Description
The financial services make up a high-skill sector well above the standards of other industries. This, however, did not prevent the business from triggering the current world financial crisis which seems to be heading towards the worst economic depression for decades.
DG Employment, Social Affairs and Equal Opportunities
LOT 15
of
Comprehensive Analysis of Emerging Competences
and Economic Activities in the European Union
undertaken for the
European Commission
Employment, Social Affairs and Equal Opportunities DG
Unit Working Conditions, Adaptation to Change
VT/2007/090
by
Danielle Kaisergruber
Kurt Vogler-Ludwig
in cooperation with
Anna Kwiatkiewicz
Munich, 9 June 2009
Skills scenarios for the
Financial Services Sector
in the European Union
Final Report
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 2
This publication is commissioned under the European Community Programme for Employment
and Social Solidarity - PROGRESS (2007-2013).
This programme is managed by the Directorate-General for Employment, social affairs and equal
opportunities of the European Commission. It was established to financially support the imple-
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policy areas;
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priorities; and
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For more information see:
http://ec.europa.eu/employment_social/progress/index_en.html
The information contained in this publication does not necessarily reflect the position or opinion of
the European Commission.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 3
FINAL REPORT, 9 JUNE 2009
Contents
Executive summary ...........................................................................................................................................................11
Résumé ...............................................................................................................................................................................12
Kurzfassung .......................................................................................................................................................................13
Summary.............................................................................................................................................................................15
0. Introduction............................................................................................................................................................33
1. Mapping the sector ................................................................................................................................................33
1.1. Definition ......................................................................................................................................................... 33
1.2. Market development ....................................................................................................................................... 36
1.2.1. Banking industry.............................................................................................................................. 36
1.2.2. Insurance industry........................................................................................................................... 37
1.3. Financial services in Europe and in the rest of the world.............................................................................. 39
1.3.1. European banking industry in the world ......................................................................................... 40
1.3.2. European insurance industry in the world ...................................................................................... 40
1.3.3. Excursus: A look at the American and Japanese financial sectors ............................................... 41
1.3.4. New competitors.............................................................................................................................. 43
1.4. Employment .................................................................................................................................................... 43
1.4.1. Trends of total employment in the sector ....................................................................................... 43
1.4.2. Employment by countries................................................................................................................ 44
1.4.3. Total employment in the US............................................................................................................ 47
1.4.4. Occupational structure of workers .................................................................................................. 47
1.4.5. Employment by educational attainment ......................................................................................... 50
1.4.6. Employment by age group.............................................................................................................. 53
1.4.7. Employment by gender ................................................................................................................... 54
1.5. Excursus: review of forecasts for the sector .................................................................................................. 56
2. Main trends of change and drivers.......................................................................................................................57
2.1. Market growth in Europe ................................................................................................................................ 57
2.1.1. The impact of enlargement ............................................................................................................. 57
2.1.2. Diversification and search for new markets.................................................................................... 58
2.2. Globalisation of financial markets and international competition .................................................................. 58
2.2.1. Financial services and global market ............................................................................................. 59
2.2.2. Financial services groups are now European and global players ................................................. 60
2.3. European single market and rules ................................................................................................................. 61
2.4. Concentration in the financial services sector: mergers and acquisitions .................................................... 62
2.4.1. Competition versus "too big to fail" ................................................................................................. 62
2.4.2. Degree of consolidation in different countries and groups of countries......................................... 63
2.4.3. Relations between the three subsectors: the reality of "Bank-Insurance-Finance" ...................... 63
2.5. Technological changes................................................................................................................................... 64
2.5.1. Computer science and ICT ............................................................................................................. 64
2.5.2. ICT and customers habits............................................................................................................... 64
2.5.3. New tools for payment .................................................................................................................... 65
2.6. How financial products are delivered: the question of distribution ................................................................ 65
2.6.1. Insurance agents or brokers ........................................................................................................... 65
2.6.2. Product delivery by the insurance companies themselves ............................................................ 66
2.6.3. Product delivery by bank branches ................................................................................................ 66
2.7. SWOT Analysis............................................................................................................................................... 66
3. Emerging competences.........................................................................................................................................67
3.1. Competences for back office.......................................................................................................................... 68
3.2. Competences for the new middle office for control and financial operations................................................ 70
3.3. Competences for front office, marketing and sales related occupations ...................................................... 71
3.4. Research and development function – competences for innovation ............................................................ 72
3.5. Computer science and ICT competences...................................................................................................... 73
3.6. Competences for the management function.................................................................................................. 74
4. The financial crisis and its consequences ..........................................................................................................76
4.1. In the short run................................................................................................................................................ 78
4.2. Structural consequences for the financial services sector ............................................................................ 80
5. Scenarios for the European financial services sector........................................................................................81
5.1. Main drivers of the scenarios ......................................................................................................................... 82
5.1.1. Principal methodology..................................................................................................................... 82
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 4
FINAL REPORT, 9 JUNE 2009
5.1.2. Set of descriptors ............................................................................................................................ 82
5.1.3. Interdependence matrix .................................................................................................................. 85
5.2. The drivers ...................................................................................................................................................... 88
5.3. Three scenarios up to 2020............................................................................................................................ 89
5.3.1. Overview.......................................................................................................................................... 89
5.3.2. Scenario 1: Sustainable finance ..................................................................................................... 92
5.3.3. Scenario 2: Laissez-faire ................................................................................................................ 93
5.3.4. Scenario 3: State ownership........................................................................................................... 94
5.4. Employment effects ........................................................................................................................................ 96
5.4.1. Scenario 1: Sustainable finance ..................................................................................................... 96
5.4.2. Scenario 2: Laissez-faire ................................................................................................................ 97
5.4.3. Scenario 3: State-ownership........................................................................................................... 98
5.5. Impact on skills ............................................................................................................................................... 99
5.5.1. Scenario 1: Sustainable finance ..................................................................................................... 99
5.5.2. Scenario 2: Laissez-faire ................................................................................................................ 99
5.5.3. Scenario 3: State-ownership......................................................................................................... 100
6. Strategic impacts from the scenarios................................................................................................................101
6.1. Human resource policies in a declining industry.......................................................................................... 101
6.2. Adjustment strategies at company level ...................................................................................................... 102
6.3. Strategic choices for sector organisations, training institutions and governments ..................................... 105
6.4. Policy choices ............................................................................................................................................... 105
6.5. Critical competences .................................................................................................................................... 106
7. Human resource strategies to meet skill needs................................................................................................108
7.1. Facing the demographic challenge .............................................................................................................. 108
7.2. Hiring young people with university degrees ............................................................................................... 109
7.3. A possible answer: retrain older staff ........................................................................................................... 110
7.4. Vocational training for employees ................................................................................................................ 110
7.5. Relocation ..................................................................................................................................................... 112
8. Implications for education and training.............................................................................................................112
8.1. Implications for the initial vocational training system................................................................................... 112
8.1.1. Two different training streams for occupations in the financial services ..................................... 112
8.1.2. The increasing need for graduates with higher education........................................................... 113
8.1.3. Developing new apprenticeship systems ..................................................................................... 113
8.1.4. The controversial question on how to recruit and train the sales force ....................................... 114
8.1.5. Focus on the New Member States ............................................................................................... 115
8.1.6. The skills needs of intermediaries (insurance agents and brokers) ............................................ 115
8.2. The new needs for further training and lifelong learning ............................................................................. 116
8.2.1. Structural training needs in the New Member States................................................................... 116
8.2.2. Training needs in the context of structural changes and crisis.................................................... 116
9. Main recommendations.......................................................................................................................................117
9.1. Reform of the financial system..................................................................................................................... 119
9.2. Employment and human resource policies.................................................................................................. 120
9.3. Skills adjustment ........................................................................................................................................... 121
9.4. Equal opportunities....................................................................................................................................... 122
9.5. Regional aspects .......................................................................................................................................... 122
9.6. Developing knowledge of skills in the financial sector................................................................................. 122
Literature...........................................................................................................................................................................124
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Tables
Table 1 Financial services by NACE classification 33
Table 2 Banking in Europe 37
Table 3 Non-life insurance (2006) 39
Table 4 The importance of financial markets activity 39
Table 5 Ranking of European financial groups 1990 / 2004 40
Table 6 Insurance premiums 41
Table 7 World market shares – insurance, 2006 41
Table 8 Commercial bank assets of the United States 42
Table 9 Life and non-life premiums in the United States 42
Table 10 Financial services employment by country 44
Table 11 Financial services employment shares by country 44
Table 12 Distribution of financial services employment within the EU27 45
Table 13 Division of employment by occupation 47
Table 14 Change in division of employment by occupation 48
Table 15 Employment in financial sector by education level 50
Table 16 Change in employment; financial services by level of education 51
Table 17 Employment by age group; financial services 53
Table 18 Change in employment by age group; financial services 54
Table 19 Employment by gender; financial services 55
Table 20 Change in employment by gender; financial services 55
Table 21 CEDEFOP forecast 56
Table 22 Strengths and weaknesses of EU financial services 66
Table 23 Main functions 68
Table 24 Trend changes in the volume of employment (1996-2007) 75
Table 25 New competences for occupational functions 75
Table 26 List of Descriptors 84
Table 27 Interdependence matrix 87
Table 28 Scenarios for the European financial sector up until 2020 91
Table 29 Change of occupational structures in the “sustainable finance” scenario 99
Table 30 Change of occupational structures in the “laissez-faire” scenario 100
Table 31 Change of occupational structures in the “state ownership” scenario 101
Table 32 Main adjustment strategies 103
Table 33 Adjustment measures of companies 104
Table 34 Adjustment measures of sector organisations, training institutions and governments 105
Table 35 Policy measures 106
Table 36 Critical competences 106
Table 37 List of recommendations 118
Charts
Chart 1 The different activities within the banking industry 34
Chart 2 Development of total premium income 37
Chart 3 Life premium income 38
Chart 4 Shares of financial services in total national employment 2006 46
Chart 5 Drivers 88
Chart 6 Links among drivers 89
Chart 7 Drivers and scenarios 90
Chart 8 Employment trends in the “Sustainable finance” scenario 96
Chart 9 Employment trends in the “Laissez-faire” scenario 97
Chart 10 Employment trends in the “State Ownership” scenario 98
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 6
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Abbreviations
ATM Automatic Teller Machines
BIPAR European Federation of Insurance Intermediaries
CEA Comité Européen des Assurances
CEDEFOP European Centre for the Development of Vocational Training
CRM Customer Relation Management
EACB European Association of Co-operative Banks
EBF European Banking Federation
EBTN European Banking and Financial Services Training Network
ECB European Central Bank
ERP Enterprise Resources Planning
ESBG European Savings Banks Group
EMCC European Monitoring Centre of Change
EU15 Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Ireland, Luxembourg, Netherlands,
Portugal, Spain, Sweden, United kingdom
ICT Information and Communication Technologies
IFRS International Financial Reporting Standards
NMS Bulgaria, Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Romania, Slovakia,
Slovenia
NM10 NMS except Bulgaria and Romania
LFS Labour Force Survey
R&D Research and Development
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 7
FINAL REPORT, 9 JUNE 2009
Reference tables of the general methodology
Title in the general methodology Presented as: Page
Economic trends in the EU, USA and other countries Tables 6 and 7 42, 42
Output trends in the EU Table 2, Charts 2 and 3 38, 39, 39
Trade balance Not applicable
Knowledge intensity Not applicable
Employment trends in the EU Table 10 45
Employment trends by EU Member States Table 11, Chart 4 46, 48
Employment trends in vertical shares Table 12 47
Employment trends by occupation Tables 13 and 14 50, 51
Employment trends by educational level Tables 15 and 16 52, 53
Employment trends by age groups Tables 17 and 18 55, 56
Value chain Section 2.6 69 pp.
SWOT analysis Table 22 70
Main drivers of change Table 26, Charts 5, 6 and 7 87, 91, 92, 93
New critical competences by occupations Tables 25 and 36 78, 110
Main characteristics of scenarios Table 28 94
Scenarios and implications for employment Charts 8, 9 and 10 99, 100, 101
Scenarios and implications for competences and occupa-
tional profiles
Tables 29, 30 and 31 102, 103, 104
Main corporate strategies Table 33 107
Strategic choices Table 34 108
Policy measures Table 35 109
Recommendations Table 37 121
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SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 9
FINAL REPORT, 9 JUNE 2009
Acknowledgements
For this scenario study, we undertook a series of interviews in European countries, asked various
institutions for documentation and data, and discussed our results with the members of the work-
shops and the steering committee. We would like to thank all the persons for the valuable help
they provided and the time spent for this undertaking. We are also grateful for the analysis and
reactions we received after the financial turmoil of September 2008 that helped us finding our way
through a particularly intransparent terrain.
We would like to thank the European Banking Federation and the European Banking and Finan-
cial Services Training Network for giving us the opportunity to present the main findings of the
study on November 12
th
, 2008. Our thanks include the European Association of Co-Operative
Banks for inviting us to participate in their Social Commission meeting on January 12
th
, 2009, and
to the European Social Partners of the insurance sector for including us in their European Social
Dialog Committee on January 13
th
, 2009. We also want to thank the two French Employment and
Occupation Monitoring Centres for very valuable support.
Finally an experts panel meeting was organised by the European Commission on February 26
th
and 27
th
2009 in Brussels with 44 participants coming from different countries and institutions,
employers associations as well as unions and experts.
Interview partners
Ms Barbara BARENSKA (Polish Banking Association, Manager for the Human Resources Devel-
opment, Poland)
Ms Anna BUGALSKA (Kredyt Bank and Warta Insurance Human Resources Director, Poland)
Mr Sigitas BUBNYS (LKU – Lithuanian Central Credit Union CEO, Lithuania)
Mr Alfred BURKHART (BVR – National Association of German Co-operative Banks – Head of HR
development, Germany)
Ms Silvia CASSANO (UNICREDIT Head of International Industrial Relations, Italy)
Mr Henry CHEYNEL (Banking Employment and Occupations Monitoring Centre, France)
Mr Aivaras CICIELIS (SEB – Scandinavian Enskilda Banken - Head of Corporate Clients and
Institutions Department, Lithuania)
Mr Guillaume DESVIGNES (ING DIRECT Head of Human Resources, France)
Mr Sigute DINDAITE (DbN Nord Bankas Manager of Human resources Department, Lithuania)
Dr Daniel DIRKS (ALLIANZ Executive Vice President Group HR, Germany)
Mr Germain FEREC (GENERALI Human Resources Vice President, France)
Ms Katja HECHT (BVR – National Association of German Co-operative Banks – Senior Officer
HR Development, Germany)
Dr Thomas HEIMER (FRANKFURT School of finance and management Dean of the Faculty,
Germany)
Mr Stanislas IGNATOWICZ (Credit Union of Vilnius President, Lithuania)
Mr Jacek KLISZCZ (Association of Polish Insurance and Reinsurance Brokers President, Poland)
Mr Gérard LOBJEOIS (Insurance Employment and Occupations Monitoring Centre, France)
Mr Nic de MAESSCHALK (BIPAR Director, Bruxelles)
Ms Mihaela MINDRISTEANU (BANCPOST Head of training, Romania)
Mr Valentin PAUNA (BANCPOST HR Director, Romania)
Ms Gabriella TUDOR (Romanian Banking Institute Director, Romania)
Mr Fernando VOLPE (UNICREDIT, Department of Labour policies and industrial relations, Italy)
Scenario workshop participants
Mr Sigitas BUBNYS (LKU – Lithuanian Central Credit Union- CEO, Poland)
Mr Henry Cheynel (Banking Employment and occupations Monitoring Centre, France)
Mr Guillaume DESVIGNES (ING DIRECT Head of Human Resources, France)
Ms Katja HECHT (BVR – National Association of German Co-operative Banks- , Germany)
Mr Manuel HUBERT (DG Employment and Social Affairs)
Ms Joanna MIKOLAJCZAK (BPI Polska, Poland)
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 10
FINAL REPORT, 9 JUNE 2009
Ms Gabriella TUDOR (Banking Institute director, Romania)
Expert panel meeting (26
th
-27
th
February – Brussels)
Ms Gabriella ALMBERG (BIPAR)
Ms Barbara BARANSKA (Polish Bank Association)
Ms Barbara BENEDETTI (EBTN, European Banking and Financial Training Association)
Ms Marta CARVALHO (IFB, Portuguese Bank Training Association)
Mr Henry CHEYNEL (AFB, Association Française des Banques)
Mr Alberto CORRENTI (EWC, Generali Group Secretary)
Mr Guillaume DESVIGNES (ING Direct)
Mr Diarmuid BRADLEY (The Institute of Bankers in Ireland)
Mr Daniel DIRKS (Allianz SE)
Ms Mariane DISSING (FA, The Danish Employer’s Association for Financial Sector)
Mr Michael FAWCET (European Finanacial Planning Association)
Mr Michael GOLD (CEA, European Insurance and Re-insurance Federation)
Ms Birgitta HAMMARSTROM (KPA Pension)
Ms Katja HECHT (BVR, National Association of German co-operative banks))
Ms Catherine HOCK (AMICE)
Mr Renaud HUARD (MAIF)
Mr Manuel HUBERT (European Commission, DG Employment)
Mr Christian HYTTE (SECAFI-ALPHA group)
Mr Edgardo IOZIA (UILCA)
Mr Marek KUROWSKI (Polish Chamber of Insurance)
Mr Jean-François LEBRUN (European Commission, DG Employment)
Mr Gérard LOBJEOIS (Observatoire des Métiers de l’Assurance)
Mr Magnus LUNDBERG (The Confederation of the Nordi Bank, Finance and Insurance Unions)
Ms Vijenka MARKIC SIMONETI (The Bank Association of Slovenia)
Ms Bozica MATIC (European Parliament, Committee on Employement and Social Affairs)
Mr Radoslaw OWCZARZAK (Eurofound)
Mr Dominique PATY (Confédération Générale du Crédit Mutuel)
Mr Marco PERELLI (Generali Group)
Ms Sam REES-ADAMS (Financial Services Skills Council)
Mr Zdenek SIMEK (Czech Union of Banks and Insurance Companies)
Mr Josep SOLER-ALBERTI (European Financial Planning Association)
Ms Katrine SONDERGARD (UNI-EUROPA Finance)
Mr Mario SPATAFORA (EBTN, European Banking and Financial Training Association)
Mr Clemens SPOORENBERG (NIBE-SVV)
Mr Michael STEIN (Deutsche Bank AG, HR-Labour relations/Tarifpolitik)
Mr Peter SZOVICS (CEDEFOP)
Ms Gabriella TUDOR (Romanian Banking Institute)
Mr Johan VAN DEN BRANDEN (Febelfin Academy)
Mr Simon THOMSON (The Chartered Institute of Bankers in Scotland)
Mr Martin ULBRICH (European Commission,DG Employment)
Ms Sabrina WIEMENS (European Association of Co-operative Banks, EACB)
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 11
FINAL REPORT, 9 JUNE 2009
Executive summary
The financial services make up a high-skill sector well above the standards of other industries. This, how-
ever, did not prevent the business from triggering the current world financial crisis which seems to be head-
ing towards the worst economic depression for decades.
The failure of capital market liberalisation is starting to become apparent in these days of great trouble. The
financial sector was unable to establish a sustainable business model and assess the risks correctly. This is
the responsibility of management and public regulation. However, it also depends on the skills and compe-
tences of the workforce which needs a sound understanding of the financial markets and its risks. Finally,
markets were unable to correct themselves without a severe crisis – and this is the point we are at now.
The scenarios for the European financial services sector take the strategic responses to the challenges of
the financial crisis as their starting point. Three alternatives have been created:
• Scenario 1 – called “sustainable finance” – assumes that the sector will develop a completely new
business model, based on long-term investment strategies, consumer trust and high-quality consulting
services. This exerts a cultural shock to the business, as it means the reversal of profit targets, stan-
dardisation, and controlling instruments in favour of sustainability.
• Scenario 2 – called “laissez-faire” – draws less radical conclusions from the crisis, assuming the
continuation of short-term profit orientation from the past. Public control will remain weak, also due to
impediments at the international level. Standardisation of financial products will be fostered. Merger
and acquisitions will revive.
• Scenario 3 – called “state ownership” – assumes that neither government nor the big players in the
financial business will be able to keep control of the current crisis. Financial and economic turmoil will
accumulate into a wave of destructive power. This will result in a significant reduction of economic ac-
tivities for a long period, and force the financial services into an administrative role.
All scenarios are expected to cause strong employment losses in the financial sector of the European Union
at least in the near future. Later recovery depends on the strategic choices made. Moreover, the scenarios
have different impacts on competences and the occupational profiles of the workforce. In common they
expect the continuous upgrading of skills – however with different types of specialisation.
As the emergence of the financial crisis is strongly routed in competence profiles, the study recommends
employment-related policies to address the need for adequate training and increased R&D investments in
this sector. Among the comprehensive list of suggestions, two priorities emerge in this context:
• Training policies should be reoriented towards the principles of capital markets, decent client consulta-
tion, controlling and risk assessment. Governments should take initiatives to implement such new types
of training in the financial business sector.
• As the tools of risk assessment failed to indicate long-term risks, R&D programmes should be launched
to improve these instruments. Controlling principles should be reappraised in order to develop strategic
controlling.
Human capital appears to be the key to restructuring in this sector, and public institutions can raise the
pressure on the financial sector to develop a sustainable business model. Education and training is one
approach to proceed along this route.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 12
FINAL REPORT, 9 JUNE 2009
Résumé
Les services financiers représentent un secteur de niveau de qualification élevé, se situant bien au-dessus
de la moyenne des autres activités. Malgré cette caractéristique le secteur financier (bancaire surtout) est à
l’origine de la crise financière actuelle puis de la récession économique la plus importante depuis des dé-
cennies.
Cette période de grandes difficultés fait ressortir les échecs de la libéralisation totale des marchés. Le sec-
teur financier n’a pas instauré un modèle économique durable capable de prévoir les risques correctement.
C’est une question de régulation financière et de management, mais cela renvoie également à l’analyse des
marchés financiers et aux compétences présentes dans le secteur. Les marchés se sont avérés incapables
de se corriger eux-mêmes, sauf à penser que la crise est une correction. Telle est la situation actuelle.
Les scénarios d’avenir pour les services financiers européens partent des réponses stratégiques qui peu-
vent être apportées à la crise. Trois alternatives sont développées :
• Le scénario 1 – nommé « Finance durable » - propose un développement du secteur sur un modèle
complètement nouveau, basé sur des stratégies d’investissement à long terme, d’établissement de re-
lations de confiance avec les clients dans le cadre d’un service de conseil financier de qualité. C’est un
renversement culturel pour le secteur car cela signifie des objectifs de profit moindres, des produits
fiables et des outils de contrôle permettant une régulation.
• Le scénario 2 – nommé « Laissez-faire » - ne tire pas de leçons radicales de la crise et repose sur la
poursuite de l’orientation passée du secteur vers les profits de court terme. La régulation publique de-
meure faible, en partie à ca use des difficultés de coordination internationale. La standardisation des
produits devient générale, leur distribution se fait par des canaux « low cost », parfois externalisés et
les fusions-acquisitions se développent.
• Le scénario 3 – nommé « Actionnariat public » - suppose que ni les gouvernements ni les grands
acteurs du secteur n’ont été capables de juguler la crise actuelle. La tourmente financière et économi-
que est alors fortement destructrice et ne peut être stoppée que par des nationalisations. La réduction
drastique de la croissance des activités conduit les services financiers à n’avoir qu’un rôle administra-
tif.
On peut s’attendre à ce que tous les scénarios soient à l’origine de nombreuses pertes d’emplois pour le
secteur financier de l’Union européenne dans un futur proche. Les perspectives plus lointaines dépendent
des choix stratégiques. De plus, les trois scénarios ont un impact fortement différencié sur les compétences
et les profils de métiers. Néanmoins, tous les trois prévoient la nécessité d’augmenter continuellement le
niveau de qualifications avec pourtant des spécialisations différentes.
Dans la mesure où l’apparition de la crise financière est aussi liée aux types de compétences présentes
dans le secteur, l’étude recommande le développement de politiques de R&D et de formation adaptées aux
exigences de régulation et de responsabilité dans le secteur. Parmi les propositions, deux priorités ressor-
tent dans le contexte actuel:
• Les politiques de formation doivent être orientées vers la connaissance des marchés, le service et le
conseil responsable aux clients, le contrôle et la gestion du risque. Les gouvernements doivent pren-
dre des initiatives pour aller dans ce sens.
• Dans la mesure où les outils de prévision des risques ont échoué à prévoir les évolutions, des pro-
grammes de R&D devraient être lancés pour améliorer ces outils. Les principes de contrôle doivent
être réévalués dans le sens d’un management stratégique du risque.
Le capital humain apparaît comme une clé dans la réorganisation du secteur et les Pouvoirs Publics peu-
vent faire pression pour que le secteur aille dans le sens d’un développement responsable. La formation
initiale et la formation continue ont leur rôle à jouer dans cette évolution.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 13
FINAL REPORT, 9 JUNE 2009
Kurzfassung
Die Qualifikation der Beschäftigten im Finanzsektor liegt weit über den Standards anderer Wirtschaftszwei-
ge. Dies hat die Branche allerdings nicht davor bewahrt, die aktuelle weltweite Wirtschaftskrise auszulösen,
die im Begriff ist, sich zur tiefsten Depression seit Jahrzehnten zu entwickeln.
Das Scheitern der Kapitalmarktliberalisierung wird in diesen Tagen großer wirtschaftlicher Schwierigkeiten
offensichtlich. Der Finanzsektor war nicht in der Lage ein nachhaltiges Geschäftsmodell aufzubauen und die
Risiken des Marktes korrekt einzuschätzen. Dies lag in der Verantwortung von Management und staatlicher
Regulierung. Es hing aber auch von den Qualifikationen und Kompetenzen der Belegschaften ab, die ein
tiefes Verständnis der Finanzmärkte und ihrer Risiken benötigen. Auch die Märkte waren nicht in der Lage,
sich selbst zu korrigieren – außer durch eine schwere Krise. Dies ist der Punkt and dem wir jetzt angelangt
sind.
Die Szenarien für den europäischen Finanzsektor nehmen die strategischen Antworten auf die Herausforde-
rungen der Finanzkrise zum Ausgangspunkt. Drei Alternativen wurden entworfen:
• Szenario 1 – mit dem Titel „Nachhaltiges Finanzwesen“ – nimmt an, dass der Sektor ein völlig neues
Geschäftsmodell entwickeln wird, das auf langfristigen Investitionsentscheidungen, Konsumentenver-
trauen und hochwertigen Beratungsdienstleistungen beruht. Dies löst einen Kulturschock in der Bran-
che aus, da es die Abkehr von den Gewinnzielen, Standardprodukten und Kontrollmechanismen der
Vergangenheit zu Gunsten einer nachhaltigen Geschäftsentwicklung bedeutet.
• Szenario 2 – mit dem Titel „Laissez-faire“ – zieht weniger radikale Schlussfolgerungen aus der Krise
und nimmt an, dass sich die kurzfristige Gewinnorientierung der Vergangenheit fortsetzen wird. Die öf-
fentliche Kontrolle wird – auch wegen der Schwierigkeiten auf internationaler Ebene – schwach blei-
ben. Die Standardisierung der Finanzprodukte wird vorangetrieben. Unternehmenszusammenschlüsse
werden zunehmen.
• Szenario 3 – mit dem Titel „Staatseigentum“ – geht davon aus, dass weder die Regierungen noch die
großen Unternehmen der Finanzbranche in der Lage sein werden, die Finanzkrise unter Kontrolle zu
halten. Die finanziellen und wirtschaftlichen Turbulenzen werden sich zu einer zerstörerischen Welle
aufbauen und für lange Zeit einen signifikanten Rückgang der Geschäftstätigkeit bewirken. Dies wird
die Finanzdienste in eine administrative Rolle zwingen.
Alle Szenarien werden – zumindest auf die kürzere Frist – erhebliche Beschäftigungsverluste in den Finanz-
diensten der Europäischen Union mit sich ziehen. Die spätere Erholung hängt von der Wahl der strategi-
schen Antwort ab. Darüber hinaus werden die Szenarien deutliche Veränderungen in den Kompetenz- und
Qualifikationsprofilen bewirken. Gemeinsam sehen sie aber einen weiter steigenden Qualifikationsbedarf,
wenn auch mit unterschiedlicher Ausrichtung.
Da die Entstehung der Finanzkrise stark mit der Kompetenzbasis zusammenhängt, empfiehlt die Studie der
Beschäftigungspolitik, Ausbildung und Innovationen in den Fokus zu rücken. Aus der umfassenden Liste
von Empfehlungen ergeben sich zwei Prioritäten:
• Die Ausbildung sollte die Funktionsweise von Kapitalmärkten in den Vordergrund rücken, die nachhal-
tige Kundenbetreuung, das Controlling und die Risikoeinschätzung. Die Regierungen sollten die Initia-
tive ergreifen, solche Schwerpunkte für die Ausbildung im Finanzwesen zu setzen.
• Da die Instrumente der Risikoanalyse im Hinblick auf die langfristigen Risiken versagt haben, sollten
F&E-Programme zur Verbesserung der Risikoabschätzung aufgelegt werden. Das Controlling sollte zu
einem strategischen Instrument weiterentwickelt werden.
Das Humankapital ist der Schlüssel zur Umstrukturierung des Sektors, und öffentliche Institutionen können
den Druck auf den Finanzsektor erhöhen, ein nachhaltiges Geschäftsmodell zu entwickeln. Bildung und
Ausbildung sind ein Mittel, um auf diesem Weg Fortschritte zu erzielen.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 14
FINAL REPORT, 9 JUNE 2009
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 15
FINAL REPORT, 9 JUNE 2009
Summary
Taking the present world financial crisis into consideration, the endeavour to formulate skills
scenarios for the European financial services sector appears to be courageous, if not pretentious.
Little is still known about the real extent of financial risks and their potential effects on the world
economy. Nevertheless, thinking about the future of this sector is needed more than ever in such
a period of great trouble.
The scenarios, however, can hardly escape the actual uncertainties. Accepting this fact, the study
is designed as an input to the discussion about the European financial services by developing
alternative “worlds” for the future. These alternatives might become a reality under the selected
assumptions and thus strongly depend on the decisions actually taken by the actors involved –
banks and insurance companies, customers, and governments. The different pathways are then
extended by asking for the major policy options, in particular the adequate human resource poli-
cies and training policies which constitute the focus of this study.
Financial services, mainly the banks, will probably not remain the same after this crisis even if
some trends of the past are strong enough to continue in future. It is therefore particularly impor-
tant to develop a clear understanding of the numerous mechanisms of change and of the present
crisis. The first parts of the study therefore design the statistical map of the sector, identify main
trends and drivers of change, and look for emerging competences. Three alternative scenarios
are then developed on this basis up to 2020 taking the present financial crisis as a starting point
and asking for the possible structural answers to this challenge. Finally, the implications of these
alternatives on skills, education and training policies and sector-related policies are discussed
and condensed in recommendations for actors at EU level, Member States, regions and the sec-
tor itself.
Main characteristics of financial services
The European financial services sector
Financial services include three main sub-sectors:
• banking industry with retail banking and wholesale banking acting on the global financial
market
• insurance industry (life insurance, non-life products and re-insurance)
• insurance and financial intermediaries
The banking sector is pluralistic as it is
composed of private banks, co-operative
banks, and savings banks. Similarly, the
insurance industry consists of private and
mutual insurance companies. Public social
insurance is excluded.
Europe is one of the world leaders in finan-
cial services, comparable to the American
financial services industry. It is concentrated
in the main financial cities such as London,
Paris and Frankfurt. The sector remains
very diversified but some of the European
groups have become global players. In
2007, 7,345 banks with 218,000 branches were registered in the EU27 area.
Market performance of EU27 financial services
1998 2007 % change
Banking
Number of banks 2,996 7,345 145
Number of branches 103,188 218,234 111
Commercial bank assets (bn
euros)
12,517 40,403 223
Commercial bank loans (bn
euros)
6,222 17,232 177
Insurance
Premium per inhabitant
(euros)*
1,100 2,145 95
* 1996-2006
Source: EBF
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 16
FINAL REPORT, 9 JUNE 2009
The European banking market has tripled
since 1998 with regards to both assets and
loans. The insurance market showed a
similar performance with a 95 % increase of
average premiums per inhabitant between
1996 and 2006. Growth rates are close to
US developments while Asia only grew by 8
%. This is also due to the slow expansion in
Japan. New competitors should not be ig-
nored: China and India are starting to de-
velop this sector, Russia will take a serious
share in Eastern European markets, and
Australia has large financial groups which
are expected to improve the relative impor-
tance of this market place.
Employment
5.6 million persons were employed in EU27
financial services in 2007. 65% of these
worked in banks, 20% in the insurance
industry and 15% for intermediaries. The
sector represented 2.7% of total employ-
ment in Europe. This appears to be a small
share in comparison to the USA where the
sector had a share of 4.7% of total employ-
ment.
In contrast to market growth, the increase of
employment was very slow. Overall, EU27
employment only grew by 0.5% annually
between 1996 and 2006. Compared to this,
service sectors expanded employment by
3% per annum in total. The difference can
be explained by internal re-organisation and
productivity gains. Slow employment growth
was due to the creation of big players from
mergers and acquisitions. Economies of scale are very important in the sector and opened a wide
field for productivity increase. A strong impact came from ICT technologies and automation in
back office administration, increasing use of the internet, and outsourcing internal support ser-
vices.
Most of the employees were full-time workers. However, their share decreased from 90.5% in
1994 to 87.2% in 2006.
Employment expanded in a series of EU countries: Ireland, UK, Greece, Spain, France, Luxem-
bourg, Denmark, Slovenia and Sweden. Employment volumes declined in Germany, Portugal and
Finland, and were stable in Italy, Austria and Belgium. We must note that not all New Member
States publish employment figures.
The relative importance of financial services strongly differs between countries. The greatest
importance of the sector can be observed in the UK where it represents a share of 4.8% of na-
tional employment. Just behind are the Netherlands with a share of 3.9%, Germany and France
both with 3.4%. Luxembourg is a specific case with a very large financial services sector (11.9%).
It must be noted that Great Britain, Germany, France, the Netherlands, Spain and Italy together
employ 75% of the EU27 financial services workforce.
Employment in financial services by country
(‘000 persons)
0 200 400 600 800 1000 1200 1400
Estonia
Malta
Lithuania
Cyprus
Luxembourg
Slovenia
Latvia
Bulgaria
Slovakia
Finland
Czech Republic
Hungary
Sweden
Portugal
Ireland
Romania
Denmark
Greece
Austria
Belgium
Netherlands
Poland
Spain
Italy
France
Germany
United Kingdom
1996
2006
Source: Eurostat
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 17
FINAL REPORT, 9 JUNE 2009
Occupations and educational levels
Financial services make up a
sector of professionals which
employs high shares of finance
and business experts, technicians
and IT specialists. The shares
significantly exceed the propor-
tions that can be observed in the
countries’ total labour force.
