Has the reduction of employment been efficient in the restructuring of banks in Europe? An insight into the overbranched sector in Spain

ABSTRACT

This study examines whether the reduction of the number of employees has actually been efficient in the restructuring undertaken in the European banking sector, focusing on the case of Spain but providing insight into restructuring and downsizing issues similar in other southern countries in Europe. In Spain, the concentration process has been more intense because of the financial crisis. For this purpose, the evolution of the number of employees in the subsector of the listed banks was analyzed during the 2003–2012 period in order to have a timespan that would enable the diverse hypotheses to be verified under the double scenario of the economic boom (2003–2007) and the subsequent financial crisis (2008–2012). It was also during this second period when savings banks disappeared and had to be converted into banks; meanwhile, other entities were involved in mergers, acquisitions, and also in hybrid and innovative formulas of concentration as the Institutional Protection Schemes (IPS). This transformation has given rise to a marked reduction of the commercial network. In this context, employment has been adversely affected. Using a model of linear regression with panel data, the results enable us to confirm that none of the findings obtained examining the relationship between downsizing and the increase of corporate efficiency allow us to conclude that the impact has been positive, as significant differences cannot be appreciated between the reduction of personnel and corporate efficiency.

KEYWORDS:

• Banks
• downsizing
• employment
• Europe
• IPS
• restructuring
• Spain

Notes

Nearly 90% of MFIs are credit institutions (commercial banks, savings banks, credit unions, post office banks). The other 10% are money market funds accounted, central banks and other institutions.

IPSs arose with European Directive 2006/48/CE of June 14, of the access to the activity of credit institutions. IPSs are applicable to various types of banking institutions, although it seems better to adapt to savings banks and credit unions, by having a deep-rooted solidarity culture. Its article 80 indicates “that the institutional system of protection is based on broad participation of credit entities with a predominantly homogeneous profile of activities.” It is also more precise than entities reasonably comparable in activity and business model, as in the aforementioned given its strong territorial character, the local roots and the practice of a dominant model of intensive and extensive retail banking on a network of offices.

The cases being the savings banks (cajas) Ontinyent and Pollensa.

To be precise, the mergers and groupings of savings banks (cajas) undertaken since 2010 gave rise to the incorporation of several banks that took over the banking business of the cajas from which they derived. Their incorporation as public companies limited by shares (sociedades anónimas) and even their launch on the stock market from June 2011 was the manner of transforming their capacity in order to be solvent.

The European Association of Co-operative Banks (or EACB) was founded in Brussels in 1970 and is the leader association in the representation of the common interests of its 28 institutional members and the more than 4,200 European credit cooperatives that form part of it, while it acts as their official spokesman before the Institutions of the European Union.

To the foregoing should be added the processes undertaken earlier (the incorporation of Banca Cívica, Liberbank and Caja 3 by IPS, the mergers of la Caixa and Caixa Girona and the merger of Unicaja and Caja Jaén), and the cajas bailed out by the Bank of Spain in 2009 and 2010 respectively: Caja Castilla-La Mancha (CCM) and CajaSur, subsequently absorbed by other banks.

Source: Tribunal de Cuentas del Reino de España (The Spanish court of auditors), 2014.