UNDER NORMAL CIRCUMSTANCES, ‘change is the only constant’ is one of the very worst management-speak clichés.

In the Covid era, it’s even more of a truism.

But spurred on by crises, scandals and technological shifts, the winds of change were already rattling the roof tiles of the Irish banking industry before anyone had heard of the virus that has utterly transformed the trading environment at home and abroad.

John O’Connell says he’s not afraid of change.

In a week in which Bank of Ireland (BoI) announced 1,400 job cuts and three major Irish retail banks released half-year results, revealing the stark impact of the pandemic so far, the general secretary of the Financial Services Union believes that difficult, transformative times lie ahead.

But, he says, “There’s a way of doing change that’s tried and trusted in the banks and in Ireland. That’s what we want.”

O’Connell was expecting the results that were announced this week to be stark. What he was not expecting was the decision by BoI to roll out a voluntary redundancy plan with the aim of reducing its headcount from 10,400 to below 9,000.

“We anticipated in the sector that there was the potential, with the half-yearly results coming up, that banks were potentially going to announce redundancies or re-announce them in some cases,” he explains.

With that in mind, O’Connell says, the FSU — which represents 15,000 workers in the financial services sector — engaged with the banks at the end of March and April to secure a pause on redundancies during the current emergency.

Most of the banks frankly agreed with us that it was ‘all hands to the pump’, and that this wasn’t the time for redundancies.

“In AIB, redundancies were paused in March as a direct result of the pandemic. The 200 or so redundancies were to take place over April and May, these remain paused. The other 1,300 or so redundancies are now also paused,” O’Connell says.

O’Connell’s union, he says, represents about 60% of the workforce in BoI. Yet, he heard about the redundancy plan at the same time as everyone else — during the conference call with stakeholders and analysts on Wednesday morning at which the results were announced.

“We were surprised that they decided to go out of step with everyone else in the sector,” O’Connell says, “particularly for BoI, which a few weeks ago, decided to close branches during Covid, citing staffing issues.

“They subsequently reopened them after huge public outcry. But we just can’t square [their staffing needs] with letting 1,400 just walk out the door. It just doesn’t compute.”

Change management

Job cuts are nothing novel in the Irish banking sector.

All of the major retail banks have rolled out redundancy arrangements in the wake of the last crash, cutting their workforces by a combined 45% since then.

BoI is no different.

In 2018, the bank announced plans to cut 2,000 jobs by 2021, around 500 of which have gone so far.

Because of this, O’Connell explains, the FSU has ‘change management’ agreements in place with all of the main banks.

Those agreements, he says, “grew out of the last crisis and have stood ourselves and the banks well as we work through challenges and changes like digitalisation, increased competition and so forth”.

In this context, he says, BoI’s decision this week was “surprising”.

When asked for comment on O’Connell’s remarks, a spokesperson for BoI said “we don’t have anything additional to add” and sent a statement outlining the details of the redundancy package being offered to workers.

That offer, an ‘enhanced’ package, includes 4 weeks’ pay per year of service, instead of the statutory two weeks, and a €5,000 training grant among other things.

But O’Connell says that it’s the messaging that troubles him.

“There are people in shared accommodation, working on coffee tables or in their bedrooms, keeping the banking system going, and their reward in BoI’s case is, ‘Thanks very much. You’re no longer essential. You’re actually disposable. Good luck.’”

A notorious phrase

O’Connell has no illusions about the results announced by the banks mean for the sector.

This week, AIB, BoI and Permanent TSB announced losses in the first half of the year of €700 million, €669 million and €75 million respectively. Ulster Bank, a subsidiary of the London-listed NatWest Group, announced a loss of €276 million last week.

Most of the losses are linked to hefty sums set aside by the banks in ‘impairment charges’ in anticipation of a potential wave of loan defaults in the wake of the pandemic.

AIB has written down the value of its loan book by €1.2 billion and BoI by €936 million, which it said could rise to between €1.1 and €1.3 billion by the end of the year.

It’s an aggressive move but by absorbing the blow this year, the banks are opting to take their medicine now rather than in the future, front-loading the potential losses in 2020 in a bid to get back to profitability sooner.

They are able to do this because the Irish banks are, to use a notorious phrase, made infamous by former Financial Regulator Patrick Neary in 2008, well capitalised with a healthy store of liquid assets on the book.

Of course, that position could change in the event of a tsunami of Covid-linked loan defaults. Currently, there are no major fears among analysts about the structural integrity of the banking system.

“They’re a challenging set of results of no doubt”, says O’Connell, “but I think it is a ‘steady as we go’ situation.

“The results are better than the forecast, so things are improving and are improving faster than the bank had anticipated. And that’s in each of their interim reports.”

Because of this, he believes “it’s not a time for knee-jerk reactions”.

“If you look at the banks, they’re in very strong positions”, O’Connell explains.

“They are very well capitalised. They are robust and nobody has any fears in that regard. We will have to manage the fallout but staff should not pay the price. They shouldn’t be the first port of call in the sense of ‘Well, this is a very challenging time. Let’s axe 1400 jobs.’” 

From the perspective of the union, he says, “We want to participate in a debate about what is the future vision for banking in Ireland. The regulator has a role in that, the Banking Culture Board has a role, the banks obviously have a role and we have a role.”