Staff in the New Member States
show a bigger share of highly
skilled workers than in Western
Europe. This can be seen in all
occupational groups and can be
traced back to age structure: the
financial services sector in these
countries is younger, more highly
skilled and with more women,
even in management positions.
However, the borderlines be-
tween occupational groups of the
ISCO classification are rather
vague. Similar jobs are classified
as different groups by different
countries, depending on lan-
guage traditions and different
structures of training systems.
Therefore, occupational data
should be interpreted with great
caution.
Between 2000 and 2006, data from the Labour Force Survey shows a shift of occupational struc-
ture from medium-skilled persons to highly-skilled persons. This is visible in IT occupations, busi-
ness and finance professionals, and for the technicians and other professionals. This increasing
share of highly-skilled employees can also be observed in the recently available LFS data for
2007. The need for a highly educated and trained workforce appears to be evident in all parts of
the financial services sector and all European countries.
Division of employment by age and gender
The sector is younger in the New Member States (NM10) than in the EU15, which points out the
importance of recruiting new young graduates in the sector during the catch-up period. In all the
countries the IT occupational group is younger than the average workforce.
Nevertheless, the age distribution reveals the importance of retirement and the need of replace-
ment over the next few years. The sector-specific age structure is close to total population (ex-
cept for the UK and some of the New Member States). The countries with the highest share of
older staff are France and Germany.
Female employment is very important in the sector. It is higher in the NM10, and has increased
from 2000 to 2007. Financial services are thus becoming a female sector with the exception of IT
occupations. It is worth noting that in the New Member States women are more numerous in
senior management positions.
Main drivers of change
Change of occupational structures
Differences of percentage shares 2000-2006
-10 -5 0 5 10 15 20 25
Elementary
occupations
Craft and related trades
workers
Service workers, shop
and market sales
workers
Clerks
Professionals,
technicians and
associate professionals
Business professionals,
finance and sales
associate professionals
Computing
professionals and
computer associate
professionals
Legislators, senior
officials and managers
NM 10
EU 15
NM10: New Member States except Bulgaria and Romania
Source: Eurostat
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 18
FINAL REPORT, 9 JUNE 2009
Market growth
As indicated above the banking industry grew rapidly. Growth was strongly supported by the
enlargement of Europe, the expansion of traditional markets such as health insurance, and –
most importantly – the development of new markets in the area investment banking, private eq-
uity, and asset management. Even if the European single market is not yet a reality, common
standards for banks (Basel I and II) and insurance (Solvency I and II) have brought important
integration steps.
Drivers
Active and passive sums of descriptors
Wealth distribution
Training system
Skills structure
Self-control
Risk management
control
Retail channels
Rescue programs
Rebuilding trust
R&D knowledge
Public supervision
Product innovation
Process innovation
Outsourcing of services
Mergers & Acquisitions
LS professionals
LS administrators
Internet banking
Global capital markets
FS Value added
FS Employment
Emerging countries
Economic growth
Demography
Consumer confidence
Back office relocation
0
5
10
15
20
25
30
35
40
45
50
0 5 10 15 20 25 30 35 40 45 50
Passive Sum
A
c
t
i
v
e
S
u
m
Knowledge base
Control system
Sector organisation
Output
Markets
Source: DKRC/Economix
As a large part of the population in the New Member States is not yet “bancarised” and not cov-
ered by housing, motor or property insurance contracts, substantial growth potentials are still
available in these countries, at least in the long-run.
Globalisation
Financial services are now acting on global capital markets. Financial markets of today can be
defined as the global interconnection of all different assets: loans and inter-bank credits, real
estate, exchange rates, shares, materials etc. Global trading in these areas has experienced
tremendous growth in recent years and yielded huge profits.
It was the liberalisation of international capital markets which opened the doors for the develop-
ment of a global financial system. ICT networks have given rapid access to updated information
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 19
FINAL REPORT, 9 JUNE 2009
and have opened up the opportunity of “real-time“ trading. Even smaller banks and investors
have been in the position to manage assets on global markets. However, it has raised financial
and economic dependencies, as the present financial turmoil has revealed.
Meanwhile, global investments have become an important market segment of the sector which
has contributed substantially to overall profits of financial institutions. Capacities were redirected
towards investment banking, partly at the expense of domestic consumer markets. Supported by
a “cheap money“ monetary policy in the USA, strong leverage effects stimulated the expansion of
financial investments worldwide.
Restructuring and sector organisation
Economies of scale have had an important impact on the game. Consolidation thus became an
important driver of change. The big players were those who looked for expansion into new coun-
tries, created large “bank-insurance” groups, mergers and acquisitions in order to strengthen their
already strong market position. As an example, 52.5 % of the European insurance market is in
the hands of 20 companies. At the same time, co-operative banks, savings banks and mutual
insurance companies are developing both their regional basis and their European cooperation.
Knowledge-based technological change
Technologies – in particular ICT applications in back office processes and the internet as a sub-
stitute for front office activities – have had a major impact on the banking and insurance indus-
tries. Due to the presence of a high number of intermediaries, IT application processes were
faster in banks than in insurance companies. A new step incorporated the internet which allowed
direct distribution of financial products and opened up the possibility for clients to manage ac-
counts, savings, investments and insurance contracts. Although internet banking was not suc-
cessful at the beginning, the development of direct operating systems, new payment tools (e.g.
via mobile phones), and improved internet security will certainly be an important driver for both
market growth and the organisational restructuring of financial operations.
The global financial crisis
The strong growth of financial services came to a sudden end with the present financial crisis.
Triggered off by the US mortgages bubble, it now appears to be much more than that: the failure
of worldwide capital market liberalisation. This was caused by
• the opening of capital markets to various investment funds with an unmanageable number of
new products. This restricted the transparency of financial products and opened the doors
for irregular activities.
• the reorientation of financial business management towards short-term profit maximisation
which took the focus away from long-term risks.
• the failure of public supervision over capital markets and the misjudgements of rating agen-
cies supported the belief of secure financial markets.
• the risk of an economic expansion which was based on rising debt levels with important
leverage effects.
Even if some experts warned against the unhealthy developments on capital markets, the major-
ity of actors felt confident about the new business models and thus could not see the deterioration
of fundamental facts. Markets were not able to correct themselves without a severe crisis – and
this is the point we are at now.
Strengths and weaknesses of European financial services
Burdened by the current financial crisis, European financial services are unable to profit from their
strengths adequately. In the long-run however, market potentials are available in the New Mem-
ber States and in emerging countries. These can be used as the European financial services is a
strong player on international capital markets, disposing of a pluralistic system which now ap-
pears to be a strength rather than a weakness. Distribution is flexible because of the use of multi-
channels, and covers the whole EU area. The business can rely on a broad skills basis with a
high share of professionals possessing high and medium skills. The social dialogue works in most
of the countries.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 20
FINAL REPORT, 9 JUNE 2009
Weaknesses can be found in demographic change which may be a burden to market expansion.
The economic strength of companies was weakened considerably by the financial crisis and
consolidation has not yet been achieved. This has resulted in the loss of consumer trust. The
heterogeneity of distribution channels can push the struggle between banks and insurance com-
panies. Skills shortages may arise even in a period of declining employment, particularly in stra-
tegic competences which are important for restructuring the business (ICT, controlling, risk as-
sessment, management). Training capacities are underdeveloped in the NMS.
Emerging competences
The knowledge base of the sector has changed significantly during the past decade. New compe-
tences have been developed for new jobs. Requirements for a high-level of education have been
raised for many functions. Functional requirements have been extended along the value chain.
The usual distinction between back office jobs without customer contacts and front of-
fice/commercial jobs has been weakened.
Competences for back office jobs
Employment in administrative back offices is declining and the proportion of medium and high-
skilled persons is going to be upgraded. A double competence profile is emerging with strong
financial and IT knowledge.
Large administrative platforms and shared services centres are being established, which are
changing the back office function into highly specialised technical functions. Routine functions,
however, are being relocated to low-cost countries.
Competences for the new middle office jobs
Middle office functions are experiencing a revival in many companies of the sector. These jobs
are occupied by highly skilled persons with a deep knowledge of financial processes, more legal
expertise, an international background, language skills, and a good knowledge of IT applications.
These functions will have to be more recognised by human resource policies and remuneration
schemes.
Competences for commercial and front office jobs
Counselling functions for face-to-face communication with clients are being reorganised into
multi-functional activities: counselling clients, executing just-in-time administrative operations, and
selling new products. This requires rich competences: financial knowledge of the products, soft
competences in order to be able to discuss with the client, listen to the client’s needs and find the
correct answer, IT self-possession.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 21
FINAL REPORT, 9 JUNE 2009
Strengths and weaknesses – opportunities and threats
Strengths Weaknesses Opportunities Threats
M
a
r
k
e
t
s
• The European market
share assures a good
position in the world
• Strong dependency on
global capital markets
• Substantial amounts of
risky products
• EU15: new markets
for health care and pen-
sions schemes
• NMS: new markets for
all products
• Expanding markets in
emerging countries
• Financial crisis will lead
to a severe downturn
• Decreasing population
represents a risk of
downsizing the markets
• Economic risks in the
NMS
S
t
r
u
c
t
u
r
e
o
f
b
u
s
i
n
e
s
s
• Global players acting in
different local markets
• A pluralistic financial
system with different
types of ownership
• For the most part,
banking institutions are
commercial banks with a
high level of deposits
• Strong needs for re-
capitalisation but compa-
nies are weakened
• Consolidation must be
achieved in many coun-
tries
• Global players can
take the opportunity to
buy companies all over
the world
• Many companies can
face difficulties due to the
financial crisis
• Not enough capital for
saving banks, co-
operative banks and
mutual insurance groups
D
i
s
t
r
i
b
u
t
i
o
n
• High flexibility based on
different channels provid-
ing products, advice, and
services
• Large distribution
networks
• Bancassurance: banks
using their networks to
distribute insurance
products
• Particular experience
with internet banking
• Lack of customer
confidence
• Conflict between direct
banking, insurance distri-
bution and value-added
services in proximity to
the client
• Financial management
needs trust, transparency
and information
• New offices and
branches to be created in
NMS
• Promoting new distri-
bution channels according
to a new generation of
customers
• Internet banking and
internet insurance lack
customer trust and need
to be based on a new
financial culture
I
n
n
o
v
a
t
i
o
n
• Some of the most
innovative clusters in the
world (UK-London, Lux-
embourg, Ireland)
• “Brains in Europe”:
high-skilled persons for
innovation
• Loss of confidence in
innovation capacities: the
crisis is partly due to
innovative financial
products
• Lack of adequate risk
management
• Lack of strategic
controlling
• To practise mass-
customisation on one
hand and high value
added personal service on
the other
• NMS are dependant on
the western companies
and their innovation
policies
S
k
i
l
l
s
• Sound knowledge base
due to high-skilled staff
• Strong links between
companies and educa-
tional institutions in the
EU15 countries
• Potential skills short-
ages for highly skilled
personnel
• Underdeveloped
training capacities in NMS
• Demographic change
allows the renewal of staff
• Reinforce the qualifi-
cation level to deliver
more advice and services
• Loss of attractiveness
as an employer
S
o
c
i
a
l
d
i
a
l
o
g
u
e
• High level of unionisa-
tion in the EU15 and a fair
dialogue in western
countries
• Some innovative
studies at the European
level
• The social dialogue in
the financial services
sector was built in a
growth period with bene-
fits for wage and career
development
• Develop social dia-
logue in the crisis
• Anticipate the social
impacts of employment
change
• Develop negotiation
on career paths and
lifelong training
• Lack of social dialogue
in companies in the NMS
Source: DKRC/Economix
The choice between hard-selling standardised products or individual counselling will be strategic
for companies. Sales in call centres employ more and more temporary staff for different publish-
ing campaigns. Labour turnover is high as is the share of younger workers with instable careers.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 22
FINAL REPORT, 9 JUNE 2009
Competences for IT jobs
They are at the very heart of the business, present in Customer Relation Management (CRM) as
well as in daily administrative operations, finance and refinance, and wholesale activities. As they
encompass different tasks such as studies for new products and processes, design and man-
agement of data bases, network architectures, marketing, IT safety, CRM etc, the requirements
include IT knowledge but also knowledge of financial processes. Companies looking for budget
economies are externalising mass processes.
Competences for the R&D functions
Most financial groups have R&D departments. The professionals are economists, mathemati-
cians, actuaries, market and finance experts, and IT designers. It is not a very large group of
specialists but they play an important role in the innovation process.
Competences for the management function
Managers in the financial services sector are always finance specialists. Their role is the same as
in the rest of the economy, but the evolution of the sector requires enhanced competences: tech-
nical expertise and financial knowledge, human resource management and change management,
management of transversal projects, language skills and inter-cultural management. Managers in
branches have a commercial as well as a communicative role.
Three scenarios up to 2020
Starting from the financial crisis in 2008
The trends observed over the past ten years will certainly continue to have a strong impact on the
future. However, the financial crisis will change the financial business fundamentally:
• The liquidity crisis of financial institutions has meanwhile transformed into a solvency crisis
with a worldwide dimension. The compensation of these strains will take many years.
• The severe depreciation of property and the worldwide economic recession is on the way to
reducing the volume of financial markets substantially. Not all financial institutions will sur-
vive, and the others will see limited growth due to the long-term effects of the recession.
• Governments are planning to reinforce financial supervision at different levels: national,
European, and international. By means of rescue programmes, public intervention is already
being extended – in some cases by means of nationalisation.
• Consumer confidence is at its lowest level whilst banks are detecting the importance of
consumer markets again. It is a question of how they will be able to rebuild confidence and
which parts of the banking system will succeed with such efforts.
• A new step involving mergers and acquisitions in the whole sector may occur. Market forces
and public regulation, however, may force the industry to think about alternative approaches.
The future of the sector appears to be open and widespread options for alternative developments
are being discussed. The scenarios start from both the fundamental drivers identified in the previ-
ous sections, and the present knowledge about the financial crisis. They take the organisational
response of financial suppliers into the focus of considerations, by asking:
• how the European financial services sector will reorganise its activities and markets after the
crisis,
• how governments will develop their supervisory instruments,
• how banking clients and financial investors will react.
Three scenarios have been developed on this basis:
• Scenario 1 – “sustainable finance”
• Scenario 2 – “laissez-faire”
• Scenario 3 – “state ownership”
Scenarios and drivers
strong liberal
strong
1
Sustainable
finance
2
Laissez-faire
Sector restructuring
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 23
FINAL REPORT, 9 JUNE 2009
Source: DKRC/Economix
The scenarios are combinations of the most important drivers identified in the previous analysis:
Scenario 1: “Sustainable finance”
This starts with the assumption that the financial business will identify short-term profit maximisa-
tion strategies as one of the major reasons for the crisis. Forced by strong customer reactions, a
new business model will be developed which optimises the long-term profitability of investments.
It will require considerable efforts to rebuild consumer confidence through self-enforced control-
ling and investments into the quality of financial consulting. A strong client-orientation will be the
key to market success. Government regulation will strengthen self-controlling and re-enforce the
liabilities of financial services providers.
This will result in a “cultural shock“ for the financial business as it means a complete reversal of
prevailing business models. Large parts of investment banking will be abandoned due to the high
risks involved in that business. Product innovation in the sense of “security optimisation” will be
more important than process innovation. Improved controlling and risk assessment systems will
be established.
This will not be an advantage for the big players, as they will lose large parts of their investment
banking business in the long-run. Savings banks and co-operative banks will have comparative
advantages due to their proximity to consumer markets and public owners. Insurance companies
less concerned by the crisis will follow the same trend towards customer oriented services.
Basic characteristics of scenarios
Driver Scenario 1
Sustainable finance
Scenario 2
Laissez-faire
Scenario 3
State ownership
Business model
Trust oriented and
consumer oriented
Profit oriented Control oriented
Self-control by the sector Strong Weak Strong
Public control Restrictive Liberal Very restrictive
Mergers & acquisitions Weak Strong Strong
Market growth Restrained Unstable Weak
Product innovation Strong Strong Weak
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 24
FINAL REPORT, 9 JUNE 2009
Product
Standardisation
Low High High
Process innovation Medium Strong Strong
Globalisation Controlled Uncontrolled Restricted
Outsourcing/relocation Medium High Low
Training activities Strong Strong Weak
Employment
Recovery after
recession
Short-term
fluctuations after
recession
Long-term
reduction with late
recovery
Source: DKRC/Economix
Scenario 2 “Laissez-faire”
This will draw less radical conclusions from the present crisis. In contrast, financial actors will try
to blur the consequences of the crisis and continue with the present business model. The crisis
will be interpreted as the accumulation of unfavourable market developments. The financial busi-
ness will therefore avoid significant restructuring of the sector and more or less continue with the
business model of the past. Public control will remain liberal, particularly on global markets, as
international agreements on capital market control will be difficult to achieve.
New products will continuously be developed for investment rather than for consumer markets.
Financial services will become increasingly standardised. The sector will be segmented into a
business and asset management market with high-value services and a standardised mass-
market for the majority of consumers. Mergers & acquisitions will be undertaken on a large scale
in order to profit from economies of scale. It is the scenario which successfully returns to trends
that dominated before the crisis.
Profit orientation will remain strong with a focus on economies of scale to restore the industry’s
margins. Direct distribution of products and internet banking will be very important as will call
centres for sales and customers information. Big service providers will perform the administrative
back office tasks, while banks and insurance companies will concentrate on the front office tasks
of marketing and strategic management.
Scenario 3 “State ownership”
This emerges from the fact that neither governments nor the big players of the financial business
will be able to keep control of the current crisis. Financial and economic turmoil will accumulate
into a wave of destructive power. This will result in a significant reduction of economic activity for
a long period of time.
Governments will be forced to take control of the financial system in order to guarantee its basic
functions. The sector will return to an administrative business model with effective public control
of national capital markets. Markets will only gradually recover after the crisis and innovation will
remain restricted to the areas of organisation and controlling. The banking system will be saved
by the governments at the price of nationalisation. Public budgets will see a considerable in-
crease of debts. Economic growth will be burdened for the whole scenario period up to 2020.
Similar to the financial crisis which happened in Japan during the1990s, the economies will suffer
from the losses of property and market volumes for a long time.
Banking institutions will make no efforts to adjust to clients’ needs. In contrast, they will only pro-
vide the minimum functions of financial services and will concentrate on operational functions
rather than on new products. It will be lean banking under the direction of austerity, focussing on
surviving a difficult period, not on being efficient.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 25
FINAL REPORT, 9 JUNE 2009
Large parts of investment banking will be abandoned and there will be a clear separation of
wholesale banking and retail banking. In parallel, insurance and banking activities will be sepa-
rated. Recession and state control will dry up new markets almost completely.
Global impact on employment
Scenario 1 – Sustainable
finance: Like for all other
scenarios, employment
must be expected to
decline considerably in
the course of the finan-
cial crisis. A gradual re-
covery, however, can be
expected after 2012-
2013 due to the expan-
sion of consumer and
business markets. Re-
covery will be accom-
plished with the restruc-
turing process based on
sustainable products,
services and customer
relations. Insurance com-
panies will particularly be
able to profit from these
changes as they applied
this long-term approach
in the past.
Scenario 2 – Laissez
faire: In this scenario, the
major forces that generated the financial crisis will not be removed. Public authorities will not
come to an international agreement about capital markets supervisions. Employment will there-
fore remain unstable in the
course of the after-crisis period. Financial services will join the group of economic sectors where
employment levels are strongly determined by cyclical fluctuations.
Scenario 3 – State-ownership: Employment will remain at a depressed level for a long time. Even
insurance companies will be negatively affected. Semi-public mutual and saving banks will
achieve greater importance in the sector, encouraged by governments and local authorities. A
gradual recovery can be expected at the end of the scenario horizon.
Implications for competences and occupational profiles
The required skills associated with the three scenarios clearly differ as regards the changes of
skills and occupational structures:
Scenario 1 – Sustainable finance:
Skill needs will be high and there will be the demand for a new type of banker: client-orientation
and a sound understanding of long-term investment strategies will be important. Skill needs will
be influenced by the customer oriented organisations requiring:
• Highly-skilled persons able to analyse client needs and deliver financial advice with risk
estimation
• R&D specialists, creating new products and controlling systems
• Controllers, risks analysts and managers with a strong international orientation and a strong
ethic behaviour
• IT professionals for back office reorganisation
Employment levels
Financial services, EU27; million persons
3
3,5
4
4,5
5
5,5
6
2000 2005 2010 2015 2020
Scenario 1
Scenario 2
Scenario 3
Source: DKRC/Economix
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 26
FINAL REPORT, 9 JUNE 2009
The scenario will develop a strong need for sales and marketing specialists who will be needed to
establish the new marketing strategies and to intensify customer relations. Moreover, organisa-
tion and controlling specialists in middle office jobs will be important for developing and applying
the new rules for financial self-control.
Scenario 2 – Laissez faire:
The skills profile will reinforce the dual structure known from former industrialisation processes:
• Low and medium-skilled workers will be needed for call centres and administrative platforms.
These jobs will experience poor working conditions and strong performance oriented remu-
neration. Flexible working hours and a high share of part-time and agency work will be visi-
ble in combination with high performance demands.
• Highly skilled workers will be needed in marketing, trading business, as financial analysts,
business process specialists, and – in particular – as R&D experts who will have to develop
new products and increase the short-term flexibility of business processes. Performance re-
quirements will also be strong but remuneration will be good.
In contrast to scenario 1, scenario 2 will focus on specialists for new products, including R&D
experts for financial products and process engineering. Controlling and sales will see a lower
increase. Administrative work in back office will be strongly reduced due to increased efficiency
and outsourcing.
Scenario 3 – State-ownership:
The skills structure will shift towards:
• Medium-skilled persons for middle office jobs: accounting, reporting, controlling and risk
management
• Lawyers and regulation specialists for establishing the new regime of public banking
• Clerks and back office administrative staff due to the role of general administration
• Lean management specialists in order to improve cost efficiency
The scenario will imply a strong increase of labour demand for organisation and controlling spe-
cialists. Sales and marketing specialists, however, will see a relative decrease in demand, to-
gether with experts for new financial products.
Impact on occupational profiles
Change of occupational shares in total financial services employment 2007-2020; EU27
Occupation
Scenario 1
Sustainable
finance
Scenario 2
Laissez-faire
Scenario 3
State ownership
Managers = = ?
Computing professionals = ++ +
Business and finance professionals (sales and
marketing)
++ + ? ?
Business and finance professionals (new products) + ++ ? ?
Business and finance professionals (organisation,
controlling)
++ + ++
Clerks ? ? ? =
Service and sales workers + + ?
Craft and related trades workers ? ? =
Elementary occupations = ? =
* Change of % shares of area total:
++ strong increase; + increase
= no change
? ? strong decrease; ? decrease
Source: DKRC/Economix
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 27
FINAL REPORT, 9 JUNE 2009
Critical competences
Regarding the different functions, the scenarios imply significant changes of competence profiles:
• Managers will have to master the financial crisis in all of the three scenarios. They will need
excellent knowledge of financial markets and crisis management. Most importantly, however,
they will need to be experts in change management in order to reorient staff towards new
market conditions, business targets and public rules.
• Marketing and sales experts will have to apply completely different strategies in scenarios 1
and 2. Scenario 1 will require experts who will be able to establish long-lasting customer re-
lations in proximity with clients. Scenario 2, however, this expertise will be restricted to high
value-added markets. Standard consumer markets will be served by low or medium skilled
sales agents who will need excellent communication skills rather than a deep knowledge of
financial products. Marketing and sales experts will need excellent knowledge of the financial
markets and products in all scenarios.
• Middle office staff will have a strong position in both scenario 1 and 3. In scenario 1 they will
have an independent position, being responsible for risk analysis and strategic controlling.
They will process large amounts of information in order to identify risks among clients. They
will continuously report to the management in order to keep track of change strategies. In
scenario 3 their position will also be strong as the “masters of the rules”. They will be re-
sponsible for the strict controlling of business processes and will continuously assess risk
portfolios.
• Back office staff will decline in scenarios 1 and 2 but will remain at the same level in sce-
nario 3.
• R&D specialists will be particularly important in scenario 2. They will be needed to develop
both sophisticated financial products and standardised consumer products for different mar-
kets. Mathematical and statistical expertise will be required as well as a good knowledge in
computer science. In scenarios 1 and 3, R&D experts will mainly be used for the improve-
ment of risk assessment and controlling instruments.
• Process engineers and IT jobs will be needed in all three scenarios, but again with strongly
different profiles. In scenario 1 business processes will be reorganised in order to achieve
the flexibility to adjust to a growing variety of customer demands. In scenario 2 the stan-
dardisation of consumer products will be the main focus, while flexibility will be required for
the high-value activities in the upper market segments. In scenario 3 process re-engineering
will also be concentrated on standardisation and low-cost provision of services. The upper
segment, however, is not relevant any more. ICT experts will therefore be important for all
scenarios.
Critical competences
Scenario 1
Sustainable finance
Scenario 2
Laissez-faire
Scenario 3
State ownership
General management Risk oriented rather than
profit oriented
Long-term vision
Change management
Global orientation,
Strong profit orientation
Short-term flexibility
Security oriented
Low-cost oriented
Change management
Marketing and sales Financial professionals
Strongly client oriented
Socially responsible
Market oriented sales
specialists
Product oriented
Communication skills for
sales agents
Limited marketing efforts
Administration Strict monitoring and
controlling
Rapid adaptation to product
changes
Strict controlling according
to administrative rules
Research & development Risk assessment
Controlling instruments
New financial products
Internet-based sales
Standardisation of products
Standardisation of
products
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 28
FINAL REPORT, 9 JUNE 2009
Process engineering High flexibility of processes
due to customised products
Standardisation of
processes
Relocation of back office
services
Standardisation of
processes
Source: DKRC/Economix
Strategic impacts from the scenarios
Adjustment strategies at company level
Five principal strategic orientations might determine the prevailing business models in the long-
run:
• Diversification strategy: universal banks are the ideal business model of this strategy, dis-
tributing bank and insurance products through their network. Insurance companies provide
new day-to-day services with complex contracts.
• Trust oriented and security oriented strategy: requiring an orientation for long-term rather
than short-term profitability. It results in a fundamental change of product development, in-
vestment consulting, and investment decisions.
• Globalisation strategy: The crisis reinforces the need for huge capitalisation which makes
mergers attractive. This creates big institutions on inter-bank markets and re-insurance, but
also in private equity, asset management, and back office services.
• Specialisation strategy: this is the institutional specialisation on different markets – mort-
gages, business credits, asset management, investment banking and other market seg-
ments. The economies of this strategy are based on specialisation rather than size. A high
degree of professionalism is required for market success.
• Standardisation strategy: products for mass consumer markets are standardised and proc-
esses are automated. The internet plays a dominant role. Big back office service providers
execute the administrative tasks. Individual services are an exemption.
The scenarios will use different combinations of these strategies:
• Scenario 1 will lead the companies towards a customer-oriented organisation, putting a
strong weight on “face-to-face” work situations. This organisation is based on a high level of
competences for the counsellors, loan officers, insurance agents, and intermediaries. Their
motivation needs to be strengthened by serious career management, knowledge transfer
measures and the experience of internal and external networking.
• Scenario 2 is based on an indus-
trialised organisation and on lean
production models with large
service centres and big call cen-
tres for product sales and client
services. Turnover will be en-
couraged by profit-based remu-
neration. Young persons will be
hired on low wages to work on
sales platforms and in call cen-
tres, but also for highly profes-
sional jobs in investment bank-
ing. New products will continu-
ously be developed by special
R&D staff. Training courses will
be used to continuously update
employees’ knowledge about in-
novative products. Particular at-
tention will be paid to soft com-
petences and communication.
• Scenario 3 will lead to an admin-
istrative sector demanding rein-
forced controlling skills and persons with a strong knowledge of regulations and general law
in order to apply national and international rules. The middle office will be the most devel-
Adjustment strategies
Adjustment strategy Scenario 1
Sustainable
finance
Scenario 2
Laissez-faire
Scenario 3
State
ownership
Diversification
strategy •
Trust and security
oriented strategy •
•
Globalisation strat-
egy
•
Specialisation
strategy
•
Standardisation
strategy
• •
Source: Economix.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 29
FINAL REPORT, 9 JUNE 2009
oped function. Employees will have to participate in training courses to develop their regula-
tion and law knowledge.
Strategic choices for sector organisation, training institutions and governments
These organisations will have a strong role, particularly in scenarios 1 and 3:
• In scenario 1, sector organisation will support the image of a sustainable sector with a high
degree of public accountability. Communication skills will be particularly promoted by training
institutions together with the principles of a trust oriented and security oriented financial
business. Regional labour markets will be developed because direct communication with lo-
cal clients is important.
• Scenario 2 will present the sector as a modern and dynamic business which calls for flexible,
innovative and profit oriented professionals. Vocational training should train specialists for
various financial products, global financial markets, and business organisations. Lifelong
learning will be particularly important to keep professionals updated with the rapid paths of
innovation. Open labour markets will be important as specialists will be recruited from inter-
national rather than local labour markets.
• For scenario 3 an image campaign is not really needed as the sector is reduced to basic
financial operations. Nevertheless, it appears to be a security oriented business which aims
to provide financial services at low costs. Career promotion will select strictly task oriented
employees. Vocational training will be reoriented towards business administration and con-
trolling. Training centres will focus on law and public administration. The majority of recruits
will be from internal rather than external labour markets.
Human resource strategies to meet skill needs
The financial sector in most EU countries expanded for many years, but the present financial
crisis is going to radically change that. With the downturn of employment, human resource poli-
cies will face new conditions in internal and external labour markets. The reduction of employ-
ment will affect both labour supply and labour demand in a significant way. It will result in:
• high unemployment risks for the staff employed
• a smaller number of job openings for those entering the sector
• a stagnation of wages due to wide spread losses and rising unemployment
• a generally poorer attractiveness of the sector
This will not make human resource policies easier. While labour supply will be more than suffi-
cient due to the rising number of lay-offs, it will become difficult to recruit specialists from the non-
banking sector. Moreover, financial experts will look for job opportunities outside the financial
sector. The human resource policy in companies will be determined by low labour turnover, a
rising relevance of internal labour markets, and an ageing work force. Particular skills shortages
may appear among critical skills.
Even with declining employment, however, the sector will be faced with the need to replace due
to ageing staff in many countries. With the requirement of a higher level of formal education and
the declining attractiveness of the sector, the following measures will have to be undertaken to
meet the skills needs:
• recruiting new young graduates
• retaining older persons (even by refusing the easy solution of early retirement), particularly in
the counsellor function in order to rebuild customer trust
• updating the skills of older staff
• utilization of „lifelong training” and career paths to reduce labour turnover and to attract new-
comers
For a knowledge intensive industry like financial services it will be particularly important to guar-
antee the knowledge transfer from older to younger workers. Client trust and high quality consult-
ing services can only be established with the broad knowledge base of the workforce.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 30
FINAL REPORT, 9 JUNE 2009
Implications for education and training
All scenarios show an increasing need for graduates with higher education. A broad educational
training structure is available in the western countries including universities, business schools and
companies. In the New Member States, however, there are shortages of qualified persons. This
requires the extension of training capacities and training efforts in these countries.
While the sector increasingly emphasised the necessity for graduates with post-secondary de-
grees, human resources managers partly doubted that skills will be needed to that extent. For
example, often less skilled persons were recruited for sales-related activities. Many training ex-
perts therefore favour apprenticeships.
Intermediaries dispose of differentiated initial education and training profiles. The staff of these
SMEs can possess all forms of education. Nevertheless, the need for more qualifications is also
visible in this activity.
The development of the sector will lead to increased training needs as regards to quality and
training content. The overall capacities, however, will be more than sufficient in face of the ex-
pected downturn of employment and recruitment.
In the New Member States, training facilities are not developed sufficiently and therefore require a
different approach: in the upcoming years, companies, social partners and training institutions will
have to be much more involved in developing training structures which will provide the new skills
needs.
Beyond the need for updating skills with regard to new technologies, laws and regulations, and
customer relations, the crisis will lead to severe structural changes in the sector. Training for new
occupations and sometimes for new jobs will be required in agreement with the employees’ rep-
resentatives.
Recommendations
While European governments are actually combating for the survival of the financial system, this
report develops a longer perspective. Our recommendations for human resource related policies
for the European financial sector therefore suggest a long-term strategy for skills and compe-
tences which is able to reduce the risks of a further replication of such a crisis.
We are convinced that human resource policies play a pivotal role in the reform of the financial
systems. The financial sector was obviously unable to establish a sustainable business model
and assess risks correctly. This is the responsibility of management and public business regula-
tion. However, it also depends on the deep understanding of the way financial markets function.
Employment related policies should therefore address the need for adequate training and in-
creased R&D investments in this sector. Two priorities emerge in this context:
• Training policies should be reoriented towards the economics of capital markets, the princi-
ples of decent client consultation, controlling and risk assessment. Governments should take
initiatives to implement such new types of training in the financial business sector.
• As the tools of risk assessment failed to indicate long-term risks, R&D programmes should
be launched to improve these instruments. Controlling principles should be reappraised in
order to develop strategic controlling.
Human capital appears to be the key to restructuring in this sector, and public institutions can
raise the pressure on the financial sector to develop a sustainable business model. Education
and training is one approach to proceed along this route.
A comprehensive list of recommendations with six headings, has been developed for human
resource policies in the European financial services. They address policy actors at European,
national and regional level, as well as companies and social partners.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 31
FINAL REPORT, 9 JUNE 2009
List of recommendations
Topic 1: Reform of the financial system
EU
• make European regulatory systems more efficient
• maintain and develop a pluralistic financial sector
• develop a supervision culture in Europe
• protect customers and investors by introducing more rigorous liability rules
National authorities
• participate in the international regulation of financial markets
• reinforce national regulations
• improve market transparency and obligatory client information
• reform bonus systems and top management remuneration
Companies
• rebuild trust with clients
• develop self-controlling and reinforce the middle office function
• promote transparency and provide liable information to customers
• reform bonus payments and top management remuneration
Topic 2: Employment and human resource policies
EU
• prevent high replacement demand
• contribute to human resource investment
• support active ageing policies
• support good practices in restructuring
National authorities
• contribute to human resource investment
• support active ageing policies
• support good practices in restructuring
Companies
• preserve the knowledge base
• refuse early retirement schemes
• set up good HR practices and career path developments to struggle against labour
turnover and attract newcomers in the sector
• build mobility solutions within the sector instead of lay-offs
Social partners
• support HR policies without early retirements and an effective ageing policy, new
career paths
• promote agreements about employment, restructuring, ageing policies
Topic 3: Skills adjustment
EU
• re-enforce new competence standards to promote sustainable business models
• promote R&D in financial services in the areas of risk assessment and strategic
controlling
National authorities
• promote the introduction of sustainable business models by improved training stan-
dards
• reinforce training institutions in the sector
• promote R&D in financial services in the areas of risk assessment and strategic
controlling
• raise training standards for intermediaries
• support cooperation between companies and training institutions
Companies
• develop lifelong learning
• develop middle office apprenticeship training and trainee periods for newcomers
• develop finance-related ICT knowledge
• adapt labour force to the principles of sustainable finance
• invest in R&D in the areas of risk assessment and strategic controlling
Social partners
• reinforce involvement in training issues
Topic 4: Equal opportunities
EU
• encourage female students towards scientific studies and IT courses
National authorities
• encourage female students towards scientific studies and IT courses
Companies
• promote women in management positions
• improve the proportion of women in IT jobs
Social partners
• support and negotiate agreements about equal treatment of men and women
Topic 5: Regional policies
Regional authorities
• support decentralised banking and insurance services
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 32
FINAL REPORT, 9 JUNE 2009
• attract innovative capacities
• develop regional centres for supportive services
• address restructuring in financial services and avoid risks of high specialisation in a
single sector
Social partners
• address the employment issues at the local level
Topic 6: Knowledge about skills
EU
• develop a monitoring activity for employment and skills in the sector
• improve the European classification and statistics so they are more relevant for the
services sector (ISCO, ISCED)
National authorities
• support prospective sector studies
Regional authorities
• support prospective sector studies
Companies
• support skills monitoring
• present regular and transparent information
Social partners
• develop social dialogue about employment, skills and training needs
• promote a common understanding of the sector and develop a strategic view
Source: DKRC/Economix
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 33
FINAL REPORT, 9 JUNE 2009
0. Introduction
The objective of the study is to identify skills scenarios for the European financial services sector.
