The inevitable job cut at the banks due to the effect of Retail Distribution Review (RDR) has been set in motion with HSBC leading the pack. About 2,217 redundancies will be made as part of re-structuring at HSBC. While 2,217 will be leaving immediately, the total job losses will be 3,167 across the UK. This did not come as a surprise as the bank made announcement of redundancies last year ñ so it was more a matter of when and not if. This is part of the on-going global restructure within HSBC which will leave them with 30,000 fewer staff.
Part of the reason attributed to the redundancies has been the effect of RDR which impacts the business model and as a result the bank will end up with less and less protection business and also increased capital requirements which will mean more cost of doing the business. Most of these jobs losses have been in the middle to senior management levels and the staff from its 1,250 strong branch network have been left largely unaffected.
The increased costs of doing business is forcing the banks to look and ways and means of cutting costs and HSBC will not be the only one. It is very likely that all major banks will follow suit sooner or later.
Some of the insurers of income protection insurance and payment protection insurance have been refusing short term unemployment covers and redundancy covers to certain job categories in the banks for the last few months. This announcement risks excluding the entire middle to senior management from securing a protection such as redundancy insurance.
The news of double dip recession followed by the job losses announcement has unsettled the markets. Traditionally most people have tended to invest in protection products such as life insurance and critical illness but that trend is slowly but surely changing. More and more people now want to protect their income and income protection insurance is increasingly becoming more popular. Income Protection insurance has its benefits as it not only pays a monthly benefit for upto 12 months but it also offers people time and space to determine what they want to do with their lives. As the common adage goes, income stops but not bills. Also buying income protection insurance has been made simpler by the insurers and the intermediaries. Most income protection insurance policies have initial exclusions and it is important to ensure that the decision of buying an income protection policy is not left too late in the day as if the redundancy happens within the initial exclusion period; there is no practical use of having the policy.
Which are the other banks that will follow HSBC? It's anyone's guess.
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