Bankers who profited from Nordic hiring boom now in the firing line

Helsinki

A FEW years ago, the biggest banks in one of the richest corners of the globe were adding thousands of jobs to a department that suddenly seemed more important than most others: compliance.

But with headcount growing more than 10-fold in some cases, those same jobs are now at risk.

This month, Danske Bank warned of "significant" cuts, with analysts betting at least 1,000 jobs will be axed, especially in compliance. Nordea Bank says most of the 1,500 jobs it created to fight financial crime just a few years ago need to be automated to keep costs in check.

Mikael Bjertrup, head of Nordea's financial crime prevention unit, says the bank hired a "huge number of people" in 2016 and 2017. But cuts are now under way, because "it's simply too expensive", he said.

Nordic banks beefed up compliance units in response to a wave of financial crime allegations. Most notably, Danske's Estonian dirty-money affair, which is still being investigated by prosecutors across the globe.

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"After the scandals the banks rushed to add people, since they couldn't change technology over-night. The simplest way is adding more people," said Sujata Dasgupta, Stockholm-based expert on financial crimes compliance at Tata Consultancy Services. But, she said, "there will be a rebalancing of labour: you might not need so many people in the first line, and there's scope for automation".

The need to cut back is more urgent than ever after the Covid-19 crisis pummelled loan books and ate into profits. Analysts say compliance is an obvious area for cuts, after departments mushroomed quickly in the wake of scandals, often without much time to focus on efficiency.

Banks across the UK, Germany, France, Italy and the Netherlands are seen spending US$136.5 billion on financial crime compliance, up from around US$85 billion in 2017. About 62 per cent of the compliance budgets are spent on labour, down from 74 per cent a few years ago, according to LexisNexis Risk Solutions. Financial crime compliance processes and burdens boosted banks' costs 7 per cent annually during the past two years, with negative impact on productivity and winning new business, it said.

"Reversing the compliance-cost burden of the banks in the aftermath of the money-laundering scandal is likely to be key," said Philip Richards, a senior analyst at Bloomberg Intelligence. BLOOMBERG