The study is based on a specific methodology developed by Rodrigues
1
. It contains:
• An economic and statistical mapping of the sector, with a focus on the structure and trends
in output and employment, the regional distribution of output and employment, other relevant
factors such as the size of enterprises, the age, gender, skills and occupational breakdown
of the workforce, as well as the competitiveness of the sectors internationally (steps 3 of the
prescribed methodology);
• An analysis of the main drivers of change so far as the sectors are concerned and their
implications for employment and competence, with a particular focus on the main skill needs
and skill gaps that can be identified (steps 4 and 5);
• A presentation of plausible scenarios concerning the future development of these industries
in the period up to 2020, focusing on the implications for employment and competences
(steps 6 and 7);
• The main strategic choices to meet these skill needs (step 8), including the implications for
education and training provisions (step 9);
• Recommendations with respect to the above (step 10).
The methodology was adapted to the specificities of financial services as far as necessary.
1. Mapping the sector
1.1. Definition
The financial services sector encompasses not only all financial operations and banking activities
but also all insurance and reinsurance activities together with their intermediaries.
Table 1 Financial services by NACE classification
Aggregation of NACE Rev 1.1
41-industry [NACE] NACE Rev.1.1 [NACE]
Banking activities ( financial intermediation) NACE 1-1-65
Insurance and pension funding ( except social security) NACE 1-1-66
Activities auxiliary to financial intermediation NACE 1-1-67
Source: Eurostat
In the scope of this study we shall analyse these three "sub-sectors" and consider their economic
performance, their potential for innovation, and their employment aspects. We shall also examine
occupational profiles, relevant skills and human resources solutions. This analysis does not in-
clude the European Central Bank, diverse national banks, the stock exchange institutions nor
regulating bodies. It should be noted that the scope of this analysis does not include compulsory
social security programmes or pension programmes.
1
See M.J. Rodiguez (2008): Innovation, Skills and Jobs.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 34
FINAL REPORT, 9 JUNE 2009
Expert panel views:
The expert panel discussed the necessity of
disaggregating the industry into sub-sectors
and by Member States. In particular the
separation between banking and insurance
was requested as the two sub-sectors are
operating on different markets.
Moreover, markets are still nationally regu-
lated and segmented. Different business
models exist in the banking industry with a
wide range of company sizes, principles and
strategies.
This is acknowledged in principle. The study
therefore uses all available empirical evidence
for the sub-sectors without presenting full
statistical information at the disaggregated
level. It also separates scenarios and strate-
gic options as far as possible. However, the
study remains a study which covers the entity
of financial services in Europe.
Back office
Financial services represent an essential part of the
European economy as a macrocosm and of each
individual national economy as a microcosm. A well
developed financial system is present in every
European country, regardless of its size. This system
works both for individual customers, for enterprises
and for local authorities. These financial activities are
linked to the stock exchange and the money market.
As for financial companies, they act as a service
provider, a credit provider and an investor in all the
economic sectors. Dependent upon the country,
financial services have very tight links with enterprise
development.
It must be said that the financial services are a basic
necessity for business activity and for enterprises and
thus a stakeholder in European national markets and
economies: the “cardiovascular system” of the econ-
omy.
Banking industry
From an ownership point of view, there are three types of banks in Europe:
• private banks (working with different stock exchanges)
• saving banks
• co-operative banks (or credit unions in certain countries in the mortgage credit sector)
The differences between these three types of banks are mainly linked to their capital structure.
However, we will see that there are also differences in the degree of decentralisation of organisa-
tions and management, risk policies, customer relations and human resources management.
Chart 1 The different activities within the banking industry
Source: "La nouvelle économie bancaire", Le Cercle des économistes, 2007 (sous la direction d'Olivier Pastré)
Internal banking activities are separated into (Chart 1):
• retail or domestic banking
Asset and liability
management
Retail banking and
insurance distribu-
tion
Assets
management
Financial
market
activities
Business banking:
mergers and acqui-
sitions
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 35
FINAL REPORT, 9 JUNE 2009
• business and investment banking: this industry is deemed "wholesale banking". It includes
corporate banking, assets management, merger and acquisition management, and operations
in the global capital market.
All banks can be active in both fields with specific subsidiaries. Insurers are also active in whole-
sale banking.
We must note that banks and insurers work within the framework of the financial system. One
bank cannot work without the others as their relationship is reciprocal. Interbank credit is a basic
need for a major part of the business. At the same time, the banking industry cannot work without
regulatory bodies i.e.: the FSA (Financial Sector Authority) in Great Britain, the AMF (Autorité des
marchés Financiers) in France, and the regulations of the Basel I and Basel II Agreements which
were accorded at the European level. The same holds true for the insurance industry. We shall
analyse the influence of prudent regulations in the Section headed "Drivers of Change".
Insurance industry
The insurance industry is a key sector in the business world but similarly serves the public inter-
est by protecting an ample amount of a country’s wealth. The insurance industry provides risk
transfer mechanisms for business activities and protects individuals and families from the uncer-
tainties of daily life, such as health problems or loss/damage of property. One might assert that
insurance is a financial product which compels the insurance companies to compensate the
losses of a policy holder when a specific event occurs. When an individual or a company under-
writes an insurance policy he pays a premium. In order to compensate policy holders for their
losses, insurance companies invest their income from premiums in financial assets and some-
times in real estate.
An insurance company cannot work alone. It must relinquish some of the risk to other insurers or
reinsurers. Similar to the banking industry, the insurance industry needs prudent national and
international regulations.
The concept of risk management is at the heart of business insurance. New risks appear on the
horizon on a daily basis; environmental risks, medical malpractice suits and the like. The insur-
ance industry is also closely linked to the social security system of the welfare state.
The insurance industry is divided into:
• life insurance and private pension funds,
• non-life insurance (motor, health, causality, property, general liability, and marine aviation and
transport or MAT)
• reinsurance.
The retail of insurance policies is handled in a number of ways: i.e. independent agents, brokers,
private companies, banks or post networks and direct or internet distribution.
It must be taken into account that most of the banking companies deliver insurance products
through their branch networks. Meanwhile, insurance groups sometimes acquire banks, including
their network of branches, and develop business banking activities. This phenomenon is called
“bancassurance”. Additionally, insurance companies now sell financial products such as securi-
ties, mutual funds and various retirement plans.
Data concerning this sub-sector will be provided with NACE 2, 66 which closely covers the sector.
This includes life insurance and some of the pension savings but does not include compulsory
social security.
Insurance and financial intermediaries
This sector is more composite.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 36
FINAL REPORT, 9 JUNE 2009
Firstly, it includes what can be deemed as either insurance "brokers", "agents" or “producers".
These agents are either self-employed, are employed by small companies or by different insur-
ance brands. They act as mediators between companies seeking to sell insurance policies and
consumers seeking to procure insurance coverage. Over the past two decades many intermediar-
ies have developed other services such as risk management strategies and claims management.
Secondly, it provides advice for individuals and companies including large international brokerage
firms.
The main data is provided by NACE 2, 67. There are manifold opinions and studies about the
relevance of the data available in this sub-sector.
The financial service industry is present in all European countries and is diffused in its scope and
breadth. However, its size is usually proportional to the size of the population and that of the
national industry. Thus the highest density of financial services can be found in cities. Banks are
usually located near the economic decision centres; London, Frankfurt, and Paris are the three
main financial capitals of Europe.
Institutional structure
The representation of employers in the sector follows the divisions previously alluded to:
• Private banks in EU Member States, and in some non-Member States like Norway, Iceland,
and Switzerland, are regrouped in the EBF (European Bank Federation). Set up in 1960, the
EBF represents the interests of 5,000 banks from twenty national associations, with assets of
more than 2 trillion euros and comprises over 2.3 million employees.
• Savings banks (like Caisses d'Epargne in France, Sparkasse in Germany, Caja de Ahorros
in Spain) are represented by ESBG (European Savings Banks Group).
• Co-operative banks are represented by EACB (European Association for Cooperative
Banks) which is a part of ICMIF (International Cooperative and Mutual Insurance Federa-
tion). EACB also represents the credit unions and the so called “building societies". They
have 47 million members in Europe, employ 730,000 persons and have an average market
share of 20%.
• Insurance companies are represented by CEA, the European Insurance and Reinsurance
Federation (Comité Européen des Assurances) with 33 national member associations (EU
27, including Switzerland, Lichtenstein, Norway, and Croatia). It represents around 5,500
companies and one million employees.
• The mutual and co-operative insurance companies are now represented by AMICE (Associa-
tion for Mutual Insurers and Co-operatives in Europe) which consists of 120 direct members
and 2,700 non-direct members.
• The insurance intermediaries are represented by BIPAR (European Federation of Insurance
Intermediaries) which forms 47 national associations of insurance agents and brokers in a to-
tal of 32 countries. This represents around 80,000 insurance intermediary companies and
250,000 individuals. Initially BIPAR represented only insurance intermediaries, but now they
also represent some of the activities of financial advisers.
Employees are represented by Uni-Europa Finance, which is a very important stakeholder for the
industry. One can find specific forms of representation in each individual country depending on
the structure of the social dialogue. In Scandinavian countries (Sweden and Denmark) and in
Great Britain, unions currently tend to merge in order to represent the whole financial services
sector and to be more efficient.
1.2. Market development
1.2.1. Banking industry
The banking industry grew continuously from 1998 to 2007. The number of banks increased by
145 % and the number of branches expanded by 112 % (Table 2). Total assets and loans also
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 37
FINAL REPORT, 9 JUNE 2009
increased even stronger, particularly bank assets (+ 223 %). This market increase was largely
due to the non-euro area.
Table 2 Banking in Europe
1998 2007
% change
1996-2007
Commercial bank assets (bn euro)
EU15 12,286 39,549 221.9
NM12 223 753 238.0
EU27 12,517 40,403 222.8
Commercial bank loans (bn euro)
EU15 6,121 15,656 155.8
NM12 98 412 318.2
EU27 6,222 17,232 177.0
Number of banks
EU15 2,639 6,220 135.7
NM12 324 1,054 225.3
EU27 2,996 7,345 145.2
Table 2 continued
Number of branches
EU15 94,407 185,485 96.5
NM12 8,236 20,582 149.9
EU27 103,188 218,234 111.5
Source: EBF Statistics 2006, 2007
1.2.2. Insurance industry
The European insurance market also doubled during the 1996 to 2006 period. It can be meas-
ured with the average premium per inhabitant: 1,100 euros in 1996 and 2,174 in 2006 (CEA,
Annual Report 2007). Comparing premium insurance income accounts to the number of inhabi-
tants is a good indicator of insurance development (except for Luxembourg where insurers largely
benefit from the freedom to provide foreign services).
The decline in 2001, a year with a lower increase of growth linked to the financial crises’ so called
"internet speculative bubble”. The European insurance market grew by 4.8% in 2006. This in-
cluded 5.3% for non-life insurance, thanks to the privatisation of the Dutch health care system,
and 4.4% for life insurance. Total premium income has increased in Europe from 2006 to 2007,
but not by the same percentage as previous developments.
This growth was higher than in America for the same year, a negligible 2.7%. However, a growth
of 9.5% was observed in Asia, including Japan and newly industrialised countries in the area.
Chart 2 Development of total premium income
Billion euro, annual growth rates in %; EU27
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 38
FINAL REPORT, 9 JUNE 2009
3,7%
5,2%
6,5%
4,6%
10,1%
13,1%
-1,8%
2,9%
2,5%
3,6%
6,5%
4,8%
0
200
400
600
800
1000
1200
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
Total premium (left-hand scale)
Growth rate (right-hand scale)
Source: CEA Statistics, August 2007
Chart 3 Life premium income
Annual growth rates in %
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
EU10
EU15
Source: CEA Annual Statistics, August 2007
Considering life-insurance: the development of new pension insurance products, such as is found
in Sweden, Slovenia and France, or individual pensions. The Annual CEA Report of 2007 also
observes the development of "unit-linked products" in life-insurance, combined with options to
allow for a capital guarantee. However, the performance of the life-insurance market is closely
linked to the different fiscal incentives in each country and can be more difficult with the financial
turmoil.
Concerning non-life insurance: the shares of different markets are as follows:
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 39
FINAL REPORT, 9 JUNE 2009
Table 3 Non-life insurance (2006)
Percentage of market shares; EU27
Non-life insurance %
Motor insurance 33.7
Health-accident 25.0
Property 21.0
General liability 8.7
MAT(Marine and Transport) 3.4
Legal expenses 1.5
Others 6.7
Source: CEA, 2007
1.3. Financial services in Europe and in the rest of the world
The European financial services industry has gained greater importance on the world stage.
However, the most developed industry still remains in the United States while the centre for busi-
ness banking is Great Britain. Meanwhile, one should not ignore new competitors in Asia, the
Middle East and Australia.
A global appreciation of Europe’s placing could be illustrated by its share of activities within the
financial market (Table 4):
Table 4 The importance of financial markets activity
Percentage share of world, 2006
Activity EUROPE US Rest of the world Total
Investment banking revenue 33 43 24 100
Cross border bank landing 68 9 23 100
Commercial banking assets 70 16 14 100
Insurance global premium 40 31 29 100
Marine insurance 62 11 27 100
Funds under management 33 52 15 100
Assets of high net worth individuals 27 30 43 100
Hedge funds 27 65 8 100
Private equity, amounts invested 44 47 9 100
Source: a synthesis from OECD,CEA, Investment Company Institute and IFSL estimates (2006)
Europe and the United States are often evenly matched. However, concerning banking income
and global insurance premium income, Europe shows a higher level of income.
Europe has a market share of 33% for banking income, while the US represent 43% and the rest
of the world 24%.
Europe has a market share of 40% for insurance income, while the US and the rest of the world
represent 31% and 29%, respectively.
The securities market is larger in the United States than in Europe. Before the last subprime
mortgage crisis, the United States’ financial services industry was the most important in the world.
The United States are also represented by a large proportion of its population as being share-
holders; this proportion is much larger as opposed to the proportion of shareholders in other
nations. That said, a large percent of its population is in debt and this was a driver for both finan-
cial service growth yet also for the financial crisis.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 40
FINAL REPORT, 9 JUNE 2009
1.3.1. European banking industry in the world
Some European financial groups are in the global top ten and the position of European banks in
the world improved between 1990 and 2004, as seen in Table 5.
In 1990 the top 20 banking groups in the world were distributed as follows:
• 12 banks from Japan
• 7 from EU
• 1 from the USA
In 2004 the proportions were the following:
• 12 banks from Europe
• 4 from Japan
• 3 from the USA
• 1 from China.
Table 5 Ranking of European financial groups 1990 / 2004
Billion US $
1990 2004
Rank Bank (country) Total bal-
ance
Bank (country)
Total bal-
ance
1 Dai-Ichi Bank (Japan) 408.025 Mizuho Financial Group (Japan) 1,285.471
2 Sumitomo Bank (Japan) 372.401 Citigroup (USA) 1,264.032
3 Fuji Bank (Japan) 366.745 UBS (Switzerland) 1,205.430
4 Mitsubishi Bank (Japan) 364.100 Crédit Agricole Groupe (France) 1,105.378
5 Sanwa Bank (Japan) 357.760 HSBC Holdings (Great Britain) 1,034.216
6 Industrial Bank of Japan (Japan) 259.860 Deutsche Bank (Germany) 1,014.845
7 Crédit Agricole (France) 241.992 BNP Paribas (France) 988.982
8 Banque Nationale de Paris (France) 231.463 Mitsubishi Tokyo Financial Group (Japan) 974.950
9 Tokai Bank (Japan) 230.358 Sumitomo Mitsui Financial Group (Japan) 950.448
10 Citicorp (USA) 227.037 Royal Bank of Scotland (United Kingdom) 806.207
11 Norinchukin Bank (Japan) 222.300 Barclays Bank (United Kingdom) 791.292
12 Credit Lyonnais (France) 210.727 Crédit Suisse Group (Switzerland) 777.849
13 Mitsui Bank (Japan) 205.629 JP Morgan Chase (USA) 770.912
14 Barclays Bank (United Kingdom) 204.907 UFJ holdings (Japan) 753.631
15 Bank of Tokyo (Japan) 202.854 Bank of America Corp (USA) 736.445
16 Deutsche Bank (Germany) 202.263 ING Bank (Netherlands) 684.004
17
National Westminster Bank (United
Kingdom)
186.559 Société Générale (France) 681.216
18 Long-Term Credit Bank of Japan (Japan) 176.240 ABN AMRO Bank (Netherlands) 667.636
19 Taiyo Kobe Bank (Japan) 174.967 HBOS (United Kingdom) 650.721
20 Société Générale (France) 164.741
Industrial and Commercial Bank of China
(China)
637.829
Source: The Banker, 2004
1.3.2. European insurance industry in the world
It can be observed that while premium income doubled in Europe and North America, it grew
marginally by 8% in Asia over the same period (Table 6). For the time being, the growth of the
financial groups in Asia (except that of Japan which only resolved the big crisis from the end of
the 1990s in 2004) is quite low. The reasons for this poor development can be seen in the impor-
tance of administrative regulatory regulations, for example in India. This is the case for a large
part of Chinese financial groups; during different banking crises some of the Chinese banks have
had non-performing loans and today they are not allowed to take part in foreign groups above 5%
of the capital. In China the total amount of savings is very high and it is one of the reasons that
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 41
FINAL REPORT, 9 JUNE 2009
Chinese financial groups are partly financially secure. Yet these savings are used more for con-
sumption i.e. construction and public works (infrastructure) than for industrial investments.
Table 6 Insurance premiums
Billion euros
Continent 1996 2005
Europe 675 1332
North America 689 1247
Asia 647 765
Others 95 98
Source: Annual Report CEA 2007
One can ascertain that Europe and the USA have nearly the same market share, amounting to
twice that of Japan (Table 7). With a share of 0.3%, Poland is the only new European Member
State with a relatively high share among these countries. This means that the growth potential of
the insurance sector could remain important for both foreign and domestic companies in the New
Member States and in emerging countries.
Table 7 World market shares – insurance, 2006
Region
Market share
%
EU 25 38.7
USA: 34.0
Japan 14.6
China 2.4
Brazil 0.7
Russia 0.5
Others 9.1
Total 100.0
Source: Annual Report CEA 2007
1.3.3. Excursus: A look at the American and Japanese financial sectors
Between 1996 and 2006 the American sector had a very large and continuous growth of markets,
revenues and profitability. Together with the British financial sector it was considered as one of
the strongest financial systems in the world.
For example, commercial bank assets more than doubled between 1996 and 2006:
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 42
FINAL REPORT, 9 JUNE 2009
Table 8 Commercial bank assets of the United States
trillion US-dollars
Year Assets
1996 5.32
1998 6.87
2000 7.46
2002 8.44
2004 10.11
2006 11.86
Source: European Banking Federation, Federal Deposit Insurance Corporation
The American insurance industry shows a continuous growth with, for example, the total premium
indicator:
Table 9 Life and non-life premiums in the United States
billion US-dollars
Year Life and non-life premiums
1996 624
1998 656
2000 765
2002 847
2004 1206
2006 1485
Source: Swiss Re (IFSL, London, 2007)
The growth of the American financial services was driven by the credit and debt of the population,
of course in the mortgage business and also in consumption credit. One of the main mottos was a
sentence from a George Bush adviser: “To make an American ownership society”. This policy,
along with the American growth, was strongly pushed by the Federal Reserve Bank’s policy of
low interest rates (1% in 2007) and the government’s public deficit policy (around 7% in 2007).
Japan
The Japanese financial services sector was preoccupied with a severe crisis in the 1990s. This
was due to bad loans which caused the economic bubble to burst. This period witnessed the
failure of large and small banks, which led to a large amount of public funds being injected into
bank capital and bank management being drastically streamlined (shedding business, mergers
and consolidation). The crisis changed the whole sector. This in turn led not only to mergers and
acquisitions but also to failures and later to the creation of new low-cost banks - particularly new
types of banks created in the year 2000 which included an internet bank called Japan Net Bank
and E-Bank which specialised in internet payments, portable phones and delivering standardised
insurance products.
The major industrial companies created banks and financial institutions. Some of these include
Sony Bank in cooperation with JPMorgan, the Nippon Shinko Bank, Mitsubishi Bank and pres-
ently Incubator Bank of Japan which was created in 2004 by owners of emerging companies to
finance SMEs and start-ups.
It took a very long time to resolve the banking crisis in Japan; around 12 years in total. As Japa-
nese banks had to be very careful and concentrated on their domestic market during this recov-
ery period, they were less affected by “toxic products” and the subprime mortgage crisis. In the
Autumn of 2008 some financial institutions, such as the insurance company Nomura or the Mit-
subishi UFG Financial Group, took capital shares in American companies. Even if Japan has not
been at the epicentre of the financial crisis, it is involved in the economic crisis and its financial
system is suffering too.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 43
FINAL REPORT, 9 JUNE 2009
1.3.4. New competitors
The Oliver Wyman Report 2008, The State of the Financial Industry, pointed out that Russian
state-owned firms are taking the lead in Eastern Europe where previously only European firms
like the Italian group Unicredit held sway. Russia has gained significant economic influence
across CIS (Commonwealth of Independent States) in the telecom, dairy, machinery and financial
services sectors. This is particularly the case in the Ukrainian financial services. Though not yet
cohesive, the Russian industry is becoming a major player by expanding into Eastern Europe.
As for Chinese companies, "… they have risen to the top of the league of most valuable financial
services players around the world, flushed by trillions of dollars in households’ savings. They now
threaten established players in western economies." (Oliver Wyman, Report 2008). As the Chi-
nese market is not able to absorb such financial investment, they invest abroad, seeking access
to global expertise.
We should not, however, neglect other countries such as New Zealand and Australia, who are
willing to compete against the best in the sector. The Australian Agency for Development com-
pares the growth of financial services in Australia and in the rest of the world. The financial ser-
vices sector is the third largest industry in Australia with an annual growth of 9% between 2000
and 2005. In turn, the financial market doubled between 2001-2002 and again between 2005-
2006. However, it should be noted that Sydney’s market is half the size of London’s and a 40
th
the size of New York City's. As of November 2006, the sector employs some 392,500 people.
India: Though it promises to change slowly, public banks still manage 75% of the country’s assets
and the sector remains strongly regulated. Thus, despite WTO (World Trade Organisation) re-
quirements it is currently difficult for a foreign bank to penetrate the Indian market.
Latin America is in a period of growth with solid deposits and investments in information technol-
ogy and has the support of large European groups such as the Spanish Santander.
1.4. Employment
1.4.1. Trends of total employment in the sector
Financial services represent 5,629,600 employees in the EU27 (Source: Labour Force Survey,
LFS, 2007), 65% of whom work in the banking industry, 20% in the insurance industry and 15%
are intermediaries (agents and brokers).
CEDEFOP (European Centre for the Development of Vocational Training) provided the figure of
6,014,000 employees in 2006. Assuming that total employment amounts to about 223 million
people, the financial services sector represents 2.69% of total EU employment. The data reveal a
small increase of 0.5% p.a. between 1996 and 2006. At the same time the increase in employ-
ment for the whole service sector was 3% p.a.
The Associations of the Representatives furnishes us with statistics for different types of compa-
nies:
• The EBF(European Banking Federation) statistics for the European private banks sector
demonstrate that by December 31, 2006 there were 3,000,000 people working in 204,446
branches for 7,126 banks.
• 730,000 people were working for savings banks
• 747,000 for co-operative banks.
• 1,000,000 persons were employed by insurers
• 250,000 in different small intermediary companies.
These employees are mostly part of a full-time workforce: 90.5% in 1994, although this figure is
slowly changing: 87.2% in 2005 (CEDEFOP).
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 44
FINAL REPORT, 9 JUNE 2009
1.4.2. Employment by countries
The LFS (Labour Force Survey) data between 1996 and 2006 discloses countries which had an
employment increase in the financial sector during the fore mentioned period: Ireland, United
Kingdom, Greece, Spain, France, Luxembourg, Netherlands, Denmark, Slovenia and Sweden.
Table 10 Financial services employment by country
1,000 persons, 1996 to 2006
Country 1996 2006
Belgium 140.9 140.6
Bulgaria — 38.4
Czech Republic — 71.1
Denmark 82.5 91.7
Germany 1,174.9 1,113.8
Estonia — 7.0
Ireland 48.8 83.9
Greece 87.0 104.0
Spain 328.0 399.7
France 674.0 770.1
Italy 561.7 561.6
Cyprus — 17.7
Latvia — 23.9
Lithuania — 15.4
Luxembourg 16.0 21.5
Hungary 81.1 71.7
Malta — 9.2
Netherlands 215.8 262.3
Austria 120.8 125.7
Poland — 299.4
Portugal 122.4 82.8
Romania — 90.6
Slovenia 19.2 22.1
Slovakia — 38.6
Finland 47.0 44.1
Sweden 72.6 82.4
United Kingdom 1,088.8 1,172.3
Source: Eurostat 2006
Contrary to this period of augmentation, we can see a decline in employment in this sector from
1996 to 2006 in Germany, Portugal and Finland.
The volume of employment remained steady in Italy, Austria and Belgium. Data was not provided
for certain countries which have not been mentioned, thus no conclusion can be drawn.
Shares in the financial service employment sector as a percentage of total employment, listed by
country:
Table 11 Financial services employment shares by country
% share of total national employment, 2006
Country %
Belgium 3.88
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 45
FINAL REPORT, 9 JUNE 2009
Bulgaria 1.42
Czech Republic 1.75
Denmark 3.57
Germany 3.39
Estonia 1.17
Ireland 4.92
Greece 3.69
Spain 2.46
France 3.44
Italy 3.32
Cyprus 3.31
Latvia 2.48
Lithuania 1.21
Luxembourg 11.94
Hungary 2.08
Malta 4.71
Netherlands 3.68
Austria 3.70
Poland 2.71
Portugal 2.12
Romania 1.47
Slovenia 2.74
Slovakia 1.92
Finland 2.07
Sweden 2.08
United Kingdom 4.77
Source: Eurostat 2006
Looking at employment, the most comprehensive countries in 2006 were the United Kingdom
with 1.2 million persons working in the sector (4.77% of the total employment), Germany with 1.1
million (3.39%) and France with 0.7 million (3.44%). The Netherlands is also an important country
for the sector at 3.94%.
Luxembourg has the largest share of employment in the sector at 11.94% of the total employment
because there are specific liberal exchange regulations for financial business with international
clients in this country.
For Germany and France the employment figures are in almost the same relation to that of the
total population, but for Great Britain the relation is much higher. This establishes Great Britain as
the leader in the European financial services, represented by 14% of the GDP as opposed to only
8% for the European Union as a whole.
Spain, Italy, Austria and Poland rank medially in financial services with 0.4 million, 0.3 million and
0.1 million employees working in the sector, respectively.
Scandinavia can be seen as one geographical region with strong cross border links between
companies: it represents a total of 257,500 employees in Sweden, Denmark, Finland, Latvia and
Lithuania. Data is not available for Estonia.
Individual share of employment within the financial services sector for each European nation:
Table 12 Distribution of financial services employment within the EU27
Percentage share of total EU27 employment in financial services, 2006
Country Share
United Kigdom 20.35
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 46
FINAL REPORT, 9 JUNE 2009
Germany 19.33
France 13.36
Italy 9.75
Spain 6.93
Portugal 5.20
Netherlands 4.55
Poland 5.20
Belgium 2.44
Austria 2.18
Greece 1.80
Ireland 1.45
Denmark 1.59
Romania 1.59
Sweden 1.42
Hungary 1.24
Czech Republic 1.24
Finland 0.77
Slovakia 0.67
Bulgaria 0.66
Latvia 0.42
Slovenia 0.38
Luxembourg 0.37
Cyprus
Estonia
0.30
0.29
Lithuania 0.26
Malta 0.16
Source: FLS 2006
Three countries have the lion’s share of more than half of the total European employment in the
financial services sector: the United Kingdom, Germany and France together total 53%.
The group of Western European large countries including the United Kingdom, Germany, France,
the Netherlands, Spain and Italy represent 75% of total employment in the financial services in
Europe.
The Scandinavian countries Sweden, Denmark, Finland, Estonia, Latvia and Lithuania represent
only 4.56%.
Chart 4 Shares of financial services in total national employment 2006
CC
3 6
1.2
2.5
2.1
2.1
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 47
FINAL REPORT, 9 JUNE 2009
1.4.3. Total employment in the US
From the Bureau of Labor Statistics (2006), employment in the US financial services sector rep-
resented 4.7% of total employment, compared to 2.69% in Europe (5,629,600 / 14,070,000).
4.1 million persons are employed in the American financial services sector: 1.8 million people
work in the banking industry (44%) and 2.3 million people in the insurance industry (56%): 62% in
companies and 38% in small insurance agencies, brokerage and providers of other insurance
services. However, it must be noted that the distribution is not the same: in the United States, the
insurance sector is bigger than that of the banking sector. It encompasses more occupations
such as claims adjusters, examiners, and investigators. This also reflects a feature of the Ameri-
can society with a strong legal and insurance system. The sub-sector of intermediaries is very
developed.
1.4.4. Occupational structure of workers
The following Tables present the structure of occupational profiles, the education level for each
group of occupational profiles, the distribution by age of the workforce, and the distribution be-
tween men and women. The Eurostat occupational structure of workers is the basis of this analy-
sis (ISCO): as the definition of occupational groups is not always suitable with the functions or-
ganisation in the financial services sector, these findings should be interpreted carefully.
2
We have chosen to present only the statistics of countries which have the most important share
of employment in the financial services sector. These countries are: Germany, Spain, France,
Italy, Poland and Great Britain. Likewise, the totals for the EU15 and for NM10 are assessed.
As the primary shares for occupational groups, education level, age distribution and the propor-
tion of male/female distribution differ only slightly in the three sub-sectors, statistics for the whole
of the financial service sector are presented. The only exception is the sub-sector of intermediar-
ies which has a very large proportion of business and finance professionals who are either self-
employed or employees.
Differences between countries must be taken into account; for example, a larger share of clerks
in some countries and thus a lower percentage of professionals and vice versa, cannot be ex-
plained simply by the organisation of work and the real structure of the workforce, but by the fact
that similar jobs require different qualifications in different countries or are defined differently.
Note that this occupational profiles’ nomenclature is more suitable for the manufacturing industry
than for the services industry.
While analysing the division of employment by occupation it is worthwhile to point out that the
highest number of senior managers can be found in France followed by the UK. If one compares
France with Germany, where the share of senior managers is the smallest (4.7%), an astonishing
difference of 25.1 percentage points exist. Furthermore, this category is slightly larger (by some 5
percentage points) in the EU15 as opposed to the NM10, and the share of this category is larger
than that of the total economy (by 6 percentage points for EU15 and for NM10).
Table 13 Division of employment by occupation
Percentage of total persons employed in the sector, 2006
Financial services
Total
economy ISCO
occupations
DE ES FR IT NL PL UK EU 15
NM
10
EU 15
NM
10
2
This Chapter uses the occupational classification ISCO. The link of occupational groups to functional activities is
given in Table 23.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 48
FINAL REPORT, 9 JUNE 2009
Legislators, senior officials and
managers
4.4 13.8 29.5 7.6 9.5 10.4 25.5 15.2 10.1 9.0 6.0
Computing professionals and
computer associate profes-
sionals
3.5 3.6 4.5 1.8 7.9 5.0 5.5 4.2 4.1 1.9 1.2
Business professionals, fi-
nance and sales associate
professionals
8.8 23.7 9.6 42.1 29.4 47.7 23.5 21.4 44.1 4.6 3.6
Professionals, technicians and
associate professionals
29.6 18.9 17.8 10.8 22.6 10.8 3.3 15.7 15.0 24.4 20.6
Clerks 51.0 37.3 31.0 34.9 28.5 23.6 37.8 39.7 22.7 11.9 6.6
Service workers and shop and
market sales workers
0.4 0.7 6.2 0.9 0.8 0.8 1.5 1.6 1.2 14.2 12.5
Craft and related trade workers 0.5 0.7 0.4 0.7 0.3 0.3 0.6 0.5 0.8 21.5 28.8
Elementary occupations 1.8 1.2 1.0 1.1 0.9 1.4 2.3 1.7 2.0 12.6 20.8
Total employment
100
100 100 100 100 100 100 100
100
100 100
Source: Eurostat, 2008
The highest number of IT specialists can be found in the Netherlands, followed by the UK and
Poland. The smallest number of IT specialists prevails in Italy. While analysing data from the New
Member States as opposed to that of the old, it can be surmised that the number of IT specialists
is neither dependent on its time of induction into the European Union nor on its size. Indeed the
amount of IT specialists is similar across the board.
The largest share of occupations in the whole sector are in the groups of "professionals of finance
and sales professionals", and "professionals, technicians and associated".
The most numerous group of professionals and technicians can be found in Germany and in the
Netherlands, with the smallest share in Poland. Yet Germany additionally possesses the largest
share of clerks, significantly more than in other countries – the difference can reach up to 22.5
percentage points (in comparison with the Netherlands) or 27.4 in comparison with Poland. In this
respect, Germany is high above the average for both old and New Member States. It will be more
conspicuous later that Germany also has the highest percentage of "medially skilled" workers.
This is related to the organisational structure of German financial institutions with big companies
in both banking and insurance, but also to the training system which promotes intermediary skills
in particular.
If one considers finance, sales and other professionals, one ascertains that the countries with a
large share of clerks, such as Germany, have smaller shares of professionals and vice versa, as
is the case in France and Poland. All the New Member States have a larger share of profession-
als than clerks compared to the share of professionals in the old member states. This is due in
large to a younger and more professional population which can be found in the New Member
States. If "clerks" refers to back office and administrative occupations, it could mean that old
member states have sometimes kept an old work organisation with a high number of back office
employees. Studies show that this is the case in France, Greece, Portugal, Spain and Italy.
