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Finance

Financial giants in retrenchment mode amid market slump

Nomura's foreign exchange trading room

TOKYO -- Nomura Holdings is joining the ranks of investment banks rushing to shrink operations in light of the tough environment brought on by a slowing global economy and tightened financial regulations.

     The Japanese brokerage said Tuesday that it will reassess strategies for wholesale businesses in the U.S. and Europe, where the company had a combined 6,000 workers as of the end of last year. Nomura is seen using the scalpel mainly on its stock-related business, withdrawing from derivatives and corporate research in Europe. In the U.S., stock underwriting and business research operations will be downsized. The plan is to cut up to 1,000 jobs.

     Nomura bought the European and Asian operations of Lehman Brothers after the U.S. financial services firm collapsed in 2008, hoping to realize its long-cherished dream of becoming a global investment bank. But Europe was soon hit by a debt crisis, bringing down its economy with it. Business in emerging Asian markets also failed to grow in the face of China's economic slowdown. In the U.S., the world's biggest capital market, Nomura struggled to gain market share in stock underwriting and other areas where local players dominate.

     Nomura's overseas operations logged pretax losses for five straight years through March 2015.

     From 2011 to 2013, Nomura wielded the ax in Europe, where personnel costs were high. But this year the company has faced a "tempest in the market," a senior official said. Stock and bond trading declined sharply as resource prices tanked and anxiety over China spread. The likelihood of a protracted slump forced Nomura to take on additional restructuring. 

     U.S. and European financial institutions are contending with similar hardships, moving to cut personnel at a rapid clip. Swiss private bank and wealth manager Credit Suisse will eliminate 6,000 jobs, mainly in its investment banking segment. Barclays of the U.K. decided in January to withdraw from cash stocks in Japan, with 1,000 staffers to get pink slips, mainly in Asia.

     American investment bank Morgan Stanley plans to cut personnel in its bond business by up to 25%. Price volatility caused by speculation over U.S. rate hikes has made bond investment riskier. An official at a foreign brokerage said profits from bonds are down by more than half from when the market was active in 2009.

     Such downsizing also is driven by tighter rules from U.S. and European regulators seeking to prevent a recurrence of the global financial crisis. Revised capital requirements have made it tougher for financial institutions to dabble in proprietary trading to generate profits.

(Nikkei)

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