Cost-cutting days are here again. With the year grinding to a close, and with various banks around the world and in the US once again the target of popular adoration, management teams are wondering whether or not to cancel their "elves" parties come Christmas-time. The first bank to vote Nay on free booze, finger food and cheesy music is UK's nationalized RBS: "Royal Bank of Scotland Group Plc (RBS) is canceling Christmas for its investment bankers this year as the government-owned lender tries to reduce costs." It gets worse: the first person to laugh or joke gets the sack: "The bank will stop subsidizing holiday parties and has banned staff entertainment for the rest of the year, Chris Kyle, chief financial officer of RBS’s investment bank, wrote in an e- mail to employees obtained by Bloomberg News. A spokesman for the lender confirmed the contents of the memo." The latest development marks a new low for the bankrupt bank, which previously had the generous allowance of $16 per person for holiday spending: "RBS reduced its spending on holiday parties to 10 pounds ($16) a head, enough to buy two pints of lager and a packet of potato chips, in 2008 after receiving the biggest banking bailout in the world in the financial crisis. The lender announced 2,000 job cuts at the securities unit in August." Certainly this aggression will not stand: we expect white collar riots, powerpoints of mass demonstrations, and multiple scenario IRR excel models for the pros and cons of banker unionization, all organized via Blackberry-blasted calendar events, in which Wall Street will finally #OccupyMainStreet.
Actually scratch the Blackberry:
The bank is seeking to “further tighten and minimize the rate of spend on non-staff costs,” Kyle wrote. RBS has also frozen spending on computer hardware, new Blackberries and additional newspaper subscriptions, he said.
“International travel for internal purposes is to cease across all areas” and “travel under four hours duration will be in economy class without exception.”
Employees have also been stopped from organizing off-site meetings and from taking taxis home before 10 p.m., he said. All contractors will take a “mandatory” vacation from Dec. 19 to Dec. 30, Kyle wrote
The reason for the sudden reminder that RBS is, essentially, still insolvent - why more capital raises of course.
The lender may also have to raise capital as European Union regulators force banks to bolster themselves against losses from the region’s sovereign debt crisis.
RBS might need to raise as much as 19 billion euros ($26 billion) of new capital to pass a third round of stress tests, Credit Suisse Group AG analysts led by Carla Antunes-Silva wrote in a note to clients yesterday. Evolution Securities Ltd.’s Ian Gordon said in a note today that RBS has “absolutely no need” to raise more capital because the bank wrote down its holdings of Greek debt by 50 percent in the second quarter.