Commentary: Deutsche Bank job cuts are just tip of iceberg for finance industry

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A number of banks are doomed to fail if they don't adapt to the new realities of the finance industry, says IMD Business School's Arturo Bris.

LAUSANNE: Deutsche Bank caused a recent stir with the seemingly sudden announcement that it would cut 18,000 jobs – one fifth of its global staff.

Let me start by saying that the value of the financial industry is not easy to justify in terms of social and economic benefits. It is true that banks perform a useful function of redistributing financial risk, allocating capital and providing credit. But there are too many banks, and what is even worse, there are too many bankers.

Banks are necessary, but we need fewer and smaller banks. The so-called fintech revolution, where outsiders are taking over the traditional activities of established players is the pinnacle of a new financial order. It has been more difficult to attract talent, and the financial industry has not been able to take its choice of the top candidates.There is also something specific about large, global banks that has changed in recent years. What we thought would be optimal for efficiency’s sake and a way to serve customers better – scale – has backfired.Banks have become “too big to fail”. They are slow bureaucracies and their costs have skyrocketed.

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