Fears for jobs in banks may be overdone

FEARS of major job losses and falls in profits in the Irish banking industry in the run up to monetary union may be overdone. The sector is already in advanced stages of plan for the single currency and is lively seeking alternative sources income and employment.

The ESRI's report on the impact the single currency last week must have sent shivers around many of Dublin's dealing rooms. The findings, however, were of no surprise to management.

According to the report, commissioned by the Minister for Finance, Mr Quinn, between 2,000 and 4,000 financial services jobs will be lost as a direct consequence of joining monetary union.

In addition, the cost of implementing the changeover will be up to £100 million. As a result, the banks are likely to look to the Exchequer for some kind of compensation, perhaps through tax measures.

The exact number of job losses depends on whether Britain joins or, as looks more likely, stays out. Most of these jobs will be in foreign exchange dealing rooms. As one of the most open economies in the developed world, Irish banks have built up considerable experience, and jobs, in this area.

The report also forecasts that jobs will be lost in other treasury operations, particularly the bond markets, as they will be likely to transfer to London or Frankfurt.

Despite all this AIB, Ireland's largest bank, is convinced that the move will not mean any job losses among its dealers and treasury support staff.

"The report was very accurate," says Mr Chris Ducker, head of branch treasury products at AIB. "But we have been working on this for two years.

He admitted that the sheer scale of foreign exchange earnings means the loss is bound to have a short term effect on the bank's profits. The key, he said, is to find other sources of income and other operations to make up for the losses.

"If the economy continues to pick up and there are continued low interest rates, the biggest source of increased profits is increased activity," he said. "And, if the economy is doing well, the banks will be doing well."

His chief executive, Mr Tom Mulcahy, agreed. "We shouldn't see any job losses," he said. However, diversification may mean, for example, that some staff may end up in the bank's recently expanded Singapore treasury operations or in New York.

The bank has already expanded in the Far Fast, eastern Europe and the US, Mr Ducker points out, and that is likely to continue. "We could see an acquisition in the single currency area," he said. "Irish banks have built up excellent hedging experience and these could be applicable in markets like France. "One way to go would be to expand through strategic alliances.

He added that many European markets are not as advanced as Ireland on the import/export side. "We hope to conduct much greater levels of business," he said. "Corporate treasuries aren't location dependent." AIB will also be hoping to concentrate more on interest rate rather than currency hedging products.

Mr Ducker also stressed that a "real challenge" will be following large Irish food companies to Britain. "Irish companies looking to relocate part of their cost base to Britain will be targeted by British banks," he said.

He noted, however, that the likely relocation is more to do with Britain's opt out of the social chapter rather than whether sterling enters the single currency.

Mr Ducker also said that Irish banks would have a case to make for compensation for the cost of converting to the single currency.

He added that the retail sector will also be facing big costs and could also have a case for tax breaks.