Table 14 Change in division of employment by occupation
Percentage point difference of occupational shares, 2000 to 2006
Financial services
Total
economy
DE ES FR IT NL PL* UK EU NM EU NM
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 49
FINAL REPORT, 9 JUNE 2009
15 10 15 10
Legislators, senior officials and mana-
gers
-0.8 0.7 4.4 0.1 -1.4 — 3.4 1.6 2.6 0.5 0.9
Computing professionals and com-
puter associate professionals
0.6 1.8 0.2 1.2 0.2 — 0.1 0.6 1.0 0.4 0.6
Business professionals, finance and
sales associate professionals
1.7 4.8 2.2 4 -3.1 — 3.4 2.9 19.6 -0.7 1.6
Professionals, technicians and as-
sociate professionals
1.8 3.6 -0.2 2.7 0.2 — 1.1 1.0 -4.7 -1.4 1.6
Clerks -2,8 -11 -11.5 -7.6 4.5 — 6.4 -6.6 -0.8 -1.8 0.5
Service workers, shop and market sa-
les workers
0 0.1 5.4 0.1 0 — 0.6 0.6 -1.0 -0.2 1.9
Craft and related trade workers -0.2 0.3 -0.4 -0.2 0 — -0.3 -0.2 -1.7 -2.4 0.2
Elementary occupations -0.3 -0.3 -0.1 -0.1 -0.5 — 1.4 0.1 — 0.4 1.3
* data available only from 2006
Source: Eurostat, 2008
Regardless of whether they are old or New Member States in lower categories of occupations,
the differences are not that striking between the EU members. In general, the three groups ("Ser-
vice workers and shop and market sales workers", "Craft and related trade workers" and "Ele-
mentary occupations") have a very small share in the occupations: 3.8% in the EU15 and 4% in
NM10, compared to 48.3 and 62.1 for the total economy.
While analysing the changes in the division of employment by occupation between 2000 and
2006, it can be seen that the share of employment had been rising in the category of senior man-
agers in France and the UK, while it had been decreasing in Germany and the Netherlands. The
difference reached 5.8 percentage points. The share of IT professionals slowly increased in all
countries studied, but the increase was slightly larger in the New Member States.
The category of business, finance and sales professionals is increasing in the majority of member
states. The largest increase has been in Spain. The difference between the EU15 and the NM10
is conspicuous: in the NM10 the rise of employment in this occupational category is at 19.6% as
opposed to a negligible 2.9% in the EU15. The contrary can be observed in the category of pro-
fessionals: there is a decrease in their number in the NM10, while in EU15 there is a slight rise. In
the category of clerks there is a visible decrease of their share in all EU15; in the NM10 the de-
crease is also visible although not that significant.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 50
FINAL REPORT, 9 JUNE 2009
1.4.5. Employment by educational attainment
Table 15 Employment in financial sector by education level
Percentage of total employed in each occupation in the sector, 2006
Source: Eurostat, 2008
Analysing the financial sector based on educational prowess, one can see that there is a rela-
tively large number of managers and senior managers with a high level of education in countries
such as Spain and the Netherlands. The largest number can be found in Poland. Interestingly, the
proportion of senior managers with high education is much higher in the NM10 than in EU15 (the
difference reaches 25.5 percentage points). Therefore one can conclude that only graduates
attain high managerial positions in the NM10 but in the old member states there remains some
possibility to be promoted from the ground up.
There are remarkable dissimilarities regarding IT employees. This concerns the number of em-
ployees with an intermediate level of education; there is a divergence of some 63.6 percentage
points between France and Italy. Likewise, this reflects the category of employees with higher
education: there are countries which possess a high number of such employees, such as Spain
or France, and those with a significantly lower level of IT employment like Italy. Moreover, there is
a difference of some 10 percentage points between the EU15 and the NM10.
However, there are sizable variances, for example between Italy and Poland which reaches al-
most 30 percentage points.
Financial services
Total
economy
DE ES FR IT NL PL UK
EU
15
NM
10
EU
15
NM
10
Low 3.5 5.3 10.0 2.4 2.9 — 8.5 7.0 0.7 22.0 1.5
Medium 39.1 24.8 29.4 66.7 26.7 17.6 44.4 37.7 18.6 40.2 48.9
Legislators, senior
officials and managers
High 57.4 69.9 60.6 30.8 70.3 82.4 47.1 55.2 80.7 37.8 49.7
Low 1.6 1.1 4.5 — 4.2 — 7.7 4.4 0.1 5.1 0.8
Medium 45.0 21.2 14.5 78.1 41.4 23.1 39.0 36.4 29.2 36.0 40.8
Computing professio-
nals and computer as-
sociate professionals
High 53.5 77.7 81.0 21.9 54.5 76.9 53.3 59.2 70.7 58.9 58.4
Low 5.1 11.9 10.9 5.3 6.0 — 8.9 7.3 0.5 12.7 0.9
Medium 57.2 28.8 42.1 65.4 42.0 38.7 47.3 50.7 45.4 46.0 44.6
Business professionals,
finance and sales as-
sociate professionals
High 37.7 59.3 47.0 29.2 52.0 61.3 43.7 42.0 54.1 41.2 54.5
Low 5.8 5.5 11.2 7.7 7.4 — 8.2 6.9 0.3 6.0 0.5
Medium 67.1 21.3 41.3 61.2 39.8 37.2 42.8 51.7 39.8 33.8 43.6
Professionals, techni-
cians and associate pro-
fessionals
High 27.1 73.1 47.4 31.3 52.7 62.8 49.0 41.3 59.9 60.2 55.8
Low 6.4 9.7 17.6 10.9 19.0 0.6 20.4 11.9 0.8 21.2 3.7
Medium 75.5 35.2 46.8 68.9 58.7 74.7 60.0 61.7 76.4 59.9 81.2 Clerks
High 18.1 55.1 35.6 20.2 22.3 24.7 19.5 26.3 22.7 18.9 15.1
Low 21.3 31.6 6.0 30.8 25.7 17.3 11.7 11.8 9.1 34.6 8.4
Medium 68.2 60.5 35.1 44.9 43.5 74.2 65.1 46.8 79.0 54.6 84.7
Service workers, shop
and market sales wor-
kers
High 10.4 7.9 58.9 24.2 30.7 8.5 23.2 41.4 11.9 10.8 6.9
Low 12.0 44.5 15.9 31.3 38.7 — 26.3 28.5 — 43.9 11.3
Medium 78.3 34.0 50.9 56.0 33.5 — 40.6 49.5 98.3 49.2 86.8
Craft and related trade
workers
High 9.8 21.4 33.3 12.7 27.8 — 33.1 22.0 1.7 6.9 1.9
Low 48.6 81.9 57.0 50.3 63.0 35.0 47.7 55.0 27.9 57.0 42.5
Medium 45.9 10.4 34.6 36.8 33.4 65.0 41.5 37.2 71.1 37.4 55.8 Elementary occupations
High 5.5 7.7 8.4 12.8 3.6 — 10.8 7.8 1.1 5.7 1.7
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 51
FINAL REPORT, 9 JUNE 2009
Table 16 Change in employment; financial services by level of education
Percentage point change, 2000 to 2006
Financial services
Total
economy
DE ES FR IT NL PL* UK
EU
15
NM
10
EU
15
NM 10
Low 0 -3 -2.9 -0.4 1.8 — -0.8 -1.4 -0.8 -1.8 1.5
Medium 2.8 -14.1 -3 -3 -11.5 — -2 -4.3 -13.3 -0.3 -0.6
Legislators, senior offi-
cials and managers
High -2.8 17.1 5.9 3.4 13.2 — 2.8 5.6 14.1 2.1 2.2
Low -0.3 — -2.9 — -1.7 — -2.8 -1.8 -0.9 -0.6 -0.5
Medium -2.9 10.9 -10.8 -19 -0.6 — 4.1 -3.1 -9.3 -1.4 -8.2
Computing professionals
and computer associate
professionals
High -3.2 12 13.7 19 2.4 — -1.3 4.9 9.2 -2.0 8.7
Low 0.3 -15.2 0.2 0.1 -2.2 — -5 -3 0 -1.4 -1.0
Medium 0.6 -3.5 -1.5 -4.8 -12.2 — -1.5 -3.8 -14.9 -2.4 -14.9
Business professionals,
finance and sales as-
sociate professionals
High -0.8 -18.7 1.3 4.9 14.4 — 6.4 6.8 15.4 3.7 15.9
Low -1.4 -5.7 0.2 2.6 -2.4 — 1.0 -1.1 -2.0 -0.9 -0.9
Medium 1.7 5.4 -4.7 -9.6 -18 — 5.8 -2.9 -17.2 0.3 -6.4
Professionals, techni-
cians and associate
professionals
High -0.3 10.9 4.4 7 20.3 — -6.8 3.9 17.4 0.6 7.3
Low -2.2 -6.3 -1.7 0.4 -1.2 — -7.4 -3.4 0 -3.9 -3.1
Medium 3.1 -5.8 -6.2 -7.2 -4.2 — 3.5 -1.4 -8.5 0.2 -3.0 Clerks
High -1.3 12.2 7.9 -8.1 5.3 — 3.8 4.7 9.9 3.7 6.1
Low 34.3 16.1 8.8 1.9 -41.7 — -15.2 -15.3 -2.4 -6.9 -3.4
Medium 32.4 40.9 -29.3 -8.4 20.7 — 9.6 -5.2 -9.1 3.9 2.5
Service workers, shop
and market sales workers
High 17.2 57 38.1 5.2 20.9 — 5.6 21.4 0.7 3.0 0.9
Low -0.7 10.2 14.7 19.8 11.8 — -29 -8 — -4.2 -4.1
Medium 3.1 -21.9 -6.5 6.6 -39.6 — 4.2 -4.9 13.2 3.3 5.0
Craft and related trade
workers
High -3.7 11.6 21.3 — — — 24.8 12.9 -1.8 0.8 -0.9
Low 5.4 -1.4 15.1 29.0 -25.1 — -14.0 -8.4 1.9 -8.7 -17.6
Medium 6.0 -4.9 6.7 16.1 21.5 — 3.2 2.7 -2.9 7.2 17.6 Elementary occupations
High 0.6 6.2 — — — — — 5.6 — 1.6 -0.1
* data available only from 2006
Source: Eurostat, 2008
In the category of professionals and technicians, the major observation is that there are more
employees with an intermediate skill level in EU15, while the contrary is true for those possessing
qualifications that reflect a higher level of education. A greater number of employees with a high
skill level can be found in the NM10. These figures need to be assessed with the distribution by
age. A significant number of young highly skilled graduates are entering the sector.
In the category of clerks there are more employees with a medial skill level employed in the
NM10. However, one remarks that the percentage of this group is indeed smaller in proportion to
that of employees with a higher skill level in a similar group. In the clerk group, there are signifi-
cant differences among countries: for example in Germany the majority of clerks have a medial
level of education, while in Spain the majority of clerks have high level of education.
Although in contrast they do not represent a large share of occupations, an interesting observa-
tion can be made by analysing service, shop, and sales workers. It is striking that the number of
employees in this group with higher education is significantly lower in NM10 than that of the EU15
which represents a divergence of 29.5 percentage points.
By looking at the difference in the educational level in the group of senior managers between
2000 and 2006, the general observation is that the number of employees with a medial level of
education is decreasing in the NM10 to an even greater degree than in the EU15. At the same
time, the number of senior managers with a higher level of education is increasing, again to a
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 52
FINAL REPORT, 9 JUNE 2009
greater extent in the NM10. However, the largest increase of high skilled senior managers has
been observed in Spain.
The change in qualification levels can also be acutely seen within the IT group. The number of
employees with medial skills is decreasing, while the number of employees with high skills is
increasing. The only country where the share of IT employees with a medial level of education
increased was in Spain. The biggest increase in the share of the employed with a high level of
education was observed in Italy, followed by France. Often increases and decreases are exactly
or nearly proportional; a decline of 10.8% of medially skilled workers in France is contrasted by
an augmentation of 13.7% of highly skilled workers. One can see a mirror image in Italy where a
decrease of 19% is contrasted by an increase of 19%.
With the growth of highly educated employees, employment of low skilled and medially skilled
employees in the category of business, finance, and sales professionals is slowly diminishing in
all EU countries. This trend is even more evident in the NM10.
In the category of professionals and technicians in all the European countries, there is a shift
between medially skilled employees and highly skilled employees. In the NM10 the shift is more
pronounced. This mirrored effect is present in the entire economy, but more acute in the financial
services sector. The biggest decrease in medially educated employees, distinguished by the
largest increase of highly educated employees, is found in the Netherlands. There was likewise a
significant decrease of the employment of medially skilled employees in the NM10.
It is astonishing that the number of employees with a high level of education also increased in
service, shop and sales activities, though to a greater extent in the EU15 than in the NM10. A
possible explanation for this is that one has come to expect higher competencies among these
personnel.
From these trends one can conclude that there is an inclination to upgrade occupational skills.
The major change is in the increase of the share of highly skilled personnel in IT, finance, busi-
ness, sales professionals and in the clerks group sectors.
If we consider the LFS 2007 figures, we can see that the share of low-skilled employees and
people with basic schooling is still decreasing amongst all the groups, as well as in EU15 and the
NM10. We can also see that the percentage of medium-skilled people is decreasing within the
group of “managers” and within the two groups of professionals and clerks. The workforce struc-
ture is changing towards a high-skill profile.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 53
FINAL REPORT, 9 JUNE 2009
1.4.6. Employment by age group
Table 17 Employment by age group; financial services
Percentage of total employed in each occupation, 2006
Financial services
Total
economy
Age
group
DE ES FR IT NL PL UK
EU
15
NM
10
EU
15
NM
10
15-39 36.2 39.3 35.4 19.4 41.0 46.0 53.3 40.8 46.9 35.1 39.1
40-49 34.1 35.3 33.9 37.6 38.4 29.4 31.4 34.3 30.8 32.4 30.7
Legislators, senior officials
and managers
50+ 29.7 25.4 30.7 43.0 20.6 24.6 15.2 24.9 22.2 32.5 30.2
15-39 45.9 55.0 51.0 34.7 47.6 69.6 62.6 52.8 67.7 61.8 73.9
40-49 34.6 30.7 27.7 38.6 36.6 18.6 28.0 31.0 18.4 26.1 15.6
Computing professionals
and computer associate
professionals
50+ 19.5 14.3 21.4 26.7 15.8 11.8 9.4 16.2 13.9 12.2 10.5
15-39 43.4 51.9 49.2 43.2 57.3 62.9 63.8 51.5 60.4 55.8 60.5
40-49 31.6 26.2 36.1 30.9 24.8 23.0 21.4 27.2 23.5 23.7 21.8
Business professionals,
finance and sales associ-
ate professionals
50+ 25.0 22.0 14.7 26.0 17.9 14.2 14.9 21.3 16.2 20.6 17.7
15-39 44.5 54.5 39.1 50.4 59.4 52.3 60.8 47.7 55.0 45.1 47.5
40-49 31.8 26.0 25.5 35.9 24.0 20.6 25.2 29.3 22.0 28.6 27.0
Professionals, technicians
and associate profession-
als
50+ 23.6 19.5 35.4 13.7 16.6 27.1 14.0 23.0 22.9 26.3 25.5
15-39 49.2 57.9 45.6 50.9 58.6 61.7 66.4 54.3 60.8 50.9 54.6
40-49 28.1 22.5 24.9 31.3 25.7 22.8 19.2 25.4 23.4 26.7 25.4 Clerks
50+ 22.6 19.6 29.6 17.8 15.7 15.5 14.6 20.3 15.8 22.4 19.9
15-39 28.6 66.2 76.8 79.3 48.5 59.8 72.3 71.3 56.9 57.6 60.9
40-49 30.1 27.9 10.9 16.9 20.5 31.7 7.9 13.5 25.2 23.8 22.8
Service workers, shop and
market sales workers
50+ 41.3 5.9 12.3 3.8 31.0 8.5 19.8 15.2 17.9 18.7 16.4
15-39 23.8 55.1 53.2 42.1 63.5 — 40.4 39.4 27.8 49.5 51.9
40-49 28.7 17.5 32.1 29.5 — 11.8 22.8 27.1 25.2 27.6 27.7
Craft and related trade
workers
50+ 47.5 27.5 14.7 28.3 36.5 88.2 36.8 33.4 47.0 22.8 20.4
15-39 20.2 22.6 63.3 28.6 42.1 38.9 45.6 34.9 26.2 42.8 41.2
40-49 31.8 36.7 21.7 51.3 15.0 26.7 20.1 26.8 29.4 27.1 23.9 Elementary occupations
50+ 48.0 40.7 15.0 20.1 42.9 34.5 34.3 38.4 44.5 30.1 34.9
Source: Eurostat, 2008
By looking at the age structure of the financial sector in 2006 in the EU27, one can observe that
this sector is “younger” in the NM10 than in the EU15. Likewise there is a more than 50 point
difference in the NM10 of personnel employed in the lower occupational level than in the EU15.
The greatest number of young people aged 15 to 39 in the senior management positions are
employed in Poland and the UK. The oldest senior managers can be found in France, Germany
and Italy – the majority of whom are over 50.
Similar observations concern IT employees. This youthful group totals 52.8 % of its employees
between the ages of 15 and 39 in the EU15. In the NM10, this predisposition is even starker at
67.7%. There is almost a 15 percentage point difference in favour of the NM10 in the age cate-
gory 15-39 and 40-49. The smallest number of “young” IT personnel are employed in Italy, which
also counts proportionally less IT employees.
One finds a similar pattern across different age categories among business, finance and sales
professionals. However, these groups are inclined to be even younger in the NM10 whose pro-
fessionals and technicians have a median age between 15 and 39 compared to a median age
between 40 and 49 in the EU15.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 54
FINAL REPORT, 9 JUNE 2009
In the category of clerks the age pattern tends to be quite similar between EU15 and NM10,
though there are still more numerous clerks over 50 in the EU15.
With the exceptions of Germany and France, the age distribution for all professional and clerk
groups mirrors that of the total economy.
Table 18 Change in employment by age group; financial services
Percentage point change, 2000 to 2006
Financial services
Total
economy
DE ES FR IT NL PL* UK
EU
15
NM
10
EU
15
NM 10
15-39 -8.9 3.6 2.4 -9.6 -0.3 — -5.1 -3.3 9.2 -5.4 0.8
40-49 -7.0 -5.1 3.6 1.9 -5.0 — -4.7 4.0 -14.7 3.5 -5.8
Legislators, senior officials
and managers
50+ -3.5 1.4 -5.9 7.7 -2.1 — 0.3 -0.7 5.4 1.9 5.0
15-39 -13.8 -34.2 0.1 -47.0 -13.8 — -15.4 -14.7 2.0 -7.6 4.5
40-49 5.0 20.2 -5.0 20.3 -25.9 — 9.7 8.1 -0.3 5.3 -5.3
Computing professionals
and computer associate
professionals
50+ 19.6 — 5.0 — -1.1 — 5.6 6.6 -1.7 2.4 0.8
15-39 -0.2 -7.8 -14.4 -9.2 -8.3 — -1.5 -5.8 1.0 0.3 7.1
40-49 1.3 1.6 12.2 3.1 -38.3 — 1.5 2.8 -3.2 -0.2 -6.6
Business professionals,
finance and sales associ-
ate professionals
50+ 10.8 6.3 2.2 6.3 -2.5 — 0.1 3.0 2.3 0.0 0.5
15-39 -6.6 -3.8 -9.2 0.5 -8.5 — 3.4 -5.9 0.3 -3.2 1.6
40-49 7.2 -2.5 -6.9 2.6 -37.9 — -6.5 2.5 -7.9 -0.4 -4.6
Professionals, technicians
and associate profession-
als
50+ 3.8 6.3 16.1 -3.1 6.0 — 3.0 3.4 7.6 3.6 3.1
15-39 -7.7 8.4 -1.8 -4.7 -10.5 — -4.7 -4.0 -3.3 -4.7 2.8
40-49 3.8 -12.3 -10.3 1.8 -42.6 — 2.0 -0.4 -1.1 1.1 -5.6 Clerks
50+ 10.0 3.9 12.2 3.0 0.9 — 2.8 4.4 4.4 3.5 2.6
15-39 -9.8 -13.4 -2.4 -1.8 -24.9 — -4.3 2.4 -11.6 -2.5 -2.0
40-49 -5.4 14.1 -3.1 4.0 -41.6 — -10.3 -4.2 4.0 1.7 -2.2
Service workers, shop and
market sales workers
50+ -1.5 -0.7 5.4 -2.2 11.3 — 6.0 1.8 7.6 0.9 4.3
15-39 -10.4 10.9 5.1 -7.3 14.7 — -10.3 -3.7 -23.5 -4.9 -2.8
40-49 -11.3 -30.4 17.8 -18.3 -27.6 — -4.2 -5.9 -12.0 2.2 -2.4
Craft and related trade
workers
50+ — 19.5 -22.9 25.5 21.3 — 14.5 9.4 35.4 2.6 5.2
15-39 -5.3 -18.3 14.4 -6.4 24.2 — 15.9 4.4 -16,5 -3.7 2.5
40-49 9.4 10.0 0.8 26.4 -7.4 — -2.7 1.8 -0.1 2.6 4.5 Elementary occupations
50+ 37.5 8.3 -11.7 -19.9 -4.5 — -13.3 -6.0 16.8 1.1 -7.0
* data available only from 2006
Source: Eurostat, 2008
The most significant changes were observed in Germany and the Netherlands, particularly in the
over 50 category.
1.4.7. Employment by gender
In general, senior managers are more likely to be men in the EU15 – the highest disparity can be
observed in Italy where 81.6% are men and 18.4% are women; and in Spain 84.8% men and
15.2% women. The lowest gender gap is found in France. In the case of New Member States the
proportion of male and female employees is more equal at 53.3% men and 46.7% women. Pro-
portionally there are more women employed in senior positions in the financial sector than in the
whole economy both in the EU15 and the NM10.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 55
FINAL REPORT, 9 JUNE 2009
The share of men employed in IT jobs amounts to 80% both in the EU15 and NM10.
In the categories of business, finance and sales the majority of female employment can be ob-
served in France and Poland. Again, in the NM10 the majority of employees in these occupations
are women. Regarding professionals and technicians, there is a visible trend of prevailing male
employment in the EU15 and female employment in the NM10.
The same situation can be found in the category of clerks: there is predominant female employ-
ment both in EU15 and NM10; however in NM10 there are many more women employed in this
occupation than men (difference of more than 20 percentage points).
Table 19 Employment by gender; financial services
Percentage of total employed in each occupation in sector
Financial services
Total
economy
Sex DE ES FR IT NL PL UK
EU
15
NM
10
EU
15
NM
10
Men 70.0 81.6 58.7 84.8 75.2 50.3 64.6 67.0 53.3 67.4 66.3
Legislators, senior
officials and managers
Women 30.0 18.4 41.3 15.2 24.8 49.7 35.4 33.0 46.7 32.6 33.7
Men 78.4 80.0 63.6 82.6 84.3 88.4 87.3 79.0 82.2 82.7 79.5
Computing profession-
als and computer
associate professionals
Women 21.6 19.9 36.4 17.4 15.7 11.6 12.7 21.0 17.8 17.3 20.5
Men 75.1 56.2 38.0 70.2 60.9 28.4 59.7 61.6 33.0 59.3 42.4
Business professionals,
finance and sales
associate professionals
Women 24.9 43.8 62.0 29.8 39.1 71.6 40.3 38.4 67.0 40.7 57.6
Men 54.9 42.8 44.3 41.8 52.6 19.1 50.8 49.9 25.3 46.6 38.6
Professionals, techni-
cians and associate
professionals
Women 45.1 57.2 55.7 58.2 47.4 80.9 49.2 50.1 74.7 53.4 61.4
Men 39.3 45.7 25.7 46.8 30.8 12.5 26.5 35.7 14.8 30.6 28.7
Clerks
Women 60.7 54.3 74.3 53.2 69.2 87.5 73.5 64.3 85.2 69.4 71.3
Men 36.0 40.9 20.2 44.4 41.4 71.7 42.7 31.3 81.4 31.3 35.2
Service workers, shop
and market sales work-
ers
Women 64.0 59.1 79.8 55.6 58.6 28.3 57.3 68.9 18.6 68.7 64.8
Men 84.8 77.5 73.1 64.3 88.0 100.0 87.6 81.2 97.6 88.4 79.6
Craft and related trade
workers
Women 15.2 22.5 26.9 35.7 12.0 — 12.4 18.8 2.4 11.6 20.4
Men 25.1 22.8 7.5 57.2 7.0 28.0 46.3 31.4 20.2 53.0 52.8
Elementary occupations
Women 74.9 77.2 92.5 42.8 93.0 72.0 53.7 68.6 79.8 47.0 47.2
Source: Eurostat, 2008
Consequently, as of 2006 there were more women employed in the occupational categories
sector. The most pronounced change can be seen in both the senior management category and
the elementary occupations. The only occupation category where the proportion of male employ-
ment increased was IT jobs; moreover, the increase was more significant in the NM10 than in the
EU15.
Table 20 Change in employment by gender; financial services
Percentage point change, 2000 to 2006
Financial services
Total
economy
Sex DE ES FR IT NL PL* UK EU NM EU NM
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FINAL REPORT, 9 JUNE 2009
15 10 15 10
Men -9.9 -4.8 -12.4 -4.9 -3.6 — -0.8 -5.8 -10.3 -2.5 -2.8
Legislators, senior officials
and managers
Women 9.9 4.8 12.4 4.9 3.6 — 0.8 5.8 10.3 2.5 2.8
Men -2.5 7.0 -13.2 14.4 -0.8 — 10.5 0.7 18.3 0.3 8.3
Computing professionals and
computer associate profes-
sionals
Women 2.5 -7.0 13.2 14.4 0.8 — -10.5 -0.7 -18.3 -0.3 -8.3
Men 1.7 -10.3 -4.2 0.4 -8.0 — -6.8 -3.9 -6.0 -5.9 -0.8
Business professionals,
finance and sales associate
professionals
Women -1.7 10.3 4.2 -0.4 8.0 — 6.8 3.9 6.0 5.9 0.8
Men 1.8 -11.3 -4.7 -7.4 0.2 — -5.6 -2.2 -3.9 -1.6 -1.6
Professionals, technicians
and associate professionals
Women -1.8 11.3 4.7 7.4 -0.2 — 5.6 2.2 3.9 1.6 1.6
Men 0.7 -13.7 -2.2 -6.8 1.2 — 3.1 -2.0 -1.5 -1.8 5.2
Clerks
Women -0.7 13.7 2.2 6.8 -1.2 — 3.1 2.0 1.5 1.8 -5.2
Men 5.8 -20.2 -14.3 5.1 -5.2 — 12.4 -8.0 7.6 -2.6 1.1
Service workers, shop and
market sales workers
Women -5.8 20.2 14.2 -5.1 5.2 — -12.4 8.0 -7.6 2.6 -1.1
Men 6.0 -22.5 -2.0 -23.7 12.0 — 9.0 -6.0 3.8 -1.3 2.8
Craft and related trade
workers
Women -6.0 — 2.0 23.7 — — 9.0 6.0 -3.8 -1.3 -2.8
Men -3.3 -15.8 -25.9 -5.8 -23.0 — -7.1 -3.7 -22.8 -1.0 2.9
Elementary occupations
Women 3.3 15.8 25.9 5.8 23.0 — 7.1 3.7 22.8 1.0 -2.9
* data available only from 2006
Source: Eurostat, 2008
1.5. Excursus: review of forecasts for the sector
A few forecasts exist for financial services. As part of the skill needs projections, CEDEFOP re-
cently presented data for the European financial services sector among the complete set of sec-
toral forecasts. Moreover, the Bureau of Labour Statistics continuously publishes data of occupa-
tional change in the US.
CEDEFOP
The Synthesis Report "Future skill needs in Europe, medium-term forecasts" (2008) expected a
flat situation for financial services sector until 2015 with no growth for this period: in relation to
overall employment the sector that represented 3% of total employment in 1996 will only have a
share of 2.7% in 2015. The figures for banking and insurance are given by Table 21.
It can be noted that with these forecasts, made before the financial crisis, the trend for employ-
ment in the banking and insurance industry will be lower than in the whole sector of services.
“Business and miscellaneous services” have the best prospects with almost 9 million additional
jobs being created between 2006 and 2015.
Table 21 CEDEFOP forecast
Levels (‘000) Percentage change
1996 2006 2015 1996-06 2006-15
Business and other services 34 022 34 568 54 559 3.0 2.0
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FINAL REPORT, 9 JUNE 2009
Banking and insurance 5 743 6 014 6 032 O.5 0.0
Other business and defence 17 424 26 140 33 079 4.1 2.7
Miscellaneous services 10 855 13 485 15 448 2.2 1.5
All sectors 192 714 210 656 223 936 0.9 0.7
Source: CEDEFOP/IER (2008)
Bureau of Labour Statistics (USA)
According to the "Career guide to industries" (Bureau of Labour Statistics, 2008), the banking
sector in the USA will increase by 4% until 2011 (while 11% are expected for all the industries)
and the insurance sector (including brokerage and self-employed experts) will increase by 7.4%.
A long-term reduction of employment is expected in the banking industry for:
• back office jobs and all sorts of administrative support jobs,
• for general management and corporate jobs,
• for credit analysts (because of the development of credit scoring)
• for data entry keyers
Increases are forecasted for:
• financial analysis
• personal financial advisers
• computer specialists
• tellers
As for the insurance sector, that represents the larger share of employment in the US, „job growth
… will be limited by corporate downsizing, new technology and increasing direct mail, telephone
and Internet sales, but numerous job openings will arise from the need to replace workers who
leave or retire. Growing areas of the insurance industry are medical services and health insur-
ance, and its expansion into other financial services such as securities and mutual funds.“
Employment reduction could be expected in the insurance sector from 2006 to 2016 for:
• computer programmers
• file clerks
• data entry keyers
and increases for:
• computer system analysis
• insurance sales agents
• customer service representatives
• financial analysts.
2. Main trends of change and drivers
2.1. Market growth in Europe
European financial services experienced exceptional growth during the last ten years. This was
already presented in detail in Section 1.2. In addition to the strong and worldwide economic up-
swing during that period, the explanation for this rapid expansion has to searched in the enlarge-
ment of the European Union and the creation of new products on financial markets.
2.1.1. The impact of enlargement
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The growth of financial service markets in the New Member States has been and continues to be
crucial since the mid-1990s. It has represented a way of external growth for western companies.
This current started at the end of the 1990s.
During the catch-up phase in eastern European countries, the insurance market was character-
ised by strong growth: over 26% on average in 2006. This demonstrates that in several countries
new pension schemes are now managed by insurers.
That said, for the time being, a great share of the financial service sector in the New Member
States is still dependent upon western European companies: some 85% of the banking sector in
Hungary for example, or 90% of the banking sector in Slovakia.
Example: One evokes the following example of the Hungarian insurance group, the bank OTP
Garancia formerly known as the single public bank during the communist regime, OTP Bank.
After being privatised, the financial group developed retail banking activities, non-life insurance
products and life insurance products. Then the group expanded in six eastern European coun-
tries: Romania, Slovakia, Bulgaria, Ukraine and Russia., As of 2007 OTP has 1,432 branches,
30,532 people and 32 million euros of assets. In 2008, the group sold its insurance activities (with
an increased growth of 13% a year since 2004) in order to concentrate on its central business
segment. It is suspected that will be acquired by the French insurance group GROUPAMA keep-
ing true to their strategy of external eastern European expansion. The Hungarian market has
been growing rapidly since 1998: premiums were tripled. GROUPAMA will become the second
insurance group in Hungary.
What will the growth in eastern European countries be after the present crisis? It is sure that
margins for further developments exist: only a part of the population is “bancarised”, there are
people with no insurance for motor cars, property and of course life insurance. A large share of
the Polish population lacks bank deposits (Belgian network for alternative financing; European
Commission, May 2008).
2.1.2. Diversification and search for new markets
Over the past ten years, some examples of the constant effort of the sector to invent new prod-
ucts can be given. In the insurance sector, there is a constant search for new markets and new
products according to the changes of welfare state benefits. This mainly concerns health care
and pension funds. The expanding areas for the insurance industry are primarily in medical ser-
vices and health care. Insurance companies are trying to provide new services: not only reim-
bursement but services.
In the banking sector the search was for direct banking activities and a wide range of speculative
investment products ranging from hedge funds to credit default swaps and other options on the
future.
Regarding direct banking, low cost products in order to address the ”non bancarised” people.
Many are looking towards microfinance. The market is also constantly devising new products to
attract the consumption of young people, such as "pay-as you-drive" car insurance. In Sweden
the youth are looking to be the recipients of SMS loans, another example of this type of marketing
based on consumer demand.
The real estate sector was seen not only as a guarantee but as an investment. The Dutch group
ING has a real estate subsidiary which recently bought a property developer in Lyon to construct
offices and commercial centres. The French group Credit Agricole, under the brand "Square
Habitat", has bought 480 real estate agencies as of 2005 - that is nearly the same number of
agencies as real estate companies such as the German Hypo Real Estate.
2.2. Globalisation of financial markets and international competition
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The concept of "globalisation" has a wide range of meanings, but in step with the problematic
aspect of employment and skills, we should stress two points:
• financial services are now more dependent on global money and capital markets;
• most firms are now global players; they seek to develop activities in a wide range of countries
and seek to grow externally by employing an international strategy.
2.2.1. Financial services and global market
Description: for a considerable time in the banking industry, companies secured loans mainly with
their customers’ bank deposits and partly with interbank credit. In the meantime, insurers invested
in the economy and in the real estate sector in order to insure their risks. This period was charac-
terised by separation of retail activities and business activities. Currently, a substantial share of
coverage is based on a large range of financial products depending on the stock exchange and
global financial market. Thus, every company benefits from doing its job and by acting methodi-
cally on the global financial market. The worldwide market can be defined as a global intercon-
nection of all assets: real estate, loans and interbank credits, exchange rates, shares, materials
etc.
This represents hope for quick benefits and a certain fragility for the whole sector.
Example: the recent subprime and systemic crisis
The following is to better understand the value and risk chain in this part of financial activity which
unleashed a credit domino effect, risk of failures and thus giving rise to what experts deem the
credit crunch. Business or market banking is linked to retail banking activities and credits. While
the prices of real estate were increasing, building brokers and credit institutions, mainly in the
USA, but also in Great Britain and Spain, took to selling construction credits with a high degree of
risk. Firstly, because they were sold to high risk borrowers, secondly because they were guaran-
teed by "commercial papers" and derivatives out of the normal accounts of the companies and
balance sheet. In this way, in the run-up to the crisis, a lot of financial companies became
strongly over-leveraged: in 2006, the derivatives represented 6 times the world GDP, $286,000
billions (International Swap and Derivatives Association, 2007). It was in 2000 that derivatives
and credit default swaps (CDS) were excluded from regulation and in 2004 the SEC (Securities
and Exchange Commission) exempted the investment banks from maintaining reserves to cover
losses on investments. The "subprime" crisis has been forecasted by economists since 2005 by
analysing the risk externalisation of new sophisticated products.
