HSBC, one of the largest banks and lenders in Europe, is planning a global pay freeze in 2016, according to Reuters.
Sources who are familiar with the matter told Reuters that the staff were sent an email on Friday, with details of the bank’s most recent cost-saving measures. The sources wished to remain anonymous.
“As flagged in our Investor Update we have targeted significant cost reductions by the end of 2017,” said Gillian James, a spokeswoman for HSBC.
In June, 2015, HSBC’s Chief Executive Officer Stuart Gulliver had outlined a three-year plan to reduce its global network by closing businesses that were losing money, in addition to reducing its workforce, according to Bloomberg. These actions were to surge compliance costs and improve the bank’s earnings.
BBC News reported that the London-based bank had told investors in June of 2015, that it planed to cut $5 billion of costs by 2017. HSBC also said that, in the U.K., 8,000 employees would be fired out of its 48,000 workforce. The workforce in the U.K., has since trickled down to 45,000. Additionally, 25,000 job cuts are planned globally.
Its investment bank was also shrunk by a third due to slow economic growth and a tighter regulation of the bank balance sheet risk globally. HSBC is also looking for a buyer to take over its operations in Turkey, after they sold their operations in Brazil. Earlier this month, it was suspected that the bank may leave Lebanon, after reviewing its operations there.
In November, 2015, HSBC closed its private banking business in India, which singled out customers who had “a relationship balance” of $1 millon. Around 70 employees were transferred to the Premier banking business under HSBC, according to sources who wished to remain anonymous.
Along with the global pay freeze, HSBC has also made news last week for talks of potentially moving the company’s headquarters from the U.K. to Hong Kong. A senior source for the bank said on January 27, that the decision could be made as early as this week.
“Memo to HSBC: If the bank was ever serious about moving its headquarters to Hong Kong, the arguments in favor have been diminishing fast,” said Nisha Gopalan, in an article for Bloomberg titled “H Is for Home (and That’s London.)”
Gopalan noted that if HSBC were to move shop, it would most likely be in Hong Kong, since that’s where the bank was founded in 1865.
“How the landscape has changed,” said Gopalan, who noted that a former HSBC CEO called Hong Kong, the “the gateway to China.”
Gopalan continued, “Being the gateway to China isn’t what it used to be, with the world’s second-largest economy growing at its slowest pace in a quarter of a century last year.”
On Friday, HSBC faced a setback when a cyber attack forced its personal banking websites in the U.K. to shutdown, according to Reuters.
“HSBC’s internet and mobile services have partially recovered, and we continue to work to restore a full service,” said John Hackett, U.K. Chief Operating Office for HSBC, in a statement.
HSBC isn’t the only company in 2016 to have put a global pay freeze on its employees. Earlier this month, Sam Walsh, the CEO of Rio Tinto, a mining company, announced for a global pay freeze across the company, according to Financial Review. The London-based company wanted to cut its spending on consultants and contractors, as well as being stricter on expense management.
“If something is not essential, stop doing it,” Walsh said a note to his staff. “What is ahead is very sobering.”
Walsh also noted that he canceled many business trips and has asked employees to follow suit. He has stressed that growth cannot be achieved without some cost-cutting measures.
“We are one of the world’s most trusted and admired companies, and to preserve this we need to respond to the challenges of 2016,” said Walsh.
We’re only into the beginning of 2016, but one has to wonder if other other companies will start to impose a global pay freeze in order to cut costs.
[Photo by Matt Cardy/Getty Images]