RBS to Shrink Trading Business and Cut Hundreds of US Jobs

The Royal Bank of Scotland is planning to cut hundreds of jobs in the US as part of its shrinking of its mortgage trading business in the country.

RBS will cut around 300 jobs over the course of two years, according to a Financial Times report which cited people familiar with the matter. A Wall Street Journal report put this figure even higher, at 400 roles to go over 18 months.

The move is part of an effort to reduce the bank's assets in the country ahead of new rules set out by the US Federal Reserve. The Fed is demanding higher capital and liquidity levels for foreign broker-dealers with more than $50bn (£29.7bn, €36.6bn) in assets.

RBS currently has $85bn of assets in its trading business.

"The moves solidify a sharp reversal in strategy from RBS, which built one of the biggest trading floors in the world in Stamford, Connecticut outside New York, but has now dramatically scaled back its ambitions," the FT writes.

In order to comply with new regulations, the bank will cut its non-agency mortgage business, which involves trading mortgage bonds that are not guaranteed by the US government, by two-thirds over two years, sources told the FT.

The UK bank, however, is expected to retain its securitisation and agency mortgage business.

Furthermore, there would be job cuts in the bank's interest rate trading business, which it plans to "optimise."

Without cutting back on its business, the bank would have to face costs between $50-100m to comply with the Fed's rules, the sources added.

"As the financial services industry continues to evolve so must RBS's US corporate & institutional banking business," a spokesperson for RBS said in a statement.

"Our ultimate goals are to enhance our client focus and connectivity, simplify our operating model, mitigate risk and reduce cost."