The debt was very high and American banks were strengthened by having the highest level of
capitalisation. Some experts concluded that they faced better conditions for the globalisation and
liberalisation of markets. Yet when a financial crisis appears, or if American households become
insolvable, the crisis could be systemic and involve all types of financial businesses. This burdens
other financial institutions, and sometimes even households, with risks.
The impact of such a crisis hits credit institutions first: some of them were near bankruptcy (such
as the British Northern Rock which was nationalised by the British Government) or in urgent need
of capital (such as Merrill Lynch or JP Morgan Chase). The turmoil that affected financial markets
in the summer of 2007 turned for the worse in September 2008.
This crisis is acuter than that of 1991; banks and construction companies are racked by heavy
losses (note CBI/Price Water House, London, 2008) and it spread worldwide when equity prices
were felt all around the word.
The consequences for the whole sector are very important and as yet unknown:
• The risk of bankruptcy for some large banks has obliged them to look quickly for ways of
increasing their capital. This is accomplished with the assistance of the United States which
buy preference shares, or guarantee their debt, by wealth of sovereign funds or from foreign
companies in emerging countries. These foreign companies can take advantage of the
weakness of American or European companies in order to inject their capital.
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FINAL REPORT, 9 JUNE 2009
• This cyclical weakness could lead to a new concentrated movement within the sector. This
can be seen mainly in countries where the consolidation of the sector is yet to be realised.
Mergers and acquisitions could have negative effects on the volume of employment.
• The credit squeeze: activity of credit and loans in banks will be reduced. With a general
recession looming, such a limit is expected for individuals and companies. Therefore the
whole economy could be affected by the effects of employment in all sectors. One can re-
mark that all the banks are not concerned by the credit crunch: some of the co-operative
banks for example still give loans to individuals and SMEs. On the other hand, some saving
banks or mutual insurance groups are concerned because they bought “toxic products” .
The subprime crisis is not a new phenomenon: experts concede approximately 24 such financial
crises since 1980. But it has capsized not only banks but money mutual funds, hedge funds,
manufacturers and all sorts of companies, and even countries such as Iceland, Hungary and
Ukraine. It has spread to a wider range of markets and institutions than others, including emerg-
ing countries, which until quite recently seemed to have been saved and now the fall in financial
wealth is general.
We shall examine the economical and social consequences of the crisis at the beginning of the
Chapter “Scenarios”.
2.2.2. Financial services groups are now European and global players
Previously held strategies for growth did not incorporate cross-border mergers, but were relatively
confined as a national affair. This is mainly due to the financial sector being under the authority of
active national government regulations.
Today, experts notice that the whole banking and insurance industry in Great Britain, Benelux,
France, Spain, and in Scandinavia are acting beyond their own administrative and national bor-
ders; the majority of financial groups are not reticent to become global players. This is the result
of a long-lasting deregulation policy at national levels and at the European level. Deregulation
enhances the possibility for financial companies to access all European markets and to acquire
various financial groups. More precisely, it marked the end of the dividing lines between the bank-
ing industry and the insurance industry as well as between retail banking and whole sale banking,
though the current crisis now calls many of these deregulatory actions into question.
As was the case in Sweden in 1990, the deregulation in some countries meant that new financial
activities, like brokering, became legal. As a result, there are now 800 brokers in just 300 small
companies. One acknowledges that solely the Italian and German financial services still have to
institute strategic changes to liberalise due to the continued limitation of their financial service
sector by active regulation of national and regional authorities. Will this be protection?
The following indicators give examples of the new global players and their size: in 2007, large
financial companies had employees throughout the world. Some of these included:
• HSBC- 312,000 employees worldwide: 57,000 in Great Britain, 50,000 in the United States,
29,000 in Brazil, 28,000 in Hong Kong etc.
• UNICREDIT-HBV- 120,000 employees worldwide: 38,000 in Italy, 27,000 in Poland, 25,000 in
Germany, 15,500 in Turkey, 12,500 in Austria.
• Société Générale- 120,000 people worldwide: 58,200 in France, 9,700 in Czech Republic,
7,200 in Russia, 7,100 in Romania, 2,100 in Asia and 3,000 in the United States.
• Credit Agricole Group- 157,000 employees worldwide: 116,000 in France, 7,600 in Italy, 7,000
in Greece, 5,300 in Poland, 3,300 in Ukraine.
• BNP-PARIBAS- 155,000 employees worldwide: 63,000 in France, 20,300 in Italy, 10,400 in
Ukraine, 6,400 in Great Britain, 14,500 in the United States.
Source: Internationalisation in retail financial services. "New jobs, new skills, new organisations",
EBTN (European Banking and Financial services Association for Training. Paris 15-16 November
2007.)
Of course, smaller groups are still present in regional areas.
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The following developments illustrate the new strategy: European financial groups are expanding
into China. Inversely, Chinese funds are being introduced into the capital of western groups, like
other international sovereign wealth funds:
• In 2007, the Spanish group CAIXA acquired the private banking activities of the American
group Morgan Stanley. The group also took a share in The Bank of East Asia, an Asiatic
group well organised in China. Hence CAIXA now has subsidiaries in Poland, Romania, and
elsewhere.
• In November 2007, the Chinese group PING AN, the second most important on the Chinese
market, became the primary shareholder for the Belgian and Dutch group FORTIS perhaps
partly due to FORTIS being well developed in combination with Taiping Life in Asia. This fact
has two important consequences: firstly, it proves that the Chinese groups are taking advan-
tage of the subprime crisis in order to enter into the western market. Secondly, they are
seeking strategic partnerships with European groups to develop innovations and new prod-
ucts for their own domestic market.
Increased international competition could arise from the crisis and from this great new game. This
needs to be viewed against the backdrop of the high profitability of the “Anglo-Saxon” banking
and insurance system countered by the German, and as of late, Japanese banking crises. The
highest profitability is obtained in countries where there is an economic policy in favour of a large
household debt. However, the risks are at their maximum. (Michel Aglietta, Vingt ans de muta-
tions, in: La guerre mondiale des banques - Le Cercle des Economistes, 2007). The main ques-
tion for the future will be the credit policy.
The internationalisation of the financial service sector could have several consequences for em-
ployment patterns:
• It is difficult to avoid the fallout of the global crisis leading to further restructuring and layoffs.
The crisis reinforces the need for profitability: several British companies are looking for a low
cost model to face the crisis. This is the case for the insurance Group AVIVA (cutting 10% of
jobs in its non-life insurance company Northern Rock) and for ZFS.
• The large size of companies could lead them to a more industrious organisation with stan-
dardised products; easily delivered and a minority of skilled employees (we will examine this
issue in the Chapter 4 about scenarios and competences implications).
• The worldwide organisation of firms could lead them to relocate support functions and back
office jobs.
• The advantage of being a global player lies with weakened links between financial groups
acting as investors and the national industry (this is the case in Germany where more than
50% of DAX companies are now under non-German control).
2.3. European single market and rules
Since 1990, national controls have to a large extent been abolished and have been replaced by
European regulations, such as Basel I and II for the banking industry. Central banks in each
country and the ECB are independent bodies. The rules laid down in the so called Basel I and
Basel II aim to ensure a liable relation between the capital and the volume of loans dependent
upon their risk degree. This has replaced the so called "ratio Cooke". Basel II encompasses a
more economical approach: the level of risks would be calculated by the banks themselves as a
result of their own risk evaluation. Some of the experts for the sector are now in favour of this new
system because they lack confidence in their own risk management internal system. However,
the latest philosophy of Basel II is relatively new and not without its failings. Under it, the conse-
quences of new industrial regulations, like the new IFRS accounting rules, cannot be completely
analysed, but some of the experts think that these new accounting rules had a “pro-cyclic” role
and made the crisis worse.
For the insurance sector, the directive "Solvency I" was set up in July 2007: it requires a more
solid capital basis for companies in order to assume risks and to encourage them to go to the
stock exchange to raise money. However, it also established that the companies’ value will be
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estimated from the current market value (“fair value”), which increases the volatility of the market:
this is a rule which is now being discussed among experts and company managers.
The question of the diversity of ownership in the financial services sector is also on the table for
some experts and company representatives. Among the main conclusions of a recent study con-
ducted by Oliver Wyman, published at the convention for co-operative banks: "they should have
been seen as a safe haven in the current times of turbulence and uncertainty, and as a customer
champion" (2007 Report for EACB). That is an important issue for employment which is better
protected in the co-operative or mutual sector than in the private sector which demands a higher
return ratio.
The European market (for the 27 EU Member States) is now open and in each state the barriers
between the different sub-sectors have been abolished. Deregulation allowed financial service
institutions to offer a wider range of products.
CEBS is the European Committee for supervisors in the banking sector. It is a body of the Euro-
pean Commission which is responsible for the implementation of the Basel II regulations. How-
ever, the “vision” of a single EU financial service market is being delayed by heterogeneous local
market conditions such as differences in tax incentives and consumer preferences (Oliver Wyman
Report, State of Financial Services Sector -2008). That is why a multitude of companies attempt
to have both a decentralised organisation suitable for each county’s rules and customer habits,
and common industrial platforms for standardised activities.
CEIOPS is in charge of prudential rules and regulations for the insurance sector. It groups the EU
27 national control bodies and is now preparing the directive "Solvency II" for 2012 (also known
as the Lamfussy Process). In July 2007, a European directive on insurance was adopted (for a
survey: European Commission 's Green Paper in Financial Services Policy 2005-2010).
It is evident that in the upcoming months and years new rules will have to be established at dif-
ferent levels in order to answer to and to anticipate crisis.
2.4. Concentration in the financial services sector: mergers and
acquisitions
2.4.1. Competition versus "too big to fail"
There may be several reasons for the process of concentration in the sector:
• The wish to enter new markets where an important growth can be expected. For example, in
the New Member States western European companies are well established. Or for example
in large market companies such as the English HSBC Holdings plc. (Hongkong and Shang-
hai Business Corporation), the Scottish RBS (Royal Bank of Scotland), or the French Axa
which are all important players.
• Looking for sales economies: experts continue to debate the subject. They mostly conclude
that there were no serious economic reasons to expand other than power and reputation.
"The first driver for gigantic size is the struggle for power” (Michel Aglietta, Pastré, de Bois-
sieu in La nouvelle économie bancaire, Economica, 2006).
• In order to expand into one another’s markets: insurance groups, banks, and security firms
are engaged in numerous mergers. This allows the merging companies to access each
other's client base and geographical markets. In the USA there have been plenty of mergers
since 1994. This is largely due to the abolition of both the Mcfadden Act, which accepted
banks to collect only in the State where they were registered, and the Glass-Steagall Act in
1999, which separated banking and insurance activities. Seeking wider markets to spread
their risk efficiently, particularly in the insurance industry, is a further rationale for mergers.
Cross-selling products means that banks and insurance groups spread costs and risks
across products and services. "Diversified risk spreading is positive" said Charlie McCreevy,
the European Commissioner for Internal Market at the EBF dinner, September 24, 2007.
• Mergers may be perceived as help in resolving a financial crisis. After the big bank crisis of
1997, the Japanese government encouraged mergers in order to increase the consolidation
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of the sector and a large number of secondary banks were closed. The government also re-
acted by creating a regulatory body based on the English model. Mergers resulting from the
present crisis are already underway: BNP Paribas with Fortis, Barclays buying a part of
Merryl Linch etc.
• New mergers and acquisitions will certainly continue as a consequence of the financial crisis,
although there is now a “risk of TBTF” (too big to fail): “huge financial groups cannot fail”. “It
is not inconceivable that the US will end up with four giant banks. If defaulting credit card
debt then assaults these banks’ balance sheets, who is there to take them over?” (Paul Craig
Roberts, Financial Times September 30
th
2008).
2.4.2. Degree of consolidation in different countries and groups of countries
Firstly, it must be noted that there is a wide range of financial institutions in Europe: for example
there are 7,196 different private banks (European Banking Federation general statistics on the
European banking sector as at 31.12.2006).
The degree of concentration on the market varies significantly, contingent on the European coun-
try. Some of the representatives of the sector underline that diverse credit institutions are useful
for each type of customer. It can also be reckoned that decentralised countries and their econo-
mies invite a wide variety of institutions from different countries and regions into their own.
The Annual CEA Report for 2007 states that the highest degree of concentration (in insurance
business) can be observed in the Baltic and Scandinavian countries. The explanation is that
insurers need a portfolio of a minimal size in order to spread their risk efficiency: thus smaller
markets have higher concentration ratios. Indeed, the largest financial markets, such as in Great
Britain, Germany, Spain and France, are less concentrated.
Medium-sized firms can be found in non life insurance companies, sometimes with so-called
"mono-liners".
The top 20 insurance companies in Europe represented 52.5% of the market in 2005 (50% in
2004): the degree of consolidation in the insurance sector has slightly risen to a share of 75% of
their income coming from Europe, followed by America (16%) and Asia (9%). Therefore they are
"European groups" with external growth onto other continents.
Great Britain, which is the most important country for financial services, can be named as having
72% of its market concentrated in the hands of the top 10 firms in the insurance sector.
Mergers do have consequences on employment volumes and structures: there are no global
statistics, but many important mergers have led to layoffs, e.g. 1,800 jobs were cut when Crédit
Agricole merged with Crédit Lyonnais. When HVB merged with UNICREDIT there were 1,500 lay-
offs. Exceptionally, in the case of Crédit Agricole and Credit Lyonnais, 1,000 new sales related
personnel were hired.
2.4.3. Relations between the three subsectors: the reality of "Bank-Insurance-Finance"
Ten years ago the main trend was the so called "bancassurance". Banks started to deliver insur-
ance products through their numerous branches covering all parts of the country, to set up new
life-insurance products. Insurance companies began investing in business banking activities.
Banks had been willing to offer a larger range of saving products, to increase their assets under
management, and to diversify their income sources. Over the last decade this trend has given
rise to large financial conglomerates offering insurance as well as bank products. On the con-
sumer side, the propensity to consult the bank about investing or saving money is very strong.
The difference between insurance and bank products is not always obvious to the consumer,
particularly between savings and life insurance products. Moreover, the wide variety of savings
products offered by financial institutions and the central location of all financial services within a
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FINAL REPORT, 9 JUNE 2009
bank can be seen as an advantage for the customer (see Financial Services: Overview, Pros-
pects.ac.uk, 2008).
Today, in the context of financial globalisation, the majority of financial groups are both banks and
insurers. They are players on the global stock exchange and in the financial market. The financial
industry has become and continues to be more integrated, encompassing bank activities, insur-
ance activities, assets, property management, securities enterprises and brokerage activities. We
should examine if this new reality has consequences on skills and training at different educational
levels.
2.5. Technological changes
2.5.1. Computer science and ICT
Technology has a major impact on the banking and insurance industries. Electronic transfer pay-
ments, debits cards and ATMs (automatic teller machines) have influenced all the activities in the
sector.
Meanwhile, technical and high value-added activities, including daily management, continue to be
outsourced. The financial services sector is one of the first users of IT companies; the IT ex-
penses for banks increased by 6% in 2006 alone (survey form the IDC company, January 2007).
The main expenses are security of IT systems, fraud, payment systems and customer relation
management.
However, it is worth noting that during the past ten years the banking sector has been more apt
than the insurance sector to utilise IT processes such as the installation of automates. This is
largely due to the presence of a high number of insurance intermediaries. Some experts state
that the “new technologies were not applied in order to keep employment" (see interview with Mr
Lobjeois, Director of the French Insurance Employment and Occupations Monitoring Centre).
Advancements in technology have also led to improvements in the ways in which banks and
insurers process information. Some new developments are:
• Software package development
• IT processes
• Network architectures
• Computer science security
• Designing databases
• Customer relations management (CRM)
2.5.2. ICT and customers habits
Firstly, it must be understood that the different national markets remain very specific for retail
banking because of the different laws in each country. Different pension and health care systems
influence the life insurance market and other insurance products. Customers likewise retain cer-
tain habits regarding payment and financing. All the experts insist on this aspect.
Another characteristic is the “inertia” of customers’ habits. Experts explain that the low propensity
to change their financial services provider is more important than for other services.
For insurance and banking companies it is an innovative discovery that the internet can poten-
tially be a powerful tool for reaching existing and new customers. Not only to post company in-
formation but also to enable customers to access their account and billing information online. For
the time being, direct internet banking or insurance products distribution on the internet is well
developed in Great Britain and in Scandinavia. Whether this trend will catch on in other countries
will be a question for our forecast scenarios.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 65
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Online services change a great part of the activities and distribution channels for financial prod-
ucts. A recent study conducted by Cap Gemini and Novamétrie predicts that by 2011 European
banks will deliver one third of their products via the internet.
For the time being, the widespread uptake of e-banking cannot be confirmed and “brick and mor-
tar” banks will continue to function, according to the Interim Report on ICT in the financial ser-
vices sector from e.Business Watch (June 2008). The first period of internet banking was not a
success. Zee Bank/ING Direct attempted to set up such a network in 2000 which floundered.
However, today the internet has logically become a true channel for various banks in multi-
channel distribution. This is the case for the British and international group HSBC. This develop-
ment has important consequences on skill needs (see interview with M. Desvignes, Human Re-
sources Manager, ING Direct).
Examples
ING Direct, Axabanque, Monabanq, develop direct services, and Groupama created in 2008 a
direct channel for delivering insurance products, deemed AMAGUIZ.COM. It aimed at having
100,000 clients within four years and it succeeded (Les Echos, March 19th 2009). This new
channel will complete all the traditional ones. The new subsidiary will be economically viable with
jobs and intermediation costs ("low cost" said its director).
We can separate the main consequences of direct distribution for financial products as follows:
• Distribution is the driving force for the development of the whole of the financial service indus-
try
• Standardisation of financial products
• Transparency of new problems and information for clients
• Segmentation of services by customers groups with specific databases
• Weak job creation
• Risks for the intermediaries (see interviews with Nic de Maesschalck, director for the BIPAR
and the Polish Association for brokers)
• Skills needed for specialists in different channels (internet, call centres and branch tellers).
• Design of branches. Note that while online banking and the direct insurance are continuing,
new branches are opening everywhere in Europe.
Will clients with major private assets demand more financial advice from banks or financial con-
sultants? The answer is yes, but from a small number of advisers.
2.5.3. New tools for payment
• ATMs are now well developed in Europe. There are many heterogeneous methods of auto-
matic payment, for example with credit cards.
• Europe’s new "SEPA" (Single Euro Payments Area): adopted in January 2008 and concerns
the euro zone and other countries such as Liechtenstein, Switzerland, Ireland and Norway.
Thus, roughly 4,500 banks will now be able to use the same means of payment as on a na-
tional market (bank transfers, cards etc.) within a window of three open days.
• Payment via mobile phone cards which currently exists in Estonia and Latvia and France is in
the experimental stage. Electronic pocket money is already well developed in Japan.
2.6. How financial products are delivered: the question of distribution
2.6.1. Insurance agents or brokers
In most European markets insurance distribution is organised through professional intermediaries
such as agents and brokers. Their relative market share differs however per country and in the
function of market segments: life or non-life, commercial lines or large industrial risks.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 66
FINAL REPORT, 9 JUNE 2009
In terms of market share, insurance agents and brokers represent a great majority of EU markets
currently over 50% of market share in non-life insurance. Since the 1990s, alternative forms of
insurance distribution, such as direct banks and internet sales, have been in strong competition
with agents and brokers in the private lines insurance business.
In commercial business lines, agents and brokers continue to have the majority of the market
share. In life insurance the market share of insurance agents and brokers is lower than their
market share in non-life within the majority of EU Member States. In the private lines life insur-
ance, banks and bancassurance networks compete with professional insurance agents and bro-
kers.
Though few statistics exist about the precise market share of the main distribution channels for
insurance (namely direct sales by insurance companies, sales through agents and sales through
brokers) the information available demonstrates a great deal of variation across Member States.
The number of intermediary firms present in each country varies widely. In Finland there are just
70 brokers, whereas in the UK there are some 10,000 authorised intermediaries. The number of
intermediary firms does not appear to be related to the size and income level of the country. This
is because, in some countries, there has been a longer tradition for intermediaries to provide
services to customers than in others.
The broad picture emerging from the intermediaries is of a sector populated by a large number of
very small firms and a relatively limited number of large broker firms.
• In Italy there are a few big firms (100 to 1,000 employees) and many small brokers (2 to 4
employees). The top ten brokers are estimated by AIBA (Italian Association of Insurance
Brokers) to have a market share of about 40%.
• In Sweden there are just three non-life firms with more than 50 employees. There are about
35 medium-sized firms (5-20 employees) and 550 small firms (1-4 employees) covering both
life and non-life insurance.
With the insurance intermediary channel, the agent channel is the largest in countries such as
France, Germany, Greece, Luxembourg, Portugal and Spain while in countries such as Belgium,
the Netherlands and the UK, brokers are by far the largest non-life distribution channel.
2.6.2. Product delivery by the insurance companies themselves
Insurance companies deliver their products directly with a market share of 43% in Austria, 40% in
Denmark and 70% in Finland (source: BIPAR, 2007).
2.6.3. Product delivery by bank branches
The Netherlands has the most important share of products delivered by banks and post offices
(16%). In Portugal and Estonia their shares are 11% and 10%, respectively. Shares are, how-
ever, generally increasing; in Great Britain 5% of the insurance products were delivered by banks
in 1996 and 17% in 2006 (Bipar Information, November 2007).
2.7. SWOT Analysis
We deem the financial services sector to be integrated, hence we shall present the SWOT analy-
sis for the whole sector.
Table 22 Strengths and weaknesses of EU financial services
Strengths Weaknesses Opportunities Threats
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 67
FINAL REPORT, 9 JUNE 2009
M
a
r
k
e
t
s
• The European market
share assures a good
position in the world
• Strong dependency on
global capital markets
• Substantial amounts of
risky products
• EU15: new markets
for health care and pen-
sions schemes
• NMS: new markets for
all products
• Expanding markets in
emerging countries
• Financial crisis will lead
to a severe downturn
• Decreasing population
represents a risk of
downsizing the markets
• Economic risks in the
NMS
S
t
r
u
c
t
u
r
e
o
f
b
u
s
i
n
e
s
s
• Global players acting in
different local markets
• A pluralistic financial
system with different
types of ownership
• For the most part,
banking institutions are
commercial banks with a
high level of deposits
• Strong needs for re-
capitalisation but compa-
nies are weakened
• Consolidation must be
achieved in many coun-
tries
• Global players can
take the opportunity to
buy companies all over
the world
• Many companies can
face difficulties due to the
financial crisis
• Not enough capital for
saving banks, co-
operative banks and
mutual insurance groups
D
i
s
t
r
i
b
u
t
i
o
n
• High flexibility based on
different channels provid-
ing products, advice, and
services
• Large distribution
networks
• Banc-assurance: banks
using their networks to
distribute insurance
products
• Particular experience
with internet banking
• Lack of customer
confidence
• Conflict between direct
banking, insurance distri-
bution and value-added
services in proximity to
the client
• Financial management
needs trust, transparency
and information
• New offices and
branches to be created in
NMS
• Promoting new distri-
bution channels according
to a new generation of
customers
• Internet banking and
internet insurance lack
customer trust and need
to be based on a new
financial culture
I
n
n
o
v
a
t
i
o
n
• Some of the most
innovative clusters in the
world (UK-London, Lux-
embourg, Ireland)
• “Brains in Europe”:
high-skilled people for
innovation
• Loss of confidence in
innovation capacities: the
crisis is partly due to
innovative financial
products
• Lack of adequate risk
management
• Lack of strategic
controlling
• To practise mass-
customisation on one
hand and high value
added personal service on
the other
• NMS are depending on
the western companies
and their innovation
policies
S
k
i
l
l
s
• Sound knowledge base
due to high-skilled staffs
• Strong links between
companies and educa-
tional institutions in the
EU15 countries
• Potential skills short-
ages for highly skilled
personnel
• Underdeveloped
training capacities in NMS
• Demographic change
allows renewing staffs
• Reinforce the qualifi-
cation level to deliver
more advice and services
• Loss of attractiveness
as an employer
S
o
c
i
a
l
d
i
a
l
o
g
u
e
• High level of unionisa-
tion in the EU15 and a fair
dialogue in western
countries
• Some innovative
studies at the European
level
• The social dialogue in
the financial services
sector was built in a
growth period with bene-
fits for wage and career
development
• Develop social dia-
logue in the crisis
• Anticipate the social
impacts of employment
change
• Develop negotiation
on career paths and
lifelong training
• Lack of social dialogue
in companies in the
NMS
Source: DKRC/Economix
3. Emerging competences
At the backdrop of a low volume of employment development or of declining employment in the
sector, there are multiple changes in the structure of occupational profiles. There are new re-
quirements for a higher level of formal education and new competences which are required to do
the jobs. These needs are to fulfil a customer oriented organisation in all the businesses.
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FINAL REPORT, 9 JUNE 2009
We can describe six main functions in the financial services sector with new skills needs and new
emerging competences for the occupational profiles in each function. For details see Table 23.
Firstly though, we must repeat that in every sector each function is becoming "customer ori-
ented". This comprises likewise IT jobs (except for some jobs in "logistic" and support functions),
so the usual distinction between front office jobs and back office jobs is less distinct.
The six main functions are the following according to the ISCO classification of EUROSTAT:
Table 23 Main functions
FUNCTIONS OCCUPATIONAL GROUPS (ISCO)
Back office
• Professionals, technicians and associate profes-
sionals
• Clerks
Front office
• Business professionals, finance and sales
associate professionals
• Professionals, technicians and associate profes-
sionals
Middle office
• Legislators, senior officers and managers
• Business professionals, finance professionals
• Professionals, technicians and associate profes-
sionals
R & D
• Legislators, senior officers and managers
• Business professionals, finance professionals
IT
• Business professionals, finance professionals
• Professionals, technicians
Management
• Legislators, senior officers and managers
• Business professionals, finance professionals
Source: DKRC/Economix
3.1. Competences for back office
Back office can be divided into four specific functions:
• the traditional administrative and secretarial back office
• the back office for sales and managing insurance contracts
• the wholesale bank back office
• the back office in intermediaries and small companies.
For the insurance industry, the back office function is broad: it includes all operations for under-
writing contracts and policies, answering and resolution of claims and liquidation. The banking
industry is concerned with the handling of information, which is primarily controlled by IT.
Over the past ten years, employment in the financial services sector has remained stable but
there are two major changes in the structure of the workforce which are still taking place:
• The traditional administrative and secretarial back office is acutely declining in all countries.
The proportion between commercial or sales related jobs and back office administrative jobs
has changed. We can see from the EUROSTAT statistics (Chapter "Mapping" 1-2) that in
the EU15, the share of clerks in the total employment of the sector had decreased while the
share of professionals had increased.
• As a consequence, the proportion between medially skilled employees and highly skilled
ones has also changed, as we can see with the Chart about "level of education". In the
banking industry, the French Monitoring Centre for Banking Employment notes that the
share of technicians decreased from 72.1% in 1996 to 58.9% in 2006, while the share of
"cadres" (a high level of education and five years of academic studies or equivalent by inter-
nal training and promotion) increased from 27.9% in 1996 to 41.1% in 2006.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 69
FINAL REPORT, 9 JUNE 2009
• If there is no contact with the "insured" or the bank customer, the work can be done any-
where, with big platforms handled by the administration through IT tools: e.g. in France and
Spain 63% of insurance claims are resolved without any physical contact. Therefore, tasks
can be realised by automised systems, within huge shared services centres, or in foreign
outsourced call centres or administrative centres. The main drivers are productivity and cost
effective work.
There can be contact between the client and the company’s employee concerning a claim or
dossier, the schedule for reimbursement, or the search for new services. Due to these multi-
farious tasks, the job requires more finance and business knowledge and more relational
competences than previously known. In the insurance sector, Mr. Ferec, HR Manager for
Generali, insists that the traditional back office administrative are now expected to provide
personalised and quality service to each individual client.
• The" wholesale bank" (business and investment banking) requires a new type of back office
which appeared from managing securities that can work not only for its parent company but
for any kind of financial of company. It requires specialised IT personnel.
• Administrative and support services such as archives, reprography and editing are no longer
at the heart of businesses and have therefore been externalised.
The so-called "sheltered jobs" have become an anomaly in almost every European country. In the
study "Structural change in the financial services sector and consequences on employment and
training" (Bernard Brunhes Consultants, 1998), we noted that the volume of back office jobs was
formidable in countries such as Greece, Austria, Spain, France, Ireland and Italy. Yet these occu-
pations were done away with in the New Member States, in Great Britain and in Scandinavia.
However, the decline in the "clerks" group has alleviated. As for the NM10, the Tables show that
they have directly adopted a customer-oriented work organisation based on young educated
professionals.
Some of the occupational profiles within this function are:
• Administrative agents
• Administrative and banking technicians
• Credit technicians
• Claims technicians
• Accountants
Competences for the back office function :
• Insurance intermediaries, clerks and technicians who are in contact with the client (via differ-
ent channels) must have new soft competences such as communication skills, reactivity and
the ability to propose new services
• Extensive knowledge of the various and changing products
• Knowledge of the process
• IT literate
Examples of relocation
British companies were the first in Europe to undertake a wide relocation policy. In 2004, the
British insurance group AVIVA (operating in UK under the name of Norwich Union) decided to
outsource 2,500 jobs to India: 500 in call-centres and 2,000 for administrative back office and the
computer science department.
The French group AXA recently decided to create 1,500 jobs in Morocco in order to manage a
new contract with an automotive group. The CEO insists that news jobs will be created in France
(Le Monde, 13.03.07) needing the same skills. His reason for creating jobs rather than outsourc-
ing is to avoid losing essential skilled French employees.
In 2003 the HSBC banking group relocated 4,000 jobs (it employed 55,000 people in GB) to
India, Malaysia and China. British Unions still exhibit signs that this debate is far from waning.
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3.2. Competences for the new middle office for control and financial
operations
Traditionally in this sector, a stark contrast was made between back office operations and front
office operations. Today, however, many employment experts note that a new function has ap-
peared. With the inception of this function, experts and specialists with a high level of education
are needed. The new European regulations and the recent financial crisis have led to a rein-
forcement of this function. By combing the functions of both back and front offices, though skilled
employees are needed, their number is limited.
Beyond this fusion of back and front office functions, many specialised employees are sought
after. These include market analysts, risk analysts and risk managers, property managers, assets
managers, experts for local finances and actuaries in insurance businesses. Therefore, one can
conclude that there is a development in heavy specialisation.
Property management and enterprise relations are carried out by staff with high level of education
(higher education university degree or five years of university or vocational training) dependent
upon the criteria of the country.
Among the jobs encompassed in this new function are:
• market specialists
• risk analysts
• risk managers
• actuaries
• project managers
One can note that they are all highly skilled and specialised and they are all in development.
Among the competences required by the middle office function are:
• Deep finance process knowledge
• Specialised accounting and reporting knowledge
• Knowledge of the products and their risks
• Knowledge of the law (national, European, international)
• Foreign language knowledge (English) for the international regulation framework
• IT literate
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3.3. Competences for front office, marketing and sales related
occupations
All of these tasks represent an increasingly important function in companies. We can divide the
sales function in three parts :
• Marketing
• Direct sales (in call centres or on the internet)
• Clients counsellors in branches, local insurance offices or local intermediaries offices
The marketing function is equated to the design of new products, communication campaigns and
the sales functions. It is the preparation for sales: the product, marketing and publishing opera-
tions are based on clients differentiation using statistical research, defining targets and communi-
cation channels.
The industrialisation of data and information management has been developed in tandem with
customer relations. It is based on industrialised CRM (Customer Relation Management) on one
hand and on personal contact on the other hand.
Call centres do not enjoy an irreproachable reputation, especially in the United Kingdom. This is
due to many factors, among them the employment of youth for short term contracts and poor
working conditions. In most countries call centres do "hard selling" and employ an army of tempo-
rary staff in order to sell as much as possible in a short amount of time.
Counsellors: In this sector every job in each different branch and local office is defined as "sales
related". In the insurance and banking industries these jobs require a wide range of knowledge
about a wide range of products. Employees are not only expected to be competent but also to
possess a sense of inventiveness about the daily use of Internet and Communication Technolo-
gies, therefore being able to provide clients with the necessary solutions.
Often "sales related jobs" are the first jobs proposed to young graduates. As long carriers are
proposed in the financial services sector (internal labour market is the rule in large companies),
these young people can work their way up to marketing (design of new products and new ways to
deliver them) or to middle management.
A major part of Human Resource Managers in the sector acknowledge that with the demographic
shock and competition for employees, it becomes all the more difficult to attract young graduates
to sales. Competences such as personal sociability and affability are much appreciated and these
jobs cannot be held by older employees who have been in the company for a long period of time.
The scenarios need to explore different ways for the design of this "sales related function". Is it
preferable to have a qualitative approach which is advice-oriented or an industrial approach which
is intensively selling-oriented? The consequences for needed skills are extremely important.
When companies look at hiring people in mass distribution, it is a choice in regards to the alterna-
tive. For many industrial sectors, the challenge is now for financial services to be both a mass
marketing sector and a sector with a high level of customer relations and services.
Some of the job profiles within this function are:
• Tellers
• Cashiers
• Sales personnel
• Insurance technicians
• Insurance agents
• Brokers
• Loan client counsellors
• Securities, commodities sales people
• Marketing and sales managers
The emerging competences for the front office function are:
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 72
FINAL REPORT, 9 JUNE 2009
• Ability to work in a multi-channel environment
• Reactivity
• Resistance to stress
• Knowledge of the products
• Communication skills
• Sense of responsibility
3.4. Research and development function – competences for innovation
Research and development
This represents a new function for the financial services sector, built on the pattern of research
and development departments in industrial companies. It encompasses economists (in general
the department is directed by a high level, well known economist, with a "chief economist" having
worked in international institutions for example), mathematicians, actuaries, market and finance
experts sometimes from the audit and consulting sector and computer sciences profilers (be-
cause new developments are closely linked to ICT models).
In every major company there is now a R&D director. However, one of the challenges for the
sectors is the lack of specific protection for innovation and new products (such as "patents").
Innovation and clusters in financial services
Innovation in the global financial market has taken on an important role yet it is not measured by
experts studies as "knowledge intensity" but can be in found in industrial sectors. Innovation in
the financial service sector is strongly linked to the concentration of financial activities and the
dynamism of the local markets. Examples of innovations can be recognised by new financial
products for the global market and wholesale banking, such as:
• creation of mathematical tools for risk models and management (SWAPS, financial futures,
options etc.) with the so-called “quants” or quantitative engineers
• derivative products
• dematerialisating with IT process.
Products and service innovations are also at the forefront of customer retail banking and insur-
ance, in step with marketing activities: "through innovative concepts, successful firms will find and
exploit new growth opportunities that arise at the intersections of traditional sector boundaries".
They work in unison with IT developments: the share of IT investment can be used as an indica-
tor for knowledge intensity. For example in the UK industry, the IT investment per hour worked
doubles every five years ("A view from Europe: productivity and change in the UK financial ser-
vices", Oxford Research and Eurofound, December 2007).
It can be ascertained that the most innovative clusters are logically located in the most important
financial centres. The primary position is held by London City, but also can be found in Luxem-
burg, Frankfurt, Zurich, Geneva and Paris.
