company to keep its employees against the logic of the market.”
For bank experts too, UBS’s move to downsize “makes a lot of sense,” says Teodoro Cocca, adjunct professor at the Swiss Finance Institute and asset-management expert at the University of Linz, Austria. In fact, tougher industry-wide rules set by global regulatory bodies to avert another financial crisis require that banks have enough reserve capital to cover any future losses, which means they have less cash to invest in risky ventures.
“For UBS, this a historic shift of their strategy, a remarkable step that puts the bank ahead of its competitors in terms of reduction of the investment activities,” Cocca says, adding that adaption of similar measures by American banks “will depend on the reforms that will be implemented in the U.S” – which, according to a recent global banking report by Ernst & Young, are “hampered by political uncertainty and regulatory unknowns.”
For UBS clients, a leaner bank means more security, “and now they will be able to put their money into a less risky and more transparent organization,” Cocca says. “In the end, UBS will be less of a systemic risk for Switzerland and that is good news for Swiss taxpayers.”
(MORE: Can UBS Bounce Back from the Rogue-Trader Scandal?)
This is also a promising development for UBS’s shareholders who saw their shares soar by 7.3 % on the day the new strategy was unveiled.
That, however, is little comfort to the bank’s employees on both sides of the ocean, whose jobs are on the line.
In Britain, where UBS has a staff of 17,000, a total of 5,000 jobs will be ditched. The traders found out about the layoffs when they were stopped from entering the bank’s London offices on Tuesday, and their badges were deactivated, according to Twitter posts, reportedly sent from a neighboring pub.
UBS declined to release to TIME the number of expected layoffs in its U.S. subsidiaries in New York, Connecticut and New Jersey, which employ about 17,000 people, but the math suggests about 2,500 will be let go. A staffer at the bank’s Weehawken, NJ office, who asked not to be identified, told TIME that he and his colleagues “are sitting on pins and needles wondering when we’ll be sacked, and how we will find another job in this economy.”
Over in Switzerland, where 2,500 jobs will be axed, UBS workers are feeling a little less pain than their counterparts in the United States. Denise Chevret of the Swiss Bank Employees Association trade union says the organization has negotiated a “good” severance package for the departing workers – financial and social benefits not available to the bank’s American employees, who are not unionized.
As massive layoffs are underway, UBS’s longtime advertising slogan, “Here today, here tomorrow,” is no longer something its employees can bank on.