The joke going around Parisian financial circles is that CGT, the Confédération Générale du Travail, the French trade union umbrella organization, has a new meaning: Confédération Générale des Traders. Meanwhile, at the investment banking office at Natixis, real CGT flags are draped in the windows.
Especially for someone used to London, investment banks are the last place you might expect to see union activity. But the strength of trade unions in continental Europe is a big worry for bank chief executives and their investors. Many more cuts are needed to make these banks profitable, especially in investment banking, and above all in France and Germany.
More worrying still, the increasingly charged atmosphere in European politics could make it harder to carry out the employee negotiations that by law must happen before bank restructuring plans can go ahead. Populism in the style of the Gilets jaunes (yellow vests) could impact the willingness of their representatives to play ball, or obstruct their executives’ attempts to do so.
Trade unions may already be part of the reason why European banks – in France, and especially Germany – are less profitable than their US peers. Banks are big employers. Union power may make them more likely to delay acting decisively until close to disaster, when everyone has to acknowledge it’s necessary. It might have made their investment banks even slower to admit defeat, too.
Now trade unions, or fear of trade unions, could scupper the Commerzbank/Deutsche Bank merger and other deals, primarily due to the way job cuts are negotiated.
Société Générale’s announcement of 1,600 job losses in April, 7.5% of its workforce, could only have happened after talks with its unions, via employee committees, this year. Analysts need to pay greater attention to union relations in banks, rather than just looking at the numbers.
The benefits of bank employee committees in countries like France are important.
Some bank employees may be opportunistic in their participation and positions in these negotiations, but more will simply be worried about losing a job that they love and do well, and of the impact of instability on their family life.
Bank management would not make as much effort to retrain and replace employees if they did not have to engage with unions.
Bank executives must acknowledge and respect this, for their own good and that of their shareholders. Banks must foster good relations with employee organizations over the longer term, so that when cuts are necessary, there is already a basis of trust.
Listening to their staff’s concerns is vital.