A cluster in the financial services sector cannot be defined in the manufacturing industry. The
FSSC, however, establishes that a cluster can be defined:
• as a specialised local labour marker
• as an extensive business
• by the presence of recruitment services, computer services, postal services and telecommu-
nication services.
In London, independent brokers, the self-employed, and the European Monetary System are
considered as resources for innovations.
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Example of "cluster" supported by the Government: the French "Pôle de compétivité" or business
cluster: "Finance Innovation"
This cluster was created in 2005 with the aim of increasing the French percentage of the Euro-
pean market from 11% to 20% within 10 years and to increase employment in the R & D area.
The hub is located in the capital region (Ile de France Region); here one finds Paris Europlace
which has developed Creditnext, an independent platform for "derivative products". Researchers
concentrate on risk management with new tools for financial forecasts, financial mathematics and
regulations.
40 programmes are conducted with a financial volume of 40 million Euros. The cluster aims to
develop market management skills in the highly qualified jobs segment; it aspires, by developing
the French mathematical tradition, to challenge London’s financial hegemony.
One research programme concerns the "carbon finance" for managing the CO2 emissions, an-
other concerns climate indicators. By engaging in a partnership with Meteo-France, they are
developing environmental risk management and new insurance policies.
The cluster is not exclusively linked to universities and business schools in Paris but also to R&D
departments within main financial service groups. In France, about 700,000 persons are em-
ployed in the financial services.
3.5. Computer science and ICT competences
This function is at the core of business. New products are inextricably linked to ICT not only in
their delivery but also by guaranteeing the financial product’s place in the global world market.
ICT represents the basis for financial operations: buying and selling on the stock exchange, on
the exchange rate markets and on the primary materials markets.
The employment share of this function is larger than in other sectors of the economy. One can
see this in the EU15 as well as in the NM10: 4.3% of financial services compared to 1.9% of the
total economy in the EU15 and 4.1% of financial services compared to 1.2% of the total economy
in the NM10.
It encompasses different occupations:
• Studies
• Design and management of data systems (like information system architect)
• Daily operations (exploitation), software packages management
• Network architectures
• Project engineers
• ICT safety
• CRM: customer relation management
• Management of customer data
Two main trends can be observed regarding the development of this function and the jobs within
it:
• Developing skills within companies (for more safety and discretion regarding the different
processes and products)
• Externalising functions to major ICT suppliers (Cap Gemini, Ernst and Young, Pick Marwick).
It is not only a question of cost but also a question of skills and careers. A computer scientist
must be informed about the latest technological developments. This may be more difficult in a
bank or insurance company than in an ICT company.
The number of jobs in this function, both within and outside the financial services companies,
would increase if the financial crisis does not lead to externalisation of mass processing for
budget economies. These jobs are becoming highly qualified and competitive. Due to these fac-
tors, a shortage of qualified personnel could threaten the industry in some countries.
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FINAL REPORT, 9 JUNE 2009
Competences for the ICT function :
• A good level of academic scientific education
• A high level of specialisation according to the different activities
• A multi-dimensional competence: finance process, product knowledge and IT tools.
3.6. Competences for the management function
This function is present in top management, in support services, in branches and in local offices
management. It represents a larger share of total employment in the sector than in the total
economy.
Managers at different levels are generally financial services specialists. They are hired primarily
for specific jobs such as actuaries or credit specialists. There are not a lot of top managers from
other sectors, they are hired generally for their specific purpose and are not usually promoted.
The internal labour market works in this sector.
One of the main challenges at this moment in time is for companies to bring about an internation-
alisation of their management.
Competences for the management function:
• Knowledge of financial products and processes
• CRM (local managers are commercials)
• HR management (communication, motivation, coaching and mentoring...)
• Change management and ability to conduct restructuring process
• Foreign languages skills
• Intercultural management skills
The outcome points towards new requirements for training. Formal education, professional edu-
cation, internships and continued education will be described in Chapter 7, together with exam-
ples of company policies and training institutions.
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Table 24 Trend changes in the volume of employment (1996-2007)
FUNCTION EMPLOYMENT VOLUME
Administrative back office Declining
Sales back office Decreasing
Insurance back office: contracts , claims
and new services management
Stable with no differences between front office and back office
Wholesale bank back office It represents a small share of banking employment
The past trend was to a higher level of employment (before the 2008 crisis) but
now it is expected to be reduced
Middle office:
• control
• securities factories
Slow increase but a reinforcement of the function is expected
Front office and sales related jobs:
• direct sales and hard selling (call
centres)
Strong increase but with changes: development of definite contracts and
possible relocations
Front office and sales related jobs:
• client counsellors in branches and
local offices
Increase in NM10 (new branches and new offices)
Stability in EU15
Front office and sales related jobs:
• marketing
Stable
R & D Increase (but it is a very small share of total employment)
IT function Stable but needs for replacement
Risks due to concentration and externalisation
Management:
• of local teams
• strategic management
• international management
Increase in NM10
Stable in EU15
Possible decrease in companies looking for budget economies
Source: DKRC/Economix
Table 25 New competences for occupational functions
FUNCTION COMPETENCES
Administrative back office • IT skills
• Knowledge of administrative rules
• Knowledge of financial techniques
Sales back office • IT skills
• Perfect knowledge of the products
• Sales competences and capacities to get information about the clients’
needs
• Sense of responsibility
Insurance back office: contracts, claims
and new services management
• Communication with the client
• Requirement for more social competences for the employees answering
claims: interpersonal relations, communication skills
• More autonomy and ability to propose new services and to organise them
(reactivity)
• More poly-competences
• Ability to manage partnerships with other activities outside the company on
a local basis
• Perfect knowledge of the products
• IT skills
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Table 25 continued
FUNCTION COMPETENCES
Wholesale back office • Financial process knowledge
• Financial products knowledge
• IT skills
Middle office:
• Control
• accounting
• securities factories
• risks management
• Double competence: specialised knowledge of finance processes and IT
tools
• Knowledge of the law
• English language knowledge
• Updated knowledge on the international and national regulatory framework
• IT skills
Front office and sales related jobs:
• direct sales and hard selling (call
centres)
• Ability to work in a multi-channel environment
• Reactivity
• Soft competences such as interpersonal communication and social compe-
tences
• Rapidity and reacts well under stress
Front office and sales related jobs:
• clientele counsellors in branches and
local offices
• insurance agents
• brokers
• Poly-valence and various knowledge about the products
• Poly-competence and stress resistance
• Communication with the client
• Interpersonal relations
• Autonomy
Front office and sales related jobs:
• marketing
• Statistical competences for screening customer habits
• Sociology to understand client behaviours
• IT skills
R and D • Actuaries
• Mathematicians
• Statisticians
• Economists
• IT innovations
• Globally prospective competences for forecasting economic and business
trends
Management:
• local teams
• strategic
• international
• Knowledge of financial products and processes
• HR management
• New management techniques
• Customer relation management
• Languages skills
• Inter-cultural management sensibility
Source: DKRC/Economix
4. The financial crisis and its consequences
For the first time in decades, the threat of a systemic crisis – a big financial crash – became a
worldwide reality. Due to the interconnection of all the different financial markets, all types of
financial activities are concerned. Activities are already declining in many countries and are ex-
pected to weaken further in the short-term. The OECD Economic Outlook (N°84, December
2008) expects a severe breakdown for all the OECD economies: “A recovery to the trend, at
least, is not expected before the second half of 2010, leading to a sharp rise of unemployment.”
The European Commission also reversed its economic forecasts considerably, expecting a 1.8%
decline of GDP in 2009 and hoping for a minor increase in 2010. The uncertainty of projections,
however, is extremely high: alternative GDP growth rates range between ± 0 and ? 4% for 2009
(European Commission (2009): Interim Forecast, 19 January 2009).
The financial system almost collapsed in autumn 2008. “Money, interbank and credit markets
were in disarray amid a rarely seen uncertainty about the strength of banks’ balance sheets and a
complete collapse of confidence among market participants and intermediaries” (EU Commission
2009, page 4). Banks tumbled into a severe liquidity crisis which was followed by a solvency
crisis. Without massive support from central banks and rescue programmes provided by national
authorities, a financial meltdown would have happened with unpredictable economic effects.
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Nevertheless, the crisis remains with substantial risks, uncovered by a series of press releases
about bank losses and alarms about bankruptcies.
Considering the transition of the financial sector
over the past decades, the financial crisis can be
seen as the consequence of market liberalisation.
Three major factors contributed to the emergence
of the crisis:
• The opening of capital markets: hedge funds
and other investors have been allowed to en-
ter the markets, borders between financial
business and retail activities have been re-
moved, insurance and banking businesses
have merged, and traditional banking has
been restructured towards investment bank-
ing. Lucrative markets emerged and ex-
panded the financial bubble which then ex-
ploded in September 2008.
• The failure of risk management, which al-
lowed capital investors to reorient their activi-
ties towards short–term profits without assessing long–term risks. This was certainly pro-
pelled by the exceptionally strong upswing of the world economy, opening excellent oppor-
tunities for short–term speculation but blurring the sense of risks.
• The failure of public supervision over financial markets. Neither the International Monetary
Fund (IMF) nor national and other international authorities were able to identify the accumu-
lating risks of a short–sighted financial business, not to speak of avoiding these risks. Rating
agencies failed in adequately assessing securities.
Even if some experts warned against the unhealthy developments of capital markets, the majority
of actors felt confident about the new business models and thus could not see the deterioration of
fundamental facts. Markets were unable to correct themselves – except through a severe crisis:
and this is the point we are at now.
The magnitude of financial risks still is unknown as is the length and depth of the economic down-
turn. However, we have learned a lot about the crisis’ facts and figures:
• The enormous expansion of financial markets which happened during this decade: the vol-
ume of financial derivatives has multiplied by four since 2002 and doubled within one year
after mid 2007. Large parts of GDP growth in the USA, the UK and other countries came
from financial products.
• The accumulation of risks: the latest Global Financial Stability Report by the IMF estimates
write-downs of financial assets in the world economy to around $ 4 trillion. For clarification,
these amount to 7 % of the current world output.
• The spread of the financial crisis: pension funds, life insurance, companies and private asset
owners have been hit hard by the crisis. Substantial parts of their assets have been devalu-
ated. Stock exchange values have declined by almost 50 % since the beginning of 2008.
• Strong effects on the real economy: output has been declining at extraordinary rates. In
February 2009, industrial production in Europe was 17.5% below the previous year, and
there was no country with output growth. Unemployment started to rise considerably in the
Baltic States, Spain and Ireland. The Scandinavian countries were also affected. Most of the
other member states are presently entering recession in labour markets.
• Signs of disintegration in the world economy: on capital markets, the retrenchment from
foreign markets is meanwhile outpacing the overall deleveraging process with a sharp de-
cline of cross-border funding (IMF: Global Financial Stability Report, 2009). Governments
tend to favour domestic suppliers and consumers buy locally. Emerging countries are par-
ticularly affected by these trends, in parallel to the New Member States of the European Un-
ion.
Expert panel views
Some of the participants at the expert panel under-
lined that it appears particularly difficult to capture the
scope of the financial crisis at present. The tremen-
dous losses which have accumulated to date, how-
ever, will call for substantial reforms in the sector.
It was also stressed that the different sub-sectors are
affected very differently in the member states. Bank-
ing and insurance were seen as separated sectors,
and the segments within the banking business were
also perceived as being largely independent. In
particular, co-operative groups may be less affected.
Moreover, participants had the opinion that long-term
skill requirements will not be changed fundamentally.
The effects of the crisis will be limited to wholesale
baking which was at the origin. Large parts of retail
banking and insurers will continue with their business
model, meaning that the skills requirements will
hardly be affected.
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These few observations underline the dimension of
the crisis. Comparisons between the current and
previous US recessions reveal that various statisti-
cal indicators are meanwhile far beyond former
experience. Residential investments and private
consumption have declined with exceptionally
strong rates, output and employment have shrunk
considerably and unemployment is increasing
rapidly (IMF: World Economic Outlook, 2009).
Other countries in the world – the European coun-
tries in particular – are following the US and are
significantly worse off compared to former reces-
sions.
Expectations are divided between hope and de-
spair. The latest interim forecast of the European
Commission (January 2009) indicates a strong
decline of economic activity in 2009 and a gradual
recovery in 2010. However, the analysis of past
financial and economic crises tells another story.
The observation of the Swedish and Japanese
banking crisis at the beginning of the 1990s is that economic growth was well below former trends
several years after the start of the crisis. The IMF concludes from this past analysis that reces-
sions associated with financial crises have typically been severe and protracted. Recoveries from
these recessions are often held back by weak private demand and credit. Moreover, globally
synchronised recessions are longer and deeper than others. The IMF summarises: “Past epi-
sodes of financial crises have shown that restoring the banking system to normal operation takes
several years, and that recessions tend to be deeper and longer lasting when associated with
financial crisis.” (IMF: World Economic Outlook, 2009, p. xii).
4.1. In the short run
Consequence n°1: the risk of failure for financial institutions
The subprime crisis led to failures or quasi-failures of a series of banks: Northern Rock (UK) in
September 2007, Bear Sterns (USA) in May 2008, Lehmann Brothers (USA) in September 2008,
Hypo Real Estate in Germany, Fortis Group and DEXIA in Belgium were among the first to de-
mand financial support from national authorities. Most of them – except Lehmann Brothers – were
stabilised by a government bailout, illustrating the motto “too big to fail”. However, the bankruptcy
of Lehmann Brothers triggered a wave of severe losses, revealing the face of the crisis without
any public rescue.
Initially, it was mainly a banking crisis. Insurance companies were partly saved from the tempest,
except when they were engaged in CDS activities (Credit Default Swaps) such as AIG in the US
or KBC and AEGON in the Netherlands. Insurance groups, however, have been affected in other
ways:
• Companies have lost parts of their assets due to the devaluation of stocks and residential
property.
• The companies’ clients have experienced similar property losses and are becoming less
inclined to sign new contracts.
• Competition with bancassurance companies is becoming keener due to the governments’
support of the banking sector. Probably some representatives will claim for more fair compe-
tition.
• For the time being they are not protected from the “fair value rule” and the European discus-
sion for the Solvency 2 rules will be hard.
Facing the risk of failures within the financial system, public authorities reacted quickly. To protect
the financial system, the States had to increase guarantees in order to avoid the withdrawal of
deposits by bank clients. It can be noted that this phenomenon took place only in the British bank
Expert panel views
An intensive debate arose on the role of co-operative
and semi-public banks. In particular the National
Association of German Co-operative Banks under-
scored that their business model is certainly sustain-
able and follows a long-term orientation since many
years. Moreover these banks have put the recom-
mended actions and policies already in place.
These arguments however have to be contrasted
with the fact that German co-operative banks were
reported to have been hit by losses of 2 bn euros
from their investments in dubious financial papers
(Handelsblatt, April 2009). The heading organisations
of the German Sparkassen – the Landesbanken –
have been unable to survive the financial crisis
without massive public support. Moreover, for both
German organisations, co-operative banks and
Sparkassen, substantial restructuring needs have
been identified before the crisis.
Even if this report has identified various merits of
these decentralised banking systems, the analysis
gives little support for the argument to apply such
business models without substantial changes.
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Northern Rock, which was immediately nationalised by the UK government. Looking at other
cases, in spite of various deposit transfers, their volume did not achieve dangerous levels.
The OECD Outlook provides a list of governments which explicitly gave blanket deposits: Austria,
Denmark, Germany, Greece, Ireland, Portugal, Slovakia and Slovenia. Some others raised their
ceilings to 50 000 or 100 000 euro, as in the case of Belgium and the Netherlands. As a second
step, governments of the EU member states took equity stakes in several financial institutions,
often by the way of non-voting preference shares. By the end of 2008, rescue programmes for
Germany, France and the UK amounted to between 20% and 30% of annual GDP. In small coun-
tries like Ireland the volume was expanded to 210%. Additionally, the European Central Bank
expanded money supplies considerably and lowered interest rates to historically low levels.
Consequence n°2: confidence crisis and credit crunch
The lack of liquid assets immediately led to the breakdown of interbank credits. The state-owned
and central banks helped banks during this first liquidity crisis with guarantees for interbank cred-
its. However, the question of confidence is most probably a central one. The breakdown of trust is
huge and is more extreme than the interbank credit issue. It will take time to restore trust and
there will be consequences for customer relations.
The major consequence from the liquidity crisis is that lending possibilities are decreasing: less
credit for individual demands (for housing and consumption) and less credit for businesses, par-
ticularly for SMEs. Banks became reluctant to extend credit and sharply tightened their criteria for
lending to businesses and consumers. What has generally been deemed as the “credit crunch”
has had a direct impact on companies’ investments and economic growth. Enterprises have
stopped their expenditures on communication, advertising, human resources, R&D, and a lot of
new investments have not been realised. The consequences on employment are direct: a lot of
companies are starting to announce job cutting plans in different countries. The credit crunch has
also had an immediate effect on the real estate sector: building sites and condominium programs
have been stopped and all the business of this sector are affected.
Only very few banks have not been directly affected by the liquidity problem and the credit
crunch: the co-operative banks have been less engaged in new financial products. However, they
are also faced with the various indirect effects of the financial crisis and the economic downturn.
In order to make credits cheaper all the central banks lowered interest rates, even if it was not
their policy in the past. For a long time this was the philosophy of the American FED. Now the
Japanese Central Bank, the English Central Bank, and last but not least the ECB have changed
their monetary policy and have promoted lower interest rates.
Consequence n°3: stock exchange crisis
The financial tempest has captured banks, but also money-market mutual funds, hedge funds,
retirement funds and companies’ capital in all sectors. So far the uncertainties are large and “a
negative feedback loop” (OECD 2008) is possible. Since the beginning of 2008, stock markets in
Europe have lost almost half of their value (-45%).
Initially, some experts thought that there will be a decoupling trend in the world with emerging
countries partly being saved from the crisis. But now it appears that all countries are concerned,
even if growth perspectives remain better in emerging rather than in developed countries. The
financial crisis is nevertheless global as many emerging countries were involved in speculation
with derivatives or other “toxic products”. With the expanding economic crisis growth, exports to
developed countries are affected negatively. When writing this report (during December 2008 and
the beginning of 2009), it could be said that the worst of the financial crisis may have already
passed (even if new developments cannot be excluded) yet the worst of the economic crisis is
still to come.
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4.2. Structural consequences for the financial services sector
Consequence n°4: needs for recapitalisation
“International experience shows that a rapid recapitalisation of the banking sector is an important
ingredient of a successful and fast resolution of a financial crisis.” (IMF, Global Economic Report,
November 2008). Companies therefore need capital (some of them immediately) because they
have – in the first instance –a liquidity and now increasingly a solvency problem. The financial
services sector needs capital to rebuild its debt and leverage ratio.
The first way to recapitalise banks is public capital injection. This is the reason why the British
government went so quickly into nationalising banks: the British government adopted a rescue
programme (for Northern Rock in 2007 and for Royal Bank of Scotland, Lloyds-TBS, Bingley etc
in 2008) based on public stakes in the companies. The effect was a rise in the banks’ dept ratio to
around 12%, the highest rate in Europe. As this ratio cannot be reached by the banks in the oth-
ers European countries, Great Britain retains its leadership in the financial business.
Public ownership is spreading:
• in the Netherlands for the FORTIS group (a public-private solution built with the Dutch gov-
ernment and the French group BNP-Paribas) and the insurance group Aegon
• in Germany, even if this country is more reluctant to this solution (HRE was nationalised in
March 2009)
• in Austria for Erste Bank
• in France for DEXIA
One can note that these new types of public ownership – named by the OECD as a “non-
orthodox” policy – usually took the form of non-voting preference shares and will probably be very
different from previous nationalisation in countries such as France.
The question remains: are the interests of tax-payers really preserved? In some cases there is a
clear deal between the governments and the banks, such as the dividend policy in the Nether-
lands, regarding their lending strategy and lower compensation for top management. So far,
however, the results of such deals have not been proved.
Finding money on the stock markets is the second solution: examples of Société Générale,
Unicredit, Santander, Barclays can be given. Are new competitors, such as Asian countries,
Sovereign Wealth Funds going to take advantage of this situation to become stake-holders in a
wide range of western companies? For example, Qatar and Abu Dhabi own a 38% share in Bar-
clays’ capital. some Chinese firms in American or European companies at the beginning of 2008.
Consequence n°5: crisis leads to consolidation
The lessons of past crises, particularly the Japanese banking crisis (1992) and the Swedish crisis
(1993), show that each crisis brought a new step of consolidation through mergers and acquisi-
tions. The trend has already started: Barclays buying parts of Lehmann Brothers, BNP-Paribas
buying the major part of FORTIS, the Japanese insurance company Nomura invested into Leh-
mann Brothers, the German Dresdner Bank is merging with Commerzbank. Some of these merg-
ers may be encouraged by governments in Spain, for example, for CAIXA and local savings
banks.
This need for consolidation is due to the weak position of some companies and the need for
capital, and also because European regulation leads to consolidation in the mutual and regional
banking sector: see examples for Germany and Spain.
The consequences of mergers on employment are important: for example the merger between
Dresdner Bank and Commerzbank is expected to cost 9000 jobs. Moreover, consolidation will
also happen internally with the reduction of activities in investment banking and other sections.
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Consequence n°6: the end of the business banking model?
Some of the large banking companies which were involved in derivatives are (or were) pure busi-
ness banks. Companies such as Lehmann Brothers, Goldman Sachs and Morgan Stanley are
only based on wholesale activities, making the greatest part of their business with the huge debt
market. This means that no deposits are guaranteeing their activities. For some experts (such as
Michel Aglietta, 2008), the present crisis means the failure of this model. To illustrate this idea,
one can note that Morgan Stanley and Goldman Sachs have just asked for a licence to become
deposit banks. From this point of view, European banks which are generally universal banks can
be seen as being stronger as long as they have enough equity capital.
Business banks, brokers, private equity companies, and financial consulting companies are di-
rectly affected by the crisis: in London City for example, they represent 17% of the total financial
employment. The city lost around 40,000 jobs immediately after the start of the crisis. In France, it
is said that business banking activities employ 10% of the banking workforce.
Consequence n°7: a new regulatory framework?
Even though national governments rescued their banks, it was clear from the beginning of the
crisis that the regulatory framework for the financial markets needs to be improved. “International
cooperation is desirable to avoid measures that distort competition” stated the OECD, pointing
out the two problems associated with the regulation of capital markets: it is an international prob-
lem and a problem of balanced competition. This reveals that it might be a complicated issue.
However, there is less time to draw a conclusion compared to how long governments took to
negotiate the Kyoto protocol or the WTO agreements.
Several issues can be added to the check list for the international regulatory conferences:
• Encourage a better assessment and risk management: limiting or forbidding the off-balance
sheet exposures, redefining the incentives which lead to risk taking behaviours. The Euro-
pean Commission will finish a public report on CDS in April 2009.
• Regulate compensation models and align them with long-term results
• Promote transparency in order to manage risks and rebuild trust
• Regulate solvency criteria and solve the discussion about “ fair value” rules
• Change the rules for rating agencies
• Regulate hedge funds, private equity firms and all the “black areas” of non-regulated finan-
cial business
• Regulate tax havens
In Europe, the framework for managing the financial crisis needs to be improved due to the fact
that a large part of European companies are global players. This makes international agreements
indispensable.
5. Scenarios for the European financial services sector
Taking the current world financial crisis into consideration, the endeavour to formulate skills sce-
narios for the European financial services sector appears to be courageous, if not pretentious.
Little is known about the real extent of property risks and their effects on the ongoing downturn of
the world economy. However, thinking about the future of a sector is needed more than ever in
such a period of great trouble. The future appears to be widely open and widespread options for
alternative developments are being discussed. Reflecting on the future therefore is crucially im-
portant.
The scenarios, however, cannot escape the uncertainties. This Chapter therefore tries to capture
the main alternatives for future developments rather than pretending to make forecasts. It is de-
signed as input to the discussion about the future of this sector, thinking also about policy options
in these times of great change.
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Financial services will not remain the same after this crisis. It is therefore particularly important to
develop a clear understanding of the numerous change mechanisms. For this purpose, the Chap-
ter starts with the analysis of possible future impacts of the drivers identified in Chapter 2. It then
identifies the links between the drivers and finally develops three scenarios for the European
financial services sector up to 2020.
5.1. Main drivers of the scenarios
In Chapter 2 we identified five drivers of change for the past ten years: new market develop-
ments, globalisation, consolidation of the sector, regulation, ICT knowledge and the development
of distribution channels. These can now be used to describe alternative future trends under the
radically new conditions of the world financial and economic crisis. This can be expected to affect
the sector not only in the short-run but may have a strong long-term effect on the operational
scope of the business.
5.1.1. Principal methodology
As the scenarios will have to cover both the trends tied to the past and the changes triggered by
the financial and economic crisis, the identification of drivers starts with a detailed collection of
descriptors which are able to describe all the important factors. These descriptors refer to a wide
range of economic, political and social phenomena. They do not need to be directly related to the
target variables of FS output, employment and skills. Indirect links are similarly important.
The descriptors are linked through an interdependence matrix which shows the linkages between
all the descriptors in four categories. The following categories are used:
Value Meaning
3 Direct dependency
2 Strong indirect dependency
1 Weak indirect dependency
0 No dependency
These categories are applied to all combinations of descriptors in a two-sided approach: each
descriptor has a value for its active impact on each of the other descriptors, and each descriptor
has a value for its passive dependency on all other descriptors. Usually, lines contain the active
values and columns contain the passive values. Line sums therefore give the active sums, show-
ing how strongly the descriptor affects all other descriptors. The column sums make the passive
sum, which measures the degree of dependency of the descriptor on all other descriptors. Finally,
active and passive sums can be combined in a scatter plot which reveals those descriptors with
strong active impacts and weak passive dependencies (Chart 5). These can be included in the
set of drivers.
Regarding the variety of EU countries, financial services do not appear to be strongly segmented.
In particular in the New Member States, financial companies from Western countries built the
banking and insurance systems according to their principles and strategies, and applying their
approved business models. Former socialist banks were bought by western companies. Thus the
financial services market is European now and there is no stringent need to separate scenarios
by regions.
5.1.2. Set of descriptors
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Based on research literature, interviews with branch experts and workshops, a list of 25 descrip-
tors was produced (Table 26). These can be sorted into five major groups, which are called
groups of drivers:
• Knowledge base, including the skills and competences of the existing work force, the training
system, and labour shortages in different occupations. This refers to ICT knowledge in particu-
lar which was one of the major drivers of past developments.
• Markets, comprising the determinants of market development in financial services, i.e. income
and wealth distribution, consumer preferences and in particular consumer confidence in the fi-
nancial system, demography but also general economic development. The globalisation of
capital markets which was so important in the past will continue to play an important role at
European and international levels.
• Control systems, which are now under reconstruction both externally and internally in order
to have stronger public control and to rebuild consumer trust.
• Sector organisation, including mergers and acquisitions, internet banking, different types of
retail channels, and relocation of back office functions.
• Production and employment, which belong to the target variables of the scenarios.
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Table 26 List of Descriptors
Descriptor Meaning Categories
Knowledge base
FS skills structure Will companies with highly trained staff have comparative
advantages against companies with intermediary and low-
skilled employees?
• High share of profes-
sionals
• High share of clerks
R&D knowledge The R&D experience and knowledge of financial products and
processes. This means the ability to create new financial
products, apply new technologies and optimise processes,
operating internationally etc.
• Strong
• Weak
Product innovation Will product innovation come to a halt due to the risk awareness
of consumers and investors, or will the creation of new financial
products be accepted again as long as they allow improved
transparency and risk assessments?
• Strong
• Weak
Process innovation,
ICT application
Will companies use the cost-saving potential of ICT in large
scale organisations or will they apply ICT at a minimum level in
small scale units?
• Large scale
• Small scale
Training system The descriptor comprehends general education, intermediary
vocational training, and university training, evaluated from the
perspective of potential financial services employers. The well
developed training system therefore provides the competences
which are important for jobs.
• Well developed
• Poorly developed
Labour shortage of professionals Professionals include managers, professionals and specialists.
Labour shortage means a lack of sufficient supply of labour in
these occupational groups.
• Lack of labour
• Sufficient supply
Labour shortage of clerks Administrators and clerks include skilled clerical workers at the
intermediary level, sales staffs and secretaries.
Labour shortage means a lack of sufficient supply of labour in
these occupational groups.
• Lack of labour
• Sufficient supply
Markets
Consumer confidence Banking and insurance clients lost at least part of their former
confidence regarding the security of deposits, life insurance
products and the quality of consulting services.
Consumer confidence will have to be re-established. However,
consumers might adhere to their scepticism.
• Re-building
• Lost for many years
Income and wealth distribution The distribution of income and wealth widened in the past and
contributed to the segmentation of financial markets. Economic
recession devaluated substantial parts of property and might
limit the markets for property management. A rapid recovery
might lead back to former trends.
• Wide
• Narrow
Demography Age structure of the population. This is related to consumer
preferences regarding risks and the quality of services. More-
over, it affects recruitment policies.
• Aged
• Young
Economic growth Will the European economy rapidly recover from the present
recession or will it take years to overcome the financial and
economic crisis?
• Rapid
• Slow
Emerging countries Will emerging countries use the crisis to expand their shares in
the European financial services or will they concentrate on
home markets?
• Rising importance
• No increase
Global capital markets Will there be a break in the development of international capital
markets leading to a re-nationalisation of capital allocation, or
will international business grow again when the crisis is over-
come?
• Nationalisation
• Internationalisation
Table 26 continued
Descriptor Meaning Categories
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Control systems
Self-control Will companies be able to establish controlling mechanisms
(middle office function) which allow a better balance of risks, or
will they continue to follow a short-term profit maximising
strategy?
• Strong
• Weak
Rebuilding trust Will companies be able to rebuild the confidence lost among
consumers and investors? Will they invest into reliability with
better information, competent consultants and stronger product
control, or will they limit their activities to marketing campaigns?
• Determined
• Vague
Public rescue programmes Will governments be obliged to take the risks of financial
investments through shareholding and guarantees in the long-
run, or will they be able to retreat from the business soon?
• Short-term
• Long-term
Public supervision Will governments be able to control international capital markets
and avoid future imbalances or will they only cosmetically adjust
current supervisory concepts?
• Efficient control
• Weak control
Risk management control Will governments force financial institutions to introduce an
effective system of risk management for all types of invest-
ments? Will this system be able to improve risk management
and lead to the early identification of changes?
• Efficient risk man-
agement
• Weak risk manage-
ment
Sector organisation
Back office relocation Will companies follow cost pressures and relocate back office
work to low-cost countries? Will those who use this opportunity
get substantial advantages?
• Outward investment
• Balanced
• Inward investment
Mergers & acquisitions Will economies of scale through the standardisation of products
and market power further increase the rate of concentration or
will smaller companies be able to survive on a regional basis
through better services and more trust?
• Increasing
• Decreasing
Outsourcing of technical and
administrative services
Will independent “technical and administrative service organisa-
tions” emerge, which provide the whole range of services
needed for banking and insurance or will these services remain
in-house for control and data protection reasons.
• External
• Internal
Retail channels Will retail banking and insurance use sales points and branches
with sales specialists rather than financial professionals? Or will
market success depend much more on financial competences
of consultants, broad market knowledge and personal relations
available in competence centres?
• Sales points
• Competence centres
Internet banking Will internet banking and direct insurance be broadly accepted
as the usual instrument of financial activities or will customers
remain sceptical and prefer personal contact to bank represen-
tatives?
• Normal standard
• Exception
Production and employment
Financial services employment Total employment in the sector • Rising
• Stagnating
• Falling
Financial services output Total value added in the sector • Rising
• Stagnating
• Falling
Source: DKRC/Economix
5.1.3. Interdependence matrix
The interdependence matrix shows the links between these descriptors using the classification
mentioned above. All descriptors are classified and ordered by their active and passive sums in
Table 27. The classification is based on the evidence from mapping the sector, information
gained through literature analysis, expert interviews, and the debates conducted during the sce-
nario workshops. The principles of economic theory are also included.
3
3
The matrix nevertheless reflects the theoretical understanding of sector which the authors of the scenario devel-
oped. In order to reveal this understanding and open the discussion, the matrix is published in detail.
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The red cells of the matrix indicate the direct links between the descriptors and the orange cells
indicate the strong indirect links. The weak indirect links are light blue and dark blue signals no
interdependency. Due to the ordered presentation of the descriptors, most of the direct and
strong indirect links can be found in the upper right hand corner, while weak indirect and non-links
are in the lower left hand corner.
This description of interdependencies is based on the present status. It does not include forecasts
of how the role of the descriptors will change during the scenario period. Therefore, the scenarios
will also consider how the impact of the descriptors (and drivers) will change in the future and
which implications will arise from these changes.
The picture, however, is rather scattered and does not reveal a clear dominance of one of the
descriptors or a group of them. A series of descriptors appears to be both strongly active and
strongly passive. This could be understood as a contradiction, but it is the indication of strong
interdependencies among the descriptors.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 87
Table 27 Interdependence matrix
Classification categories: 3 = direct dependency; 2 = strong indirect dependency; 1 = weak indirect dependency; 0 = no dependency;
Source: DKRC/Economix
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5.2. The drivers
The comparison of active and passive sums of the interdependency matrix reveals the impor-
tance of the descriptors (Chart 5). In brief, the financial services sector is strongly driven by:
• knowledge of the sector
• control systems which will be established and reorganised in the near future
• organisation of the sector
• market developments
The result is in the two output categories of value added and employment.
Demography appears to be the least active but also the most independent factor in this set of
descriptors.
Chart 5 Drivers
Active and passive sums of descriptors
Wealth distribution
Training system
Skills structure
Self-control
Risk management control
Retail channels
Rescue programs
Rebuilding trust
R&D knowledge
Public supervision
Product innovation
Process innovation
Outsourcing of services
Mergers & Acquisitions
LS professionals
LS administrators
Internet banking
Global capital markets
FS Value added
FS Employment
Emerging countries
Economic growth
Demography
Consumer confidence
Back office relocation
0
5
10
15
20
25
30
35
40
45
50
0 5 10 15 20 25 30 35 40 45 50
Passive Sum
A
c
t
i
v
e
S
u
m
Knowledge base
Control system
Sector organisation
Output
Markets
Source: DKRC/Economix
The high interdependency of the descriptors requires a more detailed look at the linkages be-
tween the drivers. This can be seen in Chart 6, below, which shows the active and passive sums
for drivers, including the internal links among the descriptors of a driver. The active sums are
arrayed in a North-West direction while passive sums follow a North-East direction.
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Chart 6 Links among drivers
Active and passive sums of drivers
Sector organisation
Control system
Knowledge base
Market
Output
Sector organisation
Control system
Knowledge base
Market
Output
0
10
20
30
40
50
60
70
80
90
100
Active sums Passive sums
Source: DKRC/Economix
According to Chart 6, the driver “Sector Organisation”, in the bottom right, strongly affects the
driver “Knowledge Base”, ordered as the third driver in the North-West direction. It also has im-
portant internal links, visible as the bar with the brick pattern. This means that sector organisation
depends not only on one of the descriptors but on a variety of them which are closely interlinked.
