Bank of New York Mellon to Cut 1,500 Jobs, 3% of Workforce

[marmar]

(Bloomberg) Bank of New York Mellon Corp. (BK), the world’s largest custody bank, plans to cut 1,500 jobs, or 3 percent of the workforce, to curb expense growth.

The New York-based bank will implement an immediate hiring freeze across much of the company and reduce its use of temporary workers, consultants and contractors, it said today in a statement.

“Expenses have been growing unsustainably faster” than revenue, Robert P. Kelly, BNY Mellon’s chief executive officer, said in the statement. “We expect our natural turnover and immediate hiring freeze will reduce the impact on existing staff” from the job reductions.

Kelly said last month he planned to reduce costs after non- interest expenses rose 22 percent from a year earlier. At that time, he said the bank would move people to cheaper locations, consolidate its real estate holdings and cut its procurement budget.


http://www.bloomberg.com/news/2011-08-10/bny-mellon-to-cut-1-500-jobs-3-of-workforce.html

[alc]

1. put yourself in their shoes

* They want to make money (about their only goal)
* Much of their business is international and electronic
* That business can be done just as easily from Toronto with less taxes and regulation (At least Toronto is the city I've been told a few banks are relocating US business to)
* US taxes may go up
* US regulations are confusing. What exactly does the Dodd-Frank bill require and how will it be interpreted/implemented by the administration? And it may change either by Congress, or by a new president with different interpretation.
* A few people are calling for big penalties to move jobs out of the US in the future. I support a tax structure that incentivizes job creation and penalizes job loss.

If you are the CEO, what do you do? (pretend you are very greedy and your only goal is to make money)

If you are the US government, how do you change what the CEO will do? That's the question we need to answer rather than "how do we collect more revenue from the CEOs who don't leave?"

[marmar]

2. My understanding is that Canadian banks are much MORE regulated.....

...... that's why they didn't get caught up in the subprime silliness.

[alc]

3. more regulation is not necessarily bad

Being able to understand it and knowing it won't be changed or reinterpreted is critical. You obviously only move parts of your business that Canada allows to Toronto and focus on the parts with a financial advantage there (i.e. better taxes).

Knowing that the financial product you are putting money into developing this year or acquisition you are thinking of purchasing or the loan rules you are putting in place will still be legal next year is very important in making those decisions.

In the US, banks need lawyers who understand 1) What congress said, 2) how the current administration interprets it, and 3) how the SEC regulates it (and 4-how the SEC/justice department will fine/prosecute if the lawyers don't get 1/2/3 right). And once they think they have those figured out, the laws (Congress) or interpretation (President/SEC) may change (often because of bank lobbying).

Higher taxes are also not always bad. Knowing that your ROI calculations 3-5 years out are correct wrt taxes is very important. If taxes may go up X% on the business plus Y% on stockholders (capital gains) over the next 5 years, it's almost impossible to calculate the effect an investment may have on stock price. That makes it very hard to justify investing a billion dollars. Better to sit on the money until there's more stability and you don't have 20% of congress yelling "lower taxes" and 50% plus the president yelling "higher taxes". The best thing congress can do is set a 5-year tax guarantee at any rate.

[xchrom]

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