The Royal Bank of Scotland announced today that they will be making cuts to the tune of another 3,500 jobs over the next three years,  in an attempt to cut back the investment banking division of the company, to focus more on core business and reduce risk.

This announcement will see them move from investment banking to a focus on trading foreign exchange and bonds and assisting larger companies with finance management.

Instead of a ‘Global Banking and Markets’ division, Royal Bank of Scotland will establish a ‘Markets’ business and a separate ‘International Banking’ operation.

The market seems to have responded well to the news, and  RBS’s share price rose 6.8% in morning trading, outstripping other banks and larger companies on the FTSE 100 index.  The market had some warning however, as these changes were alluded to earlier in the year. Chancellor George Osborne announce these changes in strategy late last year, in December 2011:

Investment banking will continue to support RBS’s corporate lending business but RBS will make further significant reductions in the investment bank, scaling back riskier activities that are heavy users of capital or funding.

RBS have said that the restructuring is also part of an attempt to prepare for the new UK regulations requiring banks to separate their core operations from their riskier activities, such as investment  banking.  They will be looking to cut the amount the bank borrows and lends by 120bn, aiming for a goal of £300bn (from £420bn) within three years.

Robert Peston of the BBC says of the news:

The overall aim is to improve profits and reduce risks…Which matters to most of us, since taxpayers are sitting on losses of £26bn on the £45.5bn they invested in RBS to rescue it.

Royal Bank of Scotland is no owned 83% by the taxpayers,  since they invested money to save the bank.  Since the financial crisis began in 2008, RBS have seen a loss of almost 30,000 jobs, 22,000 of which were based in the UK.

 Do you have an opinion on the latest round of cuts? Let us know in the comments below!

Could this be the clearest indication yet that banks have admitted defeat in the long running bank charges saga? In a surprise move, the taxpayer-owned RBS-Natwest group has announced it will be slashing charges related to overdrafts – breaking ranks with the rest of the banking industry.

With a decision on whether the Office of Fair Trading can regulate charges levied by banks on overdrafts and direct debits due to be delivered anytime, the move could be seen as the bank’s attempt to pre-empt any judgement and from 1st October, Royal Bank of Scotland (RBS) and NatWest customers will be charged only £5 for having a cheque bounced or direct debit returned unpaid; this is down from the current charge of £38. Meanwhile, the charge for paying an item on an overdrawn account falls from its current £30 to £15.

“This is obviously very welcome news and about time,” said Marc Gander of the Consumer Action Group. “Hopefully this is a recognition of how unfair their pricing system has been.”

If the Office of Fair Trading is successful in its ongoing legal battle with eight High Street banks – including RBS-NatWest – then banks and building societies would have to pay out billions of pounds in bank charge repayments to settle the 1.2 million cases currently being held in the legal system.

However, the decision by RBS-Natwest could be a clear signal that the banks are preparing for the worst and the move is sure to be welcomed by customers of both banks.

What’s more, such a move could well see other banks follow suit and cut their own charges in order to retain their customer base.