Similarly, the creation of “Control Systems” has strong internal links, in addition to important ef-
fects on markets and the knowledge base.
The “Knowledge Base” affects markets and sector organisation, but – most importantly – shows
the strongest internal link among all the drivers. This means that the “Knowledge Base” is a driver
which reinforces itself. While it depends on the type of sector organisation, the structure of the
control system and market developments (North-East dimension of “Knowledge Base”) the deci-
sion to invest into the human competences appears as a (partly) independent option in the sce-
narios. More so than the internal links of other drivers, this option can be expected to have self-
enforcing effects.
5.3. Three scenarios up to 2020
5.3.1. Overview
The scenarios start from both the fundamental drivers identified in the previous sections and the
present knowledge about the financial crisis. It appears obvious that the European banking and
insurance sector will be affected by the crisis more than the other sectors. In particular, the failure
of liberalised capital markets and the inability to supervise these markets will have a strong im-
pact on future developments. The scenarios therefore put the organisational answers to the crisis
into the focus of considerations:
• How will the European financial services sector reorganise its activities and markets? Will it
develop a new and sustainable business model which avoids the errors of the past or will it
continue with the free-market approach of the last decade?
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• How will governments develop their supervisory instruments? Will they be able to achieve
the necessary international agreements or will they act nationally? Will the financial and
economic crisis force governments to take large parts of the banking industry into state-
ownership or will a rapid recovery allow for a more relaxed system?
• How will banking clients and financial investors react? Will financial institutions be able to
rebuild consumer trust or will the crisis raise uncertainties in the long-run?
Chart 7 Drivers and scenarios
Source: DKRC/Economix
When these considerations are combined, three alternatives appear to be crucial for the future of
the European financial services sector (Chart 7):
• Scenario 1: “Sustainable finance” describes the self-healing of financial markets. It is a
combination of strong self-governed restructuring of the sector, restrictive control, and the ap-
plication of an innovative, market-oriented approach which targets rebuilding market confi-
dence. The focus is on the development of self-enforced and self-regulating control systems,
which will overcome the short-term orientation of the financial business. A new business
model will be developed which considers risk analysis and consumer trust as its core ele-
ments. Strong investments into new financial products with superior characteristics will be
necessary, based on a long-term development strategy for the knowledge base of the sector.
• Scenario 2: “Laissez-faire” sees the main actors of the financial business avoiding significant
restructuring of the sector. They will try to blur the consequences of the financial crisis and
continue with the present business model as far as possible. Public control will remain liberal
or ineffective, particularly in global capital markets. New products will continuously be devel-
oped for investment rather than consumer markets. Financial services and products will be-
come increasingly standardised. Mergers & acquisitions will be undertaken on a large scale. It
is the scenario which successfully returns to development trends from before the crisis.
strong
restrictive
liberal
Market
confidence
Control
systems
weak
Weak
strong
1
Sustainable
finance
2
Laissez-faire
3
State ownership
Sector restructuring
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• Scenario 3: “State ownership” assumes that
the crisis will run out of control and public au-
thorities will be forced to maintain the basic
functions of banking and insurance. It is the
“Great Depression” scenario. As a last resort,
public control over the financial system will be
enforced. The banking sector will return to the
“administrative” approach without providing
many sophisticated services. Following public
regulation will become more important than
serving clients. The sector will concentrate on
process innovation rather than developing new
business models. Consumer confidence will
remain weak.
The scenarios are not developed for the driver
“economic growth” as this will happen in all three
scenarios, for better or worse. Nevertheless, they
differ in the economic performance of financial
services as well as in the overall economy.
Table 28 Scenarios for the European financial sector up until 2020
Driver Scenario 1
Sustainable finance
Scenario 2
Laissez-faire
Scenario 3
State ownership
Business model
Trust- and
consumer-oriented
Profit-oriented Control-oriented
Self-control by the
sector
Strong Weak Strong
Public control Restrictive Liberal Very restrictive
Mergers & acquisitions Weak Strong Strong
Market growth Restrained Unstable Weak
Product innovation Strong Strong Weak
Product
standardisation
Low High High
Process innovation Medium Strong Strong
Globalisation Controlled Uncontrolled Restricted
Outsourcing/relocation Medium High Low
Training activities Strong Strong Weak
Employment Recovery after recession
Short-term fluctuations after
recession
Long-term reduction with late
recovery
Source: DKRC/Economix
They are also not separated by technical or work organisation alternatives. While these drivers
are seen to be important, they very much depend on other drivers. The key to future development
seems to be the prevailing business model which may be a completely new approach in the case
of Scenario 1, the return to the past business model after the crisis in Scenario 2, or the end of an
economically independent financial sector in Scenario 3.
Expert panel views
To the great surprise of the authors, there was a
principal consensus among the expert panel partici-
pants about the relevance of the scenarios and their
realistic opinions. None of the scenarios were ex-
cluded or located to the “world of fantasy”. There was
also consensus that the financial crisis is going to
reduce employment in the sector considerably.
The broad discussion about the scenarios revealed
that scenario 1 attracted many participants as the
“desirable” future which will, nevertheless, face many
obstacles and strongly depend on the regulatory
framework of capital markets. Scenario 2 was as-
sessed as the least probable. As one of the partici-
pants expressed: “there will be no free market any
more!” Scenario 3 was characterised as the hell we
might have to cross. Nevertheless, it was seen as a
transition phase which may lead to a gradual recov-
ery of private banking.
Of course, the scenarios were criticised as being too
general and not directly applicable to specific coun-
tries or parts of the sector. The authors apologise for
not focussing on every detail.
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Table 28 contains assumptions and outcomes of the scenarios in a synoptic way. The rationale of
the scenarios is described in the following sections. The scenarios cover all 27 EU member
states.
5.3.2. Scenario 1: Sustainable finance
Facing sensitive customer reactions regarding all news about bank losses and experiencing a
high level of mistrust in interbank business, the banking sector will recognise the need to develop
an alternative business model – a business model which intends to rebuild trust into the long-
term stability of the sector and the security of deposits. The heavy government intervention in the
banking business, which will continue for some years, will be realised as the failure of liberalised
capital markets. It will become evident that short-term profit maximising strategies were one of the
major reasons for the crisis, as they systematically underestimated long-term risks. It will also be
realised that businesses turned a blind eye to long-term risk assessment for a long time.
This analysis being broadly accepted, the banking business will start a process of principal re-
structuring which targets regaining consumers’ and investors’ trust by reducing long-term risks.
Internal restructuring rather than external intervention will drive this process. The business will
accept demand from its clients and the public to avoid the recurrence of a financial crisis, and will
see the need to offer a convincing approach. This will result in a completely new business model.
At first, the banking sector will establish stringent risk assessment models. These will consider
long-term investments as the standard and thus include a wider scope of economic risks. Banking
management will be forced to assess risks in a transparent and obliging way. This will be en-
forced by government regulations, which strengthen the position of bank customers by making
banks liable for investment recommendations. Customers will prefer investments with clear risk
analysis and bank liabilities. The reforms will mainly address the banking sector but will have
side-effects on insurance. Life insurance in particular will have to adjust to the new liability stan-
dards and provide evidence of security and returns on investment.
Secondly, this will reduce large parts of the investment banking business, not only through its
actual breakdown during the financial crisis, but also in the long run as it will appear being too
risky. New forms of investments, like speculative derivatives and insurance CDS, will be scruti-
nised with respect to their profit/risk ratio and investments will be avoided if only short-term ad-
vantages appear.
Restructuring will be in favour of traditional investments where long-term profitability can be ex-
pected. Life insurance will particularly profit from this development. This will be at the expense of
profit rates in the banking sector – a rate which was exaggerated in an unsustainable way before
the 2008 financial crisis. The sector will learn that profit rates are worthless to convince custom-
ers. It will realise again that banking is a very peculiar business with a high degree of public ac-
countability. Markets will accept only those companies which will be able to demonstrate such a
responsibility. In favour of a sustainable financial business the sector will therefore abandon great
parts of its derivatives markets.
The transition process will give advantages to banks with less stringent profit orientation. This will
be the co-operative banking sector and savings banks rather than strictly private banks. At least
during the first years of the crisis, clients will put more trust into banks with a strong link to public
budgets. Private banks will nevertheless undertake great efforts to re-establish their reputation
through rigorous adjustments of their portfolios. The combat on banking markets will thus be on
private equity and consumer banking rather than investment banking or mergers and acquisitions.
The development will also be against standardisation – another main trend in actual business.
Computerised risk assessment will lose much of its importance in favour of individual risk evalua-
tion and investment consulting. Banks and insurance companies will considerably expand their
efforts to collect information on their clients. Their demands will go into the details of the clients’
businesses and try to get access to the most updated information. Supervisory systems will be
established which will lead to an early identification of risks. Continuous reporting on business
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changes will be obligatory for company clients. Sales related employees will be responsible when
selling products to customers, through ethic rules and through certifications.
Banks will also improve their consulting services with better risk assessments for different in-
vestments. Rating agencies will undergo a principal reform. By law they will have to be independ-
ent from financial institutions. Investors rather than suppliers of financial products will refund the
agencies. They will clearly indicate the degree of uncertainties included in their ratings. Moreover,
they will be reliable for severe cases of misjudgements.
Remuneration systems will be changed with a stronger financial commitment from top manage-
ment. Bonus systems will include malus components for financial losses. The independence of
supervisory boards will be strengthened in line with their liabilities. Brokers and investment bank-
ers will also see a stronger impact of financial risks on their remuneration.
The switch to the “sustainable finance” strategy will solve the financial crisis through a “cultural
shock” which will not only reverse most of the present business principals, but will demand for a
new category of bankers and insurers. The present group of leaders and professionals will be-
come increasingly obsolete and a new type of management will take the responsibility with a
long-term vision and strong customer commitments. Public accountability of the financial system
will be a major business value rather than private profitability. Top management in most of the
companies will be changed in order to achieve the “cultural” change. Former managers and su-
pervisors will be incriminated for the extent to which they were responsible for losses during the
financial crisis.
5.3.3. Scenario 2: Laissez-faire
The European financial sector will come to the conclusion that the financial crisis was an accumu-
lation of unfavourable events that disrupted the formation of a new and promising type of global
finance. The unhealthy expansion of the US mortgages markets and the cyclical downturn of the
world economy will be identified as the main reasons for the crisis. The short-term orientation of
the banking business and – in particular – the expansion into highly speculative types of financial
products however will not be questioned.
The plans for strict public supervision of the banking business will fail due to severe differences
among the G20 governments about the optimal structure of global capital markets. Most of the
European governments will try to establish stringent supervisory systems, however, the US and
parts of Europe will continue to appraise liberal capital markets as the superior solution – after
having saved the financial systems with public support. Short-term capital flows will be seen as
indispensable for the flexibility of the world economy, and investment banking as a necessary
market innovation. Only minor regulative restrictions will therefore be implemented.
Governments have nevertheless pumped large amounts of money into the tumbling banking
sector in order to avoid the catastrophe of a severe world economic crisis. This will appear to be
rather efficient in that the crisis will not be extremely serious and the existing banking system will
survive.
The side effect of these rescue programmes however, will be low pressure on sector restructur-
ing. As nothing will appear to be as serious as it was expected, neither banking management nor
banking clients will see strong reasons for changing their behaviour. The banking business can
undertake a relieved restart after having transmitted the “toxic” parts of its portfolios to public
authorities. Banking clients on the other side will see most of their deposits guaranteed by public
budgets, and thus will continue to maximise short-term revenues without adequate risk assess-
ment. Switching to an alternative business model will fail.
Negative effects on the banking business will emerge only gradually through rising taxes in order
to serve the tremendous debt accumulated during the crisis. Moreover, central banks will follow a
restrictive monetary policy in order to curb the inflationary effects of money supply expansion
during the crisis. Slow economic growth will therefore be the price of this strategy.
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Private banks will be the main profit takers from these developments, as they will be able to con-
tinue their business model without substantial adjustment. Public and semi-public banks will stay
in their sub-optimal position, where they already were in the past. Moreover, they will be restricted
in their operational activities because of stronger public regulation. Public owners will demand for
compensation of previous financial help and thus will take great parts of their profits.
Investment banking will recover after the sharp decline during the financial crisis. New markets
will be developed with continuous innovation of new products for investment banking and insur-
ance. Private equity will expand. The short-term orientation of global capital markets will be re-
vived.
Consumer banking will experience further standardisation with automated risk assessment. Inter-
net banking will strongly expand, including real-time stock trading and online consumer credits.
With the economic recovery, private clients will increase their participation in speculative trading
again. Banks will distribute more and more insurance products to make their networks more prof-
itable.
However, these conditions will not be able to avoid future imbalances. The next economic up-
swing will therefore create another financial bubble, as market dynamics will create similar expec-
tations among participants and drive their investment decisions into uniform directions. With the
repeated expansion of speculative market segments, the financial sector will remain vulnerable to
changes of short-term expectations and economic trends. Instability will therefore be another
major price of the strategy.
5.3.4. Scenario 3: State ownership
Triggered off by the US mortgages bubble, the world economic crisis will accumulate to a wave of
destructive power. Even financial investors with no engagements in highly speculative markets
will be strongly hit by the depreciation of stocks and credit failures. The sharp economic recession
will cause a series of bankruptcies in the non-financial sector which the majority of banks will be
unable to evade. Economies will be on a strong downturn worldwide, whilst also dragging the
healthy parts of the economies into the crisis.
Governments will fight against the breakdown of the financial systems throughout the world, but
will be unable to keep their economies at a normal level. They will have to accept shrinkages of
between 10% and 20% below potential capacities. The crisis will escalate to a worldwide depres-
sion with a long duration.
Facing this situation, governments will be forced to take the majority of banks under state control
in order to guarantee the minimum functions of capital markets at low risks. This will appear as
unavoidable because state guarantees and funds alone will not be able to impede bankruptcies in
the private financial sector. The banking sector will come under state ownership. Some of the
insurance companies involved in CDS and other “toxic” products” will follow them.
State ownership will mean that only the basic functions of the banking system will continue at low
interest rates, with minimum standards for client services, and the focus will be on operational
functions rather than new markets. It will be lean banking in its depressive meaning; targeting at
survival, not at being efficient.
Recession and state control will dry up the new markets almost completely. Investment banking
will not see a future for at least a decade. Private equities markets will have shrunk considerably
due to the devaluation of properties and poor economic prospects. Consumer banking will be run
at a low level providing only the basic functionalities.
Insurance business will also be hit by the depreciation of stocks and other property. In particular,
those companies which are strongly linked to capital markets will be in danger,. Economic pres-
sure on mass insurance will nevertheless be heavy due to the economic recession which will
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reduce premium incomes considerably. Insurance companies therefore follow a clear separation
from banking and a specialisation on insurance markets. A large part of the sub-sector will, how-
ever, be able to avoid state ownership.
Intermediaries will see strongly declining markets. State control will be expanded to niche mar-
kets and companies will (officially) only be able to offer products supplied by state banks. Parts of
the intermediaries’ business will therefore shift to black capital markets.
Innovation activities in the banking system will concentrate on process innovation with a special
focus on the improvement of controlling instruments. New financial products will only be devel-
oped within the narrow range of public capital market regulations, which demand low risks and
standardised products. In order to keep control over banking operations, the number of products
will be significantly reduced and products will be simplified. Control efforts will be undertaken to
check compliance with administrative regulations rather than efficiency or profitability.
Due to the severity of the crisis and the suspension of markets, an effective recovery from de-
pression will only be seen by the end of the scenario horizon. Similar to the financial crisis which
happened in Japan during the 1990s, the economies will suffer from the losses of property and
markets for a long time. This will be due to the fact that the breakdown of the economies will
largely exceed the initial effects of the financial crisis, and governments will be overburdened with
stopping the avalanche. While this will lose its power after some years, the destruction of markets
will be serious. Trust and economic optimisms will be difficult to re-establish.
At the end of the scenario horizon between 2015 and 2020, private banking and insurance will
slowly recover. Governments will start to release state-control and extend the accreditation for
financial services. This will herald the reconstruction of a strongly controlled private business.
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5.4. Employment effects
Estimating the employment effects of the scenarios is an even greater endeavour than writing the
scenarios. As there is no econometric model available to reflect the changes described by the
scenarios, quantitative results must be based on differentiated employment figures for the sub-
sectors in 2006 and assumptions on growth perspectives associated to the scenarios. The em-
ployment figures estimated for the different scenarios are therefore given for demonstration pur-
poses only.
5.4.1. Scenario 1: Sustainable finance
European financial services will have to go through the crisis with substantial job losses. The
sector can be expected to lose 15 % of its employment by 2012 but will increase the number of
jobs afterwards (Chart 8)
4
. Even under positive assumptions however, the employment level of
2007 will not be achieved until 2020. This will be due to the cut in the volume of investment bank-
ing and also to the effects of the economic downturn worldwide. The recovery after 2012 will be
accomplished with the restructuring process during the crisis. Forceful consumer orientation and
visible improvements in the quality of investment consulting will contribute substantially to rebuild-
ing trust. Nevertheless, it will take years until the markets are convinced of the sustainability of
the new business model.
Chart 8 Employment trends in the “Sustainable finance” scenario
Number of persons employed (EU 27, millions)
3
3,5
4
4,5
5
5,5
6
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
m
i
l
l
i
o
n
j
o
b
s
Source: DKRC/Economix
Insurance markets will able to profit from the crisis as their products have never been under seri-
ous liability suspicion. Insurance companies will take advantage of favourable consumer assess-
ments and expand their product portfolio with respect to long-term risk minimisation. Life insur-
ance will experience a new revival due to the security orientation of the population.
4
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Intermediaries will also be less affected by the financial crisis, but will nevertheless experience
shrinking markets during the first years. They will be able to recover from this sooner than the
banking sector and will try to play their consulting and advice role. Improvement of the banks’
consulting services, however, will be a continuous threat to the expansion of intermediaries’ busi-
ness, which will grow with the overall trend in financial services.
By 2020, the financial services sector can be expected to employ fewer workers than in 2006.
Following the assumptions of this scenario the volume of job losses up until 2020 might range
between 50,000 and 600,000, depending on the strength of the recovery after 2012.
5.4.2. Scenario 2: Laissez-faire
In the “Laissez-faire” scenario, the European financial services will enter a phase of unstable
employment with short-term recoveries only. The number of jobs will continue to decrease up
until 2012 due to the effects of the current crises. Fundamental conditions of the world economy
will not allow an earlier recovery. The sector will however profit again from the succeeding up-
swing and expand its labour force in investment banking, mergers and acquisitions, and private
equities. However, this cannot be expected to be sustainable. The banking business will therefore
enter the group of sectors which are highly sensitive to cyclical fluctuations.
Chart 9 Employment trends in the “Laissez-faire” scenario
Number of persons employed (EU 27, millions)
3
3,5
4
4,5
5
5,5
6
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
m
i
l
l
i
o
n
j
o
b
s
Source: DKRC/Economix
In the long run, the recurrence of high financial risks will undermine the trust in the banking busi-
ness. It will not be perceived as a business that fully complies with its peculiar public accountabil-
ity. This will limit the expansion of the private banking sector in favour of public or semi-public
banks and the insurance industry. Being less affected by the ups and downs of global capital
markets and having applied long-term investment strategies professionally for a long period of
time, the products from insurance companies – life insurance in particular – will become more
attractive to private investors. Moreover, independent intermediaries will profit from the uncer-
tainty in capital markets, as high quality consulting is strongly appreciated by investors.
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By 2013 the sector can be expected to have lost around one sixth of its 2007 labour force and will
escape from the negative trend only for a short period. The major burden of this decline will have
to be taken on by the banking sector, while insurance and intermediaries will be able to expand,
at least in relative terms.
5.4.3. Scenario 3: State-ownership
The number of jobs within the European financial services will remain at a low level, even after
the immediate effects of the financial crisis which is expected to be more severe and to take
longer than in the previous scenarios. By 2020, the European financial sector will have lost al-
most 25 % of its 2007 level. Job losses will continue until 2015 and then turn into a slight increase
afterwards. Nevertheless, employment growth will remain limited due to slow market expansion.
Chart 10 Employment trends in the “State Ownership” scenario
Number of persons employed (EU 27, millions)
3
3,5
4
4,5
5
5,5
6
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
m
i
l
l
i
o
n
j
o
b
s
Source: DKRC/Economix
The major burden of this decline will have to be taken on by the banking industries, but insurance
and intermediaries will also lose jobs. Insurance will perform relatively better. Intermediaries,
however, will lose substantial parts of their workforce.
Employment losses will concentrate on formerly private banks, particularly in the area of invest-
ment banking and private equity. Public and semi-public banks, co-operative banks and savings
banks, however, will mainly be affected by the overall economic downturn. While this will happen
during the first phase of the scenarios up until 2015, later employment growth will result from high
cost pressure and labour saving technologies.
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5.5. Impact on skills
5.5.1. Scenario 1: Sustainable finance
As indicated above, the restructuring process will imply considerable changes of both the type of
competences needed by the banking sector and the occupational structure of employment.
Table 29 Change of occupational structures in the “sustainable finance” scenario
Tendency of % change; EU27; 2006-2020*
Occupation Banks Insurance Intermediaries
Total financial
services
Managers = = = =
Computing professionals = = = =
Business and finance professionals (sales and
marketing)
++ + ++ ++
Business and finance professionals (new
products)
+ + = +
Business and finance professionals (organisa-
tion, controlling)
++ + = ++
Clerks ? ? ? ?
Service and sales workers + + + +
Craft and related trades workers ? ? ? ?
Elementary occupations = = = =
* Change of % shares of area total:
++ strong increase; + increase
= no change
? ? strong decrease; ? decrease
Source: DKRC/Economix
The upcoming competence profiles will demand:
• Strong consumer orientation of the whole business. This will be the major battlefield of com-
petition among financial services providers. It will be governed by the ambition to provide the
best consulting services possible. Reliability and trust will be the goals to be achieved from all
marketing activities. Individual consulting will be provided and long-term consumer and busi-
ness relations will be established.
• Strong risk awareness instead of short-term profit maximisation. Consultants will have to be
trained in assessing investments risks from a long-term perspective. They will return to “con-
servative” investment strategies in favour of better security.
• Investment banking and parts of short-term capital management will be abandoned. This will
not be required in capital markets following a sustainable strategy.
• R&D specialists will be needed in order to improve risk analysis and customer consulting
rather than the development of new financial products. This will raise the demand for risk ana-
lysts, market analysis specialists, mathematicians and statisticians.
• Internet banking will experience a certain upper ceiling, as consumers prefer individual ser-
vices. Nevertheless, it will be used for daily banking operations. Back office operations will be
reorganised further. Thus ICT specialists will see a continuous expansion of labour demand.
5.5.2. Scenario 2: Laissez-faire
Skills trends remain rather unclear in this scenario, as cyclical fluctuations will have a strong
impact. In particular, investment bankers and brokers will find themselves in a similar position to
engineers in the manufacturing sector. Strong fluctuations in labour demand will create cobb-web
cycles in these labour markets. These will be driven by rising labour demand, initiating increasing
training efforts, which will arrive in labour markets at a time when demand will be in decline again.
Unemployment risks will therefore increase for these types of professionals.
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Competence profiles in the upper segment of the business will nevertheless reveal some stable
trends:
• R&D specialists will be required for product innovation and risk assessment
• Specialists for business organisation and ICT will restructure back office administration and
develop the instruments for expanded internet banking
• Marketing specialists will be used to regain market shares for private banking
• Controlling specialists will be needed to keep control of a standardised and automated con-
sumer business
Table 30 Change of occupational structures in the “laissez-faire” scenario
Tendency of % change; EU27; 2006-2020*
Occupation Banks Insurance Intermediaries
Total financial
services
Managers = = + =
Computing professionals ++ ++ = ++
Business and finance professionals (sales and
marketing)
+ + ++ +
Business and finance professionals (new
products)
++ + ++ ++
Business and finance professionals (organisa-
tion, controlling)
+ = = +
Clerks ? ? ? ? ? ? ?
Service and sales workers = + + +
Craft and related trades workers ? ? = ?
Elementary occupations ? ? = ?
* Change of % shares of area total:
++ strong increase; + increase
= no change
? ? strong decrease; ? decrease
Source: DKRC/Economix
The scenario will strengthen the trend towards a dual labour market, split into a high-skilled seg-
ment for investment brokers, R&D specialists, organisational and marketing specialists, and a
low-skilled segment for sales and call centre agents, clerks and other support staff. This will be
due to the segmentation of financial markets into a sophisticated area of investment banking and
asset management, and standardised consumer markets which will increasingly operate with
internet tools. Big service providers will be established which will take a major part of day-to-day
operations in accounting, mailing, and internet operations. This part of labour demand will be-
come effective in other sectors than financial services.
5.5.3. Scenario 3: State-ownership
Skills structures will change in opposite directions compared to the pre-crisis period:
• A greater need for back office professionals will emerge, due to a stronger emphasis on con-
trolling and general administration. This will also increase the need for computer specialists.
• The middle office jobs will grow.
• Front office professionals in the fields of sales and marketing but also in R&D for new prod-
ucts will see declining demand.
• Lean management will be introduced at the expense of the broad middle management
groups in particular.
• Clerks will keep a relatively good position due to the fact that administration will become
more regulated.
• Service and sales workers will see declining demand.
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The new type of bankers demanded by the state-owned banks will need the competences of civil
servants rather than the strategic and market oriented competences of a private banking system.
They will need to have a sound education in law, a clear perception of tasks and legal compe-
tences, and an orientation towards public targets rather than company profits.
Table 31 Change of occupational structures in the “state ownership” scenario
Tendency of % change; EU27; 2006-2020*
Occupation Banks Insurance Intermediaries
Total financial
services
Managers ? = ? ?
Computing professionals + + + +
Business and finance professionals (sales and
marketing)
? ? = ? ? ? ?
Business and finance professionals (new
products)
? ? ? ? ? ? ?
Business and finance professionals (organisa-
tion, controlling)
++ + ++ ++
Clerks + ? + +
Service and sales workers ? + ? ?
Craft and related trades workers = ? = =
Elementary occupations = ? = =
* Change of % shares of area total:
++ strong increase; + increase
= no change
? ? strong decrease; ? decrease
Source: DKRC/Economix
The new strategic orientation will bring a radical change to bank management in particular. Top
management will be largely exchanged and the middle management will have to follow the new
rules rapidly. Moreover, remuneration will be significantly reduced. Bonus systems will expire,
and overall wage levels of the banking system will decline in relation to other sectors.
Investment bankers and brokers will have to look for jobs in other areas as financial specialists in
the non-financial sector or as consultants. The rising need for administrative professionals and
controlling specialists will be covered by other occupations.
6. Strategic impacts from the scenarios
6.1. Human resource policies in a declining industry
In most of the EU countries, the financial sector expanded for many years. This is changing radi-
cally due to the current financial crisis and will lead to a substantial loss of employment, whatever
is assumed for the long-term future of the sector. With the downturn of employment, human re-
source policies will face new conditions in internal and external labour markets which will be
similar to other declining industries. This Section shortly reviews the particularities of these
branches.
The reduction of employment will affect both labour supply and labour demand in a significant
way. It will result in:
• high unemployment risks for the staff employed – certainly a new and alarming experience
for much of the workforce
• a small number of job openings for those entering the sector – a surprise for many of the
students and trainees in professional schools and colleges, and also for those who are in the
process of deciding about their educational career
• a lower wage increase due lower profits and rising unemployment
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• a generally poorer attractiveness of the sector compared to other sectors – a new condition
for the human resource departments
This will not make human resource policies easier: while labour supply will be more than sufficient
due to the rising number of lay-offs, it will become difficult to recruit specialists from the non-
banking sector (ICT specialists, marketing specialists, mathematicians, statisticians etc.). These
groups will recognise higher unemployment risks in a sector which, until recently, was perceived
as providing secure jobs. Even financial specialists will look for job opportunities outside the fi-
nancial sector. Selecting those who are the best qualified will become more difficult.
Company restructuring appears to be difficult in such a situation. While markets demand a rapid
restructuring in all areas – products, technologies, organisation – the human resource policy in
companies is determined by low labour turnover, the great importance of internal labour markets,
and an ageing work force. Particular skills shortages appear among emerging skills, which are
scarce due to competition among employers.
6.2. Adjustment strategies at company level
In the short-run, many financial institutions will be forced to consolidate and to adjust activity
levels to declining financial markets. In the long-run however, companies will follow different types
of strategies which appear clearly separated in the three scenarios (Table 32).
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Table 32 Main adjustment strategies
Adjustment strategy Scenario 1
Sustainable finance
Scenario 2
Laissez-faire
Scenario 3
State ownership
Diversification strategy
•
Trust and security oriented strategy
•
•
Globalisation strategy
•
Specialisation strategy
•
Standardisation strategy
•
•
Source: DKRC/Economix
Five principal strategic orientations might determine the prevailing business models:
• Diversification strategy: banks in particular recognised the importance of consumer deposits
and credits for the stability and security of the business. The wide distribution of risks ap-
pears to be fundamental, as well as participation in a wider scope of markets. Universal
banks are the ideal business model of this strategy. Mergers between banks and insurance
companies appear to be attractive.
• Trust and security oriented strategy: the financial crisis also revealed the importance of
consumer trust for the long-term sustainability of the sector, and it made clear that profit ori-
entation disagrees with this principle. The strategy requires long-term orientation rather than
short-term profitability, and results in a fundamental change in product development, invest-
ment consulting, and investment decisions.
• Globalisation strategy: big is not only beautiful but efficient. The economies of scale in finan-
cial markets are strong and make cross-border mergers attractive. This creates big institu-
tions in interbank markets and re-insurance, but also in private equity, asset management,
and back-office services.
• Specialisation strategy: this is not only the separation of banks and insurers, but the institu-
tional specialisation on mortgages, business credits, different types of asset management,
investment banking and other market segments. The economies of this strategy are based
on specialisation rather than size. A high degree of professionalism is required for market
success.
• Standardisation strategy: products for mass consumer markets are standardised in a limited
number of alternatives and automatic risk assessment. The internet plays a dominant role for
the business. Big back office service providers execute the administrative tasks. Individual
services are an exemption.
The scenarios contain different combinations of these strategies:
• Scenario 1 mainly refers to the trust and security oriented strategy in order to rebuild con-
sumer confidence. Also, for security reasons, a diversification strategy is followed.
• Scenario 2, in contrast, applies a strongly economic approach searching for favourable mar-
ket positions in global capital markets. This can also be achieved through specialisation in
niche markets and standardisation of consumer markets.
• Scenario 3 applies a trust and security oriented strategy by the means of a public banking
system. In order to be efficient, a high degree of standardisation must be achieved. The het-
erogeneity of consumer preferences is not directly relevant.
The different strategic options of the scenarios also imply different adjustment measures regard-
ing human resource policies. The importance of these measures is indicated in Table 33:
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Table 33 Adjustment measures of companies
Scenario 1
Sustainable finance
Scenario 2
Laissez-faire
Scenario 3
State ownership
Changing work organisation +++ ++ 0
Retraining of labour force +++ ++ +
Recruiting unemployed 0 0 +
Recruiting young ++ +++ 0
Recruiting from abroad 0 ++ 0
Improving working conditions +++ 0 +
Outsourcing / relocation 0 +++ +
Networking ++ + 0
Improving career structures +++ + +
Knowledge transfer ++ + +
Raising wages + 0 0
Improving image +++ ++ +
+++ very important; ++ important; + relevant; 0 not relevant;
Source: DKRC/Economix
Scenario 1 “Sustainable finance” will lead the companies towards a customer oriented organisa-
tion, putting a strong weight on “face-to-face” work situations. This organisation is based on a
high level of competences for the counsellors, loan officers, insurance agents, and intermediaries.
They need a high level of education to analyse the clients’ needs, the knowledge of a large range
of financial products, and a good assessment of potential economic and financial risks. They
have to maintain this level throughout their career by taking part in frequent training programmes.
Their motivation needs to be strengthened by serious career management, by knowledge transfer
measures and the experience of internal and external networking.
Scenario 2 “Laissez-faire” is based on an industrialised organisation and on lean production
models with large service centres and big call centres for product sales. Turnover will be encour-
aged by profit-based remuneration. Young people will be hired on low wages to work on sales
platforms and in call centres, but also for highly professional jobs in investment banking. New
products will be continuously developed by special R&D staff. Training courses will be used to
continuously update employees’ knowledge on innovative products. Particular attention will be
paid to soft competences and communication.
Scenario 3 “State ownership” will lead to an administrative sector demanding reinforced control-
ling skills, and people with a strong knowledge of regulations and general law in order to apply
national and international rules. The middle office will be the most developed function. Employees
must participate in training courses to develop their regulation and law knowledge.
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6.3. Strategic choices for sector organisations, training institutions and
governments
The scenarios also require different strategies to be followed by sector organisations, training
institutions and governments (Table 34):
Table 34 Adjustment measures of sector organisations, training institutions and governments
Scenario 1
Sustainable finance
Scenario 2
Laissez-faire
Scenario 3
State ownership
Image of the sector Sustainable sector with a
high degree of public
accountability
Modern and dynamic sector Strongly security oriented
sector providing low-cost
products
Career guidance Strong client orientation,
risk oriented decisions
Flexible and innovative,
Profit oriented decisions
Strictly task oriented
Vocational training Communication skills,
risk assessment and
controlling
Specialists for financial
products,
global financial markets,
business organisation
Business administration,
controlling
Cooperation between
education and industry
With a focus on the princi-
ples of trust and security
oriented financial business
Specialised continuing
training for professionals
Law and public administra-
tion
Labour markets Regional labour markets
very important
International recruitment Internal labour markets
important
Source: DKCR/Economix
• In Scenario 1, sector organisations will support the image of a sustainable sector with a high
degree of public accountability. A high degree of client orientation will be demanded from
persons in consulting and management positions, combined with strong risk awareness.
Communication skills and a sense of responsibility will be particularly promoted, together
with the principles of a trust oriented and security oriented financial business. Recruits will
mainly be from regional labour markets as direct communication with local clients is impor-
tant.
• Scenario 2 will present the sector as a modern and dynamic business which demands flexi-
ble, innovative and profit oriented professionals. Vocational training should train specialists
for various financial products, global financial markets, and business organisations. Life-long
learning will be particularly important to keep professionals updated with the rapid path of in-
novation. Specialists will be recruited from international rather than local labour markets.
• For Scenario 3 an image campaign is not really needed as the sector is reduced to basic
financial operations. Nevertheless, it appears as a security oriented business which targets
providing financial services at low costs. Career promotion will select strictly task oriented
employees. Vocational training is reoriented towards business administration and controlling.
Training centres will focus on law and public administration. The majority of recruits will be
from internal rather than external labour markets.
6.4. Policy choices
The specific policy mix applied in the three scenarios is as follows (Table 35):
• For Scenario 1 a broad policy approach is required to achieve the reorientation of the finan-
cial business towards the “sustainable finance” model. Training policy creates the basis for
this by means of a broad enhancement of competences at all skill levels. The workforce has
to be “re-educated” from the previous profit orientation towards risk awareness. This requires
strong investments in new tools for risk assessment and strategic controlling. Regulation pol-
icy will enforce these changes with strict control in risk management and rigorous liability
rules for financial consulting. Global capital markets will be controlled by international super-
vision and monitoring standards.
