According to various reports, Royal Bank of Scotland (RBS) is set to cut its mortgage trading business by as much as two-thirds over the next 18 months.
The original report, from the Financial Times and followed up by Reuters, said that the British bank will eliminate hundreds of jobs over the next two years “as part of an effort to reduce its assets ahead of new rules set out by the U.S. Federal Reserve.”
An RBS spokesperson told Reuters in an emailed response that "as the financial services industry continues to evolve so must RBS's U.S. Corporate & Institutional Banking business. Our ultimate goals are to enhance our client focus and connectivity, simplify our operating model, mitigate risk and reduce cost."
The Financial Times (paywall) also reported that the RBS cuts “primarily affect the non-agency mortgage business, and the British bank is expected to retain its securitization and agency mortgage business.”
The Wall Street Journal (paywall) reported that RBS is “partly exiting its mortgage-trading business and its distressed-loan-trading business,” and plans to cut roughly two-thirds of the jobs in its asset-backed products business by 2015. From the Wall Street Journal report:
The bank is scrambling to cut assets in the U.S. ahead of planned rules that will force foreign banks to thicken their capital cushions, face yearly stress tests and be subject to more rigorous oversight from the Federal Reserve. The more-stringent capital rules, part of the Dodd-Frank financial-overhaul law, will apply to foreign banks with at least $50 billion in assets in their U.S. units. RBS intends to cut about $10 billion in risk-weighted assets by the beginning of next year so that it can get below the $50 billion threshold.