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• In Scenario 2 the training policy will concentrate on highly-skilled professionals who are
needed to develop new financial products and reorganise administrative processes. Low-
skilled workers will only be trained in short courses for restricted tasks. Financial institutions
will have a wide scope of action to reorganise markets and business processes. Controlling
will not significantly exceed the present level, particularly not in global capital markets.
• Scenario 3 does not develop an explicit training policy as it has to operate with the existing
labour force rather than a high volume of recruits. Innovation policy will concentrate on im-
proving controlling systems and operational rules will be adjusted to public administration.
Global capital markets will be restricted and international capital flows will be controlled na-
tionally.
Table 35 Policy measures
Scenario 1
Sustainable finance
Scenario 2
Laissez-faire
Scenario 3
State ownership
Training policy Broad competence en-
hancement at all skills
levels
Focus on highly-skilled
professional
Limited efforts
No explicit training policy
Innovation policy Risk assessment and
strategic controlling
New financial products
Standardisation
Back-office services
Controlling systems
Regulation policy Strict control of risk man-
agement
Rigorous liability rules
Control of risk management
at national level
Public administration rules
Globalisation policy International controlling and
risk management rules
Free international capital
markets
Nationally restricted capital
markets with state control
for international transfers
Source: DKCR/Economix
6.5. Critical competences
The scenarios require employees who developed strongly different sets of competences (Table
36):
• Scenario 1 relies on a new type of “banker” and insurance employees who forget most of the
principles which were developed over the past decade. This starts with general management
which acts on a long-term vision rather than short-term profit orientation. In order to change
of the business model, managers need to be experienced in change management. Market-
ing and sales staff are financial professionals who are strongly client oriented even at the
expense of lower short-term returns. They communicate their social responsibility and are
able to build trust and long-term relationships with clients. Administration is independent
from the sales departments and strongly committed to short-term monitoring of business
processes and strategic controlling. Strategic controlling means that the check list of control-
lers focus on the assessment of principal business targets rather than detailed operations.
Research & development provides the instruments needed by the controllers and process
re-engineering achieves a high degree of flexibility which allows serving a wide range of
consumer demands.
Table 36 Critical competences
Scenario 1
Sustainable finance
Scenario 2
Laissez-faire
Scenario 3
State ownership
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General management Risk oriented rather than
profit oriented
Long-term vision
Change management
Global orientation
Strong profit orientation
Short-term flexibility
Security oriented,
Low-cost oriented,
Change management
Front office / Marketing and
sales
Financial professionals
Strongly client oriented
Socially responsible
Market oriented sales
specialists
Product oriented
Limited marketing efforts
Back office / Administration Strict monitoring and
controlling
Rapid adaptation to product
changes
Strict controlling according
to administrative rules
Research & development Risk assessment
Controlling instruments
Customised products
New financial products
Internet-based sales
Standardisation of products
Standardisation of
products
Middle office / controlling ,
process engineering
High flexibility of processes
due to heterogeneous client
demands
Standardisation of
processes
Relocation of back office
services
Standardisation of
processes
Source: DKCR/Economix
• Scenario 2 continues with the short-term profit orientation which was followed by the finan-
cial business in the past. It reaffirms the principles developed by the present leaders rather
than demanding for a change of business models. The competences needed by this sce-
nario, therefore, are in line with existing trends: global orientation of managers and profes-
sionals, market orientation of sales specialists, and flexibility at all levels of the rapidly
changing business. This is mainly addressed to R&D staff who will have to develop the new
financial products. Markets are strongly separated into global financial products and con-
sumer markets. While product innovation will mainly happen in global markets, consumer
markets will be strongly standardised. Internet technologies will be developed to provide effi-
cient instruments for this market. This will considerably reduce the need for administrative
staff. Moreover, relocation of back office operations will reduce the demand for this type of
labour.
• Scenario 3 will be a similar “shock” to the financial business, just like scenario 1. It will make
large groups of innovative professionals in the banking business redundant, in particular in-
vestment brokers, asset managers, private equity consultants etc. The skill profile of this
scenario will be reduced to the needs of standard banking and insurance operations. A
strong focus will be on controlling. Employees will therefore return to the principles of public
administration. Market orientation will be exchanged for low-cost orientation. Marketing and
sales staff will be hardly needed. Civil servants will take the responsibility for company man-
agement and insure the application of public rules. Low-costs will be achieved by standardi-
sation of products and processes. R&D staff will therefore concentrate on controlling instru-
ments and lean service production.
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7. Human resource strategies to meet skill needs
This part is written from the human resources management point of view. We had specific inter-
views with HR managers in companies, with responsible training institutions and with experts,
and we analysed literature about qualifications, training and HR management in the financial
services sector.
7.1. Facing the demographic challenge
For the banking sector the analysis relies on the demographic development study conducted in
2006 by the social partners at the European level (UNI EUROPA Finance, EBF, ESBG and
CEAP): "The impact of demography on the human resource policies in the banking sector", No-
vember 2006. The basic results of this study (which covers 14 countries) correspond to the facts
analysed in this report.
This very interesting study shows for several Western European countries (with the exception of
the UK where the employees in the banking sector are relatively young) that the number of peo-
ple retiring will be quite high from 2010 onwards. Even if total employment decreases (that is the
outcome of all the three scenarios), there will be certain needs for newcomers.
After the presentation of the population pyramid in different countries, the study on demography
examines how the sector would face challenges whilst adapting itself to population changes:
• recruitment of new staff members
• retention of older staff
• utilization of "life cycle policies" as a tool to attract newcomers
• updating skills of older staff
The interviews conducted for our study and also the national studies from the European social
partners both show that the big financial groups can take advantage of these important retire-
ment figures to realise productivity gains, and to now face the systemic crisis and the decline of
employment.
• In the back offices in Western European countries, replacements are realised at the rate of
one appointment to two retirements. According to the scenarios, back office employment
(clerks, technicians) will decrease. This may be a function without recruitment.
• In the insurance sector, the number of employees working in the administrative services or
preparing contracts will be reduced. The use of new computer programmes renders the
knowledge of the ageing employees whereas obsolete and retired employees are not re-
placed.
• Similarly, in the banking sector new software and new computer systems accelerate the
preparation of credit offers which in turn are replacing retired employees.
• As to the management function, the replacements are realised at the rate of two appoint-
ments to three retirements. If the companies should go to a “low cost” scenario and want to
realise budget economies, this proportion would be changed and the volume of managers
would decrease.
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7.2. Hiring young people with university degrees
The most common answer to the massive need of new competencies and the need to renew the
workforce is the recruitment of young graduates with post secondary and tertiary education:
• Highly educated and highly specialised graduates for business and investment banking
activities, for the functions of risk management, actuaries consultants for companies, and to
a large extent for retail activities.
• Two to three years of study in post secondary and tertiary education for people working in
call centres and partly in retail activities.
Following this strategy there will hardly be recruitment in this sector for graduates with a level
inferior to university entrance qualification plus 2 years of studies or training. However, the possi-
bility to recruit young graduates will be linked to the attractiveness of the sector.
The financial sector is recruiting very few newcomers who are in the middle of their professional
career with some exceptions:
• Groups of salesmen in the companies are not always satisfied with the performance of
young university graduates and started poaching employees in the large consumer service
sectors such as in travel agencies or big retail companies.
• For the employees in the sub-sectors of agents and brokers, where the more entrepreneurial
status is attracting young employees with some years of professional experience in a classi-
cally large company are available.
• For the employees in marketing functions where the companies hire employees from sectors
where the marketing aspect is highly developed (mass consumption product sector).
• In the UK where the turnover in the companies of the sector is important; the companies
prefer recruiting employees with some years of professional experience.
In the old member states the companies’ view point just before the crisis was that they do not
have any problems in finding and attracting the young graduates they need. The financial ser-
vices sector is attractive to young graduates who are drawn in by the prospect of a high income,
good working conditions including good career possibilities and significant professional ad-
vancement prospects. The financial crisis can be expected to change this situation.
Example: In the capital cities, especially in London which represents the most advanced innova-
tion hot spot in Europe, young professionals find a large number of possibilities to change from
one company to another or to be internationally mobile and change from one country to another.
Additionally, in these business activities salaries paid in London are 20% to 30% superior to the
salaries paid in Germany, France or Italy. A survey conducted by Fed Finance and the Grant
Thornton group shows that 80% of the new employees in London are satisfied with the training
they get in Europe, regardless of the country. However, they are now in turmoil and a lot of jobs
are going to be cut in London.
However, the FSSC (Financial Services Skills Council) in the UK points out problems regarding
the recruitment of young graduates: “Recruiting and retaining young people in our industry is
becoming increasingly difficult." (2008). Le FSSC defines itself as "licensed by the UK Govern-
ment to work in partnership with employers to provide strategic and responsible leadership for
training and education".
The quoted demographic study shows examples in countries like Cyprus, Italy, Portugal "where
the banking sector keeps on being attractive thanks to the benefits that are given, the above
average wages, health plans etc. But in Denmark, representatives from the employers regard the
sector as very attractive whereas the employees representatives highlight that the banking sector
is often considered as a stressful environment and for this reason not very attractive". The Eng-
lish Union Amicus points out that the financial sector is very stressful and becomes less and less
attractive for employees.
However, in the New Member States, despite the fact that the financial sector is attractive, the
number of young graduates trained in financial areas of expertise is not sufficient to meet the
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recruitment needs of the companies. In addition to this, young graduates tend to leave to work
abroad (Ireland, United Kingdom, Sweden, the US) and presently the companies and the profes-
sional organisations are trying to bring them back to their home countries. For the bank SEB in
Lithuania: "The challenge now is to attract people coming back from abroad. 200,000 people are
working abroad, in all sorts of sectors, salaries are increasing in Lithuania, people are starting to
come back. Potentially attractive candidates are graduates from foreign universities."
7.3. A possible answer: retrain older staff
To a high degree the finance sector made use of early retirement systems. Today and prior to the
present financial crisis, a rethinking in the companies of the sector and a change of strategy can
be witnessed in all countries:
• On one hand at national level in every country general measures are implemented to post-
pone the statutory age of retirement.
• On the other hand at company level new policies are just starting to be implemented.
The study of the social partners in the banking sector gives some examples:
• In Denmark, part-time employment is now a legal right for employees who are over 58 years
old.
• In the Netherlands, employees older than 57 can reduce their working time.
• In Germany, many banks offer the possibility of part-time work for young parents (to reinforce
the attractiveness of the sector) as well as for older workers.
• In the UK, the non-discrimination policy was renewed.
• In Portugal, co-operative banks institute a discount on pensions in case of early retirement
etc.
If the finance sector is faced with difficulties in recruitment, this could lead to making better use of
the older workers, however, they will face job cutting plans, and early retirement could be a solu-
tion.
In France in July 2008, an agreement between the social partners was negotiated in order to rise
the effective retirement age in the sector (at present the average retirement age is 58.5 years
old). The companies have to offer every employee a so-called “mid career interview” when they
are 45 years old and a development report on this issue is published every year.
Training employees is a response to the need of new skills; it is even more necessary to retain
the older employees in the job. "Maintaining the employability of staff is not only a question of
updating competencies, it also requires that the working environment allows people to stay in
employment until they reach normal retirement age": that was the conclusion of Mr Olivier Ro-
ethig (Uni Europa Finance) during the conference dedicated to the demographic study mentioned
above.
In some countries the banking and insurance companies created special training programmes for
aged workers: in Belgium, in Austria based on different modules (in Sweden with the programme
SenKO for those older than 55 years old and in Portugal with the programme SABERES+).
7.4. Vocational training for employees
A tradition of companies engaged in training (EU15)
For a long time big companies in the banking and insurance sector as well as all countries in
Western Europe have focused their long-term orientated human resource management strategy
on managing their internal labour market.
Until the 1990s, workers with a lower educational level were recruited and it was the companies
which guaranteed their employees long professional careers (lifelong careers) with the possibility
of continuous further training and internal professional advancement. More than other sectors the
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financial services sector was characterised by its internal vocational training and promotion pos-
sibilities.
The Labour Force Survey statistics shows an important proportion of “senior and management
officers” who only have a relatively low initial qualification level. This corresponds with this tradi-
tion.
In view of important changes in this sector and the
need to increase the general skills level, big com-
panies in the sector have resorted to permanent
training in all Western European countries. The
technological changes, product innovations,
changes in the customer relations, the changes in
the distribution channels and now the need to
rebuild confidence with the clients make the com-
panies in this sector the most active regarding
internal training of their employees.
The European CVTS (“Continuing Vocational
Training Survey”) study coordinated by EURO-
STAT for the whole economy and carried out in
1993, 1999 and 2005, proved that the practices of
the European companies became more and more
similar.
The financial service sector, which mainly consists of large companies, is in line with the tenden-
cies described. Companies in Austria, Germany, Denmark, Estonia, the Netherlands, the United
Kingdom, France, Sweden, Luxembourg and the Czech Republic are active in the field of further
training of their employees, be it in the form of training courses or in less classical training meth-
ods (“on the job learning”) like in the United Kingdom.
In contrast, Bulgaria, Hungary, Poland, Lithuania and Greece are less orientated towards training
their employees. Only 16% of their employees are trained once a year. The other European coun-
tries are in between these two groups.
The German example of BVR (Bundesverband Raiffeisenbanken – National Association of Ger-
man Co-operative Banks) shows a strong investment in permanent training. The German co-
operative institute provide banking training from a medium level to university level as well as initial
vocational training and further training. These institutes also provide training for social compe-
tence, relational competence and communication skills. 90% of the employees of the German co-
operative banks benefits from this training.
In addition to this, most of the big German companies in the sector have their own “internal
schools” (for example the insurance group Allianz, interview with Dr Daniel DIRKS, Executive VP
Group HR). The German insurance industry provides a network of organisations for vocational
training (BWV). The network offers services to over 400 German members of the association. In
2007, the German insurance industry spent an average of 1,300 euros per employee on voca-
tional training.
Similarly in France, 80% of employees in the banking sector receive annual training. Continuous
professional training represents 4.2% of the total wages in all companies. (Source: Association
Française des Banques, rapport d'Activité 2007.) For the French insurance sector 87% of em-
ployees receive training every year and the investment of companies in training represents 5.4%
of the total wages.
The Swedish group SEB (Scandinavian Enskilda Banken) has also a highly developed further
training policy: managers can continue their studies and pass a MBA or a PhD (which is financed
by the company); "training budget is decided every year and there is an unwritten rule that each
employee has to participate in two seminars a year. Training budget is stable". This interview
proves that the Swedish model of the “teaching enterprise” was “exported” to Lithuania. This
Expert panel views
There was consensus among the expert panel
participants that training is the key to future develop-
ment in the financial sector. The long-term re-
orientation as well as ethic change has to be com-
municated by the training system. Training should be
improved at all levels of formal training. Diversity will
be important as well as standards and certification.
A strong debate emerged about financing vocational
training: the responsibility of company is to maintain
employable staff while the responsibility of the
employee is to continuously update their compe-
tences and sense of ethics and responsibility.
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practice has not always been the case in the New Member States and further training will strongly
need to be developed.
In Italy the BNL (Banca Nazionale di Lavoro), bought by the BNP-Paribas group, has, since 2007,
raised the number of training hours for its employees up to a yearly average of seven days per
employee.
In Poland the Polish Association for Insurance and re-insurance brokers provides training pro-
grammes according to BIPAR propositions (interview with the Lithuanian Central Credit Union). It
offers training programmes for its members in order to ensure they have the required qualifica-
tions that consist of regular training about IT , accounting, internal control, risk management, time
management, planning etc., and it often participates in European projects.
7.5. Relocation
In general the relocation of certain activities – call centres, administrative services, IT services –
are not an answer to the lack of competencies, but it represents more of an answer for productiv-
ity problems and cost problems (UK with the examples of AVIVA, a large group of insurers, the
banking group HSBC which relocated some units in India, and the example of France with the
AXA insurance group creating new platforms and new services in Morocco).
From experts’ and human resource officers’ point of view, relocation will not concern a large part
of employees in the financial service sector, except if they adopt the low cost business model.
8. Implications for education and training
8.1. Implications for the initial vocational training system
8.1.1. Two different training streams for occupations in the financial services
The increasingly strict separation of purely financial activities (investment and business banking,
corporate banking, assets management, operations on the global capital market) and the sales
services for financial products (retail banking, savings for households and professionals, retail
banking for SMEs, life insurance products, non-life insurance products) leads to two very different
training schemes:
• On one hand, the personnel for financial “retail” activities are recruited at a minimum of
mostly university entrance qualification level + 2 to 3 years. They could be trained in voca-
tional schools and institutions linked to the professions, or in the context of the dual voca-
tional training system, which does not necessarily require university entrance qualification
level (Germany, Nordic countries). They could also be recruited when they graduate from
university and then get a first period of training in the company (for example, the Italian group
UNICREDIT has installed a training course in cooperation with a university institute, the UTU
Technical School, to train new employees).
• On the other hand, the personnel in the core financial activities (who represent about 10% of
the employees in the sector) will always only be recruited with a tertiary education degree (at
least 5 years of study) from business schools, university management departments or some-
times from engineering schools. The high level of knowledge in mathematics, economic the-
ory and IT, which is standard in these institutions, is increasingly appreciated in the financial
activities. This level of knowledge is considered a plus for the profession of an actuary, for
prognostic tasks and forecasting models, for traders and of course for statistical tasks. Euro-
pean universities and business schools have now adopted the American curricula and now
the decision makers in the business banking sector consider the training received in Europe,
including the New Member States, as being of very good quality.
Despite the fact that universities, business schools and engineering schools regularly have an
exchange with the companies in the banking sector, competition among the young high gradu-
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ates for their first job is very strong. As an example, the Frankfurt School of Finance and Man-
agement is a foundation in which all the big German banks are involved (see Interview with Dr
Thomas Heimer). The recruitment offices point out that when leaving these higher training institu-
tions the three most attractive sectors are banks, auditing and consulting companies and IT ser-
vice companies.
8.1.2. The increasing need for graduates with higher education
All the scenarios show an increasing need for graduates with higher education and this holds true
for all countries to replace some of the people leaving for retirement and to develop new activi-
ties.
In the New Member States of the European Union, the distinction between the two models of
initial vocational training is, and will be, less strict because, as we saw in Chapter 3 (mapping the
employment in the sector), the employees in the financial services sector generally have a higher
university degree compared to countries in Western Europe.
This means that in the future the competition to hire young graduates when they leave vocational
schools and universities will be much stronger. The interviewed companies in the New Member
States point out that they already have a shortage of qualified labour.
It cannot be excluded that the companies in these countries have to change their recruitment
policy and hire new staff at a lower educational level (2 years of post secondary studies instead of
5) and then develop the professional competence and the qualification level of their employees.
In addition to this, the employment of workers in positions for which the employee is overqualified
can be a reason for dissatisfaction and create problems concerning the human resource man-
agement. Without any doubt a significant part of the high rate of job turnover (yearly about 25% in
the countries covered in this study – Romania, Poland and Lithuania) is due to this reason.
Germany represents a specific situation in this respect: a high number of employees in the finan-
cial services sector are “medium qualified” employees who are recruited and qualified in the sys-
tem of vocational training also often called the “dual vocational training system” (see the Tables
on the structure of employment and on the education attainment). But today this form of training
is sometimes criticised and in order to meet the needs of a high qualification level, this system
has to change in the coming years. In the opinion of experts, the presence of this high number of
“middle skilled” employees seems to be one reason for the relative delay of German banks con-
cerning their modernisation. Also, the Head of the Faculty for Finance and Management of the
Frankfurt School of Finance and Management stated that "our school tries to overcome the Ger-
man separation between non-graduate and graduate vocational training, and to make careers
more conductive and flexible. The number of intermediaries’ skills will decline substantially in
favour of highly trained specialists" (Interview with Dr Thomas Heimer).
As for the BVR representatives, they think that the system has to be improved, but successfully
serves trainees and co-operative banks alike. It can be the basis for further development, and
university level courses and degrees can be obtained after successful completion of the voca-
tional training.
8.1.3. Developing new apprenticeship systems
Similarly, companies have to review their recruitment policy; many training experts in the sector
think that the training through apprenticeships should be developed in many countries.
This is the case in France and Belgium where the number of apprentices – at all educational
levels – is continuously increasing.
This is also the case in the United Kingdom were the FSSC (Financial Services Skills Council)
states that "to often employers report an escalating shortage of work-ready young talents". In
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different regions of the UK, in 2008 the FSSC developed new forms of apprenticeships (espe-
cially in Scotland and Wales). This was a response to the skills gap which can be observed in
many regions in the country.
8.1.4. The controversial question on how to recruit and train the sales force
While the whole service sector is developing towards a strong demand for graduates with post
secondary degrees, human resource managers in the sector ask themselves what are the skills
which are really needed for the employees in the sales sector.
Firstly, we can state that the companies use the term “salesmen and sales women” to describe
any employee working in direct contact with the client: for example a "customer consultant” who
answers all questions asked in an agency. But the characteristics of a good “salesman” corre-
spond to clearly defined skills: understanding the needs of the customer, conviction, persuasive-
ness, the ability to build confidence. Those who are responsible in the company have understood
that high graduates are not necessarily good salesmen (ING Direct, UNICREDIT, confirmed by
the training managers: Dr Thomas HEIMER, Gabriella TUDOR, director of the Romanian Banking
Institute), and are asking for changes in the recruitment policy: "we have a change in favour of
less skilled sales-workers" (Dr Heimer).
"For customer advisers, we are looking for skills profiles as acquired in mass distribution and
travel agencies", declared the head of human resource management of the French bank Credit
du Nord. (Le Monde, 11.09.07).
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8.1.5. Focus on the New Member States
While in the Western European states a shortage of employees is only observed in the financial
sector, in most New Member States there are general recruitment problems linked to the neces-
sity to develop the sector despite the crisis.
Also in Romania, the managers of Bancpost (Valentin Pauna, Country HR Director and Mihaela
Mindristeanu, Head of training) claim that the education system only provides 30% to 40% of the
labour needs. The number of students studying courses which will prepare them for banking
occupations is not sufficient and there is a need to raise the student numbers in the future.
Hired employees come from different study courses (university entrance level plus 3 to 4 years of
university studies) and then have to be trained when they start their banking career. Bancpost
has established an obviously insufficient two week training module on financial products and
customer relations, the newly recruited are then tested and trained on the job.
In the case of Romania it is the entire further training system which needs to be improved: "We
could be innovative in our approach to training. I want to build a complex programme in order to
provide each employee with specific training for her/his post" (Gabriela Tudor, Head of the Ro-
manian Banking Institute).
To summarise:
• Increasing demand for graduates with higher tertiary education in all countries: no risk of
labour shortage in the western countries but problems in the New Member States.
• A need for more high level study courses for the financial services in the New Member
States including their modernisation and their orientation towards financial services. Other-
wise, the development of financial services consultancies for individuals and companies will
be hampered.
• A need for a first phase of “professionalisation” of the work force (if there is no dual voca-
tional system).
• A need for "salesmen and sales women" with a lower qualification level but with social com-
petencies, communication skills and sense of responsibility.
8.1.6. The skills needs of intermediaries (insurance agents and brokers)
The intermediaries dispose of a more differentiated initial education and training profiles.
This sector is dominated by SMEs – often with 1 to 4 employees – where experience counts for
more than a diploma. However, a need for more qualifications is also visible in this sector: for the
past few years a qualification level corresponding to university entrance qualification plus 2 years
of training is required at European level to open an office. However, the European regulation also
allows for some years of professional experience in this sector as an equivalent qualification.
Like in the other sub-sectors both the managers and the employees in the SMEs increasingly
need a double competence: on one hand knowledge about and experience with different financial
products, yet on the other hand they have to be competent in IT applications. Insofar as the dis-
tribution of financial products is developing in the direction of “multi channel” contacts with the
clients, the training for banking jobs and for insurances and brokers must be very specific and
combine the knowledge of financial products and IT skills. This is the reason why the initial edu-
cation for jobs in the financial services sector has to be specific and designed in close coopera-
tion with the professionals of the sector.
As an example, in Poland the Polish Association for Insurance and reinsurance brokers, set up a
“ continuing professional education” taking into account the numerous and variety of insurance
products, the fields of law, and the need of responsibility.
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8.2. The new needs for further training and lifelong learning
8.2.1. Structural training needs in the New Member States
We could observe that the big companies in the Western European States are very engaged in
the training of their employees, but so far in the New Member States this engagement is not
sufficient.
Different professional education institutions are aware of this problem and try to use European
programmes to solve it (FSE, Leonardo etc.). However, it is necessary to encourage the creation
of new private organisations and institutions offering education and training.
Moreover, in these countries especially the subsidiaries which are not encouraged by their hold-
ings to invest more in further training have to make an effort.
In the upcoming years, companies and training institutions in the New Member States have to
make a big effort to develop their further training structures to respond to the new skills needs.
As long as the initial training structures do not respond to the needs of the sector and do not train
enough graduates specialised in financial services, recruitment is more open to graduates from
all disciplines. If the further training efforts fail in closing the knowledge gap, the quality and effi-
ciency of the services could suffer and so weaken the whole sector. Moreover, this could lead to
an increasing importance of low cost structures, characterised also by lower job stability.
It is well known that the EU member states would need to more than double their investments per
tertiary-level student to match the spending level in the US. Since the adoption of the Lisbon
strategy, public investment in education and training as a percentage of GDP has grown signifi-
cantly and is comparable with the US level (and higher than in Japan). However, rates of private
investment in educational and training institutions are modest in most Members States compared
to the leading countries in the world (European Social Fund support to education and training
2007-2013).
The need of intermediaries for further training deserves special attention. In most markets the
training infrastructures for intermediaries is well developed and continues to be enhanced further.
New regulation imposes the minimum qualification, and the development of the distribution meth-
ods of the financial and insurance products force intermediaries to focus more on tailored consult-
ing functions for the clients. Consequently, they will have to continue and acquire these skills
where not yet done.
8.2.2. Training needs in the context of structural changes and crisis
Beyond the need of permanently updating the content of further training (new technologies, new
products, new competitive environment, new regulation instruments, new customer relations etc.),
the fundamental changes and the impact of the crisis in the sector will also completely change
jobs. One major change concerns the diminution of the administrative back office jobs and the
rise of front office jobs, which are in direct customer contact.
Since the 1990s (and since 2000 in some countries such as Italy, Greece, Spain and Portugal),
companies have already had to face the changes in this business. Two possible strategies have
been developed:
• external recruitment from outside the company, new people with new skills for new jobs
• organising internal redeployments and, with the help of large training programmes, internal con-
version programmes
The first strategy has often been used in the case of setting up call centres or telephone plat-
forms: “tele-consultants” have been recruited in the external labour market (UK, France, Germany
where a different collective agreement was negotiated). In this case, the skills level of the existing
staff rose only slightly.
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The second strategy was widely used by the Swedish banks at the beginning of the 1990s when
they faced a big restructuring crisis. A special fund (the labour fund) managed by the social part-
ners was created for the banks as well as the insurance companies. The aim of these funds was
to support the conversion process with further training. In some cases the conversion to other
sectors was also supported. More recently, Swedish banks facing the financial crisis and job
cutting plans are not hesitating to propose jobs in public agencies such as the Finance Inspection
Agency and the Agency for Endebtment.
In the United Kingdom, some companies have negotiated with trade unions (especially the Union
BIFU ) and the "staff associations" partnership agreements to favour internal staff mobility and
therefore provide the required training at company level (or at the sector level in the case of Swe-
den). One can find similar examples in the Netherlands and in Belgium.
The Belgium group KBC (Kredit Bank Central) – shareholder of Warta in Poland - has established
a huge retraining programme: "As a result of the centralisation process for administrative opera-
tions, people from back offices (administrative staff) were transferred to headquarters and sales
functions" (Anna Bugalska, HR and Development Director of Warta, Warsaw).
The Western European financial groups which developed their business in the New Member
States are using the same practises regarding personnel management: as in the Swedish group
SEB (Scandinavian Enskilda Banken) in Lithuania, "the back office was reduced by the process
of centralisation (five years ago there was a back office in each branch) and administrative staff
were "changed" into sales forces". In some cases the structural changes even have a “cross-
border” effect: SEB has restructured its Riga office in a way that it is now working for the 3 north-
ern states.
9. Main recommendations
While European governments are actually combating for the survival of the financial system, this
report develops a longer perspective which goes beyond the present turbulences. Our recom-
mendations for human resource related policies for the European financial sector suggest a long-
term strategy for skills and competences which is able to reduce the risks of such a crisis happen-
ing again.
We are convinced that human resource policies play a pivotal role in the reform of the financial
systems. The financial sector was obviously unable to establish a sustainable business model
and assess risks correctly. This is not only a matter of management and business regulation but it
also depends on the deep understanding of the functioning of financial markets. Employment-
related policies should therefore address the need for adequate training and increased R&D
investments in this sector. Two priorities emerge in this context:
• Training policies should be reoriented towards the economics of capital markets, the princi-
ples of decent client consultation, controlling and risk assessment. Governments should take
initiatives to implement these new types of training in the financial business sector.
• As the tools of risk assessment failed to indicate long-term risks, R&D programmes should
be launched to improve these instruments. Controlling principles should be reappraised in
order to develop strategic controlling.
Human capital appears as the key to restructuring in this sector, and public institutions can raise
the pressure on the financial sector to develop a sustainable business model. Education and
training is one way to proceed along that route.
The following Section develops our recommendations under six headings:
• Reform of the financial system
• Employment and human resource policies
• Skills adjustment
• Equal opportunities
• Regional policies
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• Knowledge of skills
The recommendations are addressed to different policy actors at European, national and regional
levels. Moreover, companies and social partners are included (Table 37).
Table 37 List of recommendations
Topic 1: Reform of the financial system
EU
• make European regulatory systems more efficient
• maintain and develop a pluralistic financial sector
• develop a supervision culture in Europe
• protect customers and investors by introducing more rigorous liability rules
National authorities
• participate in international regulation of financial markets
• reinforce national regulations
• improve market transparency and obligatory client information
• reform bonus systems and top management remuneration
Companies
• rebuild trust with clients
• develop self-controlling and reinforce the middle office function
• promote transparency and provide liable information to customers
• reform bonus payments and top management remuneration
Topic 2: Employment and human resource policies
EU
• prevent high replacement demand
• contribute to human resource investment
• support active ageing policies
• support good practices in restructuring
National authorities
• contribute to human resource investment
• support active ageing policies
• support good practices in restructuring
Companies
• preserve the knowledge base
• refuse early retirement schemes
• set up good HR practices and career path developments to struggle against turnover
and attract newcomers in the sector
• build mobility solutions within the sector instead of lay-offs
Social partners
• support HR policies without early retirement and an effective ageing policy, new
career paths
• promote agreements about employment, restructuring, ageing policies
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Table 37 continued
Topic 3: Skills adjustment
EU
• reinforce new competence standards to promote sustainable business models
• promote R&D in financial services in the areas of risk assessment and strategic
controlling
National authorities
• promote the introduction of sustainable business models by improved training stan-
dards
• reinforce training institutions in the sector
• promote R&D in financial services in the areas of risk assessment and strategic
controlling
• raise training standards for intermediaries
• support cooperation between companies and training institutions
Companies
• develop lifelong learning
• develop middle office apprenticeship training and trainee periods for newcomers
• develop finance related ICT knowledge
• adapt labour force to the principles of sustainable finance
• invest into R&D in the areas of risk assessment and strategic controlling
Social partners
• reinforce involvement in training issues
Topic 4: Equal opportunities
EU
• encourage female students towards scientific studies and IT courses
National authorities
• encourage female students towards scientific studies and IT courses
Companies
• promote women in management positions
• improve the proportion of women in IT-jobs
Social partners
• support and negotiate agreements about equal treatment of men and women
Topic 5: Regional policies
Regional authorities
• support decentralised banking and insurance services
• attract innovative capacities
• develop regional centres for supportive services
• address restructuring in financial services and void risks of high specialisation in a
single sector
Social partners
• address employment issues at the local level
Topic 6: Knowledge about skills
EU
• develop a monitoring activity for employment and skills in the sector
• improve the European classification and statistics so they are more relevant for the
services sector (ISCO, ISCED)
National authorities
• support prospective sector studies
Regional authorities
• support prospective sector studies
Companies
• support skills monitoring
• present regular and transparent information
Social partners
• develop social dialogues for employment, skills and training needs
• promote a common understanding of the sector and develop a strategic view
Source: DKRC/Economix
9.1. Reform of the financial system
The only possible way of ensuring a sustainable development of Europe’s financial sector is by
reforming financial services. This appears to be an indispensable precondition to re-establish the
strength, dynamics and future development of this business and to safeguard workplaces in face
of the present systemic crisis. Even though this is not the theme of this report, we will briefly
indicate the principles of this reform:
• Making the European regulatory system on financial markets more efficient, and if possible im-
proving worldwide regulation: We can keep in mind some of the conclusions of the OECD Eco-
nomical Outlook (2008): “Reform of financial market supervision and regulation is clearly neces-
sary to build a more resilient financial system. Our efforts need to be focussed on identifying the
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markets imperfections that gave rise to the incentives for excess risk taking and high leverage, as
well as the regulatory failures that together cause this unprecedented financial crisis. This will in-
volve strengthening and streamlining the prudential oversight of financial and capital market and
plugging the gaps in regulatory regimes. It also requires enhancing transparency of market in-
struments, transactions and the governance rules that determine corporate incentives and deci-
sions. The tendency for pro-cyclicality of financial markets (fair value rules) and macroeconomic
policies also has to be corrected and ideally reversed.” (Klaus Schmidt-Hebbel, OECD Economic
Outlook, November 2008).
• Moving towards more transparency and better information for the clients: the present crisis leads
to a wide lack of confidence. Confidence in global financial institutions and markets has been
badly shaken. It will take a long time to rebuild this relation with customers and citizens. Restor-
ing confidence is one of the major tasks and the financial services staff will have a role in achiev-
ing this task. This can hardly be done without raising the liabilities of financial consultants and rat-
ing agencies.
• Developing a pluralistic financial system: Europe is a pluralistic society and economy. For the
financial services sector this means developing different types of financial institutions: private
banks and insurance companies, co-operative banks and mutual insurance companies, savings
banks, local public financial institutions. This development should be conciliated with the need for
improved capital strength, also through consolidation of the industry in Europe. This should be
complemented with efforts to build a single European market for financial services and creating a
real European supervisor.
• Creating a European culture of supervision. Rating agencies are under heavy criticism, notably
for having made errors of judgement in rating structured products. One of the reasons is that they
have been paid by the issuers of the financial tools rather than financial investors. The other rea-
son is the weak liability rules. They must be scrutinised by international regulators and public au-
thorities, and they must be made liable for their judgements.
• Protect customers and investors: there is a wide range of guarantee regulations for physical
products. Consulting services, however, can be provided without such commitments. As consult-
ing is a core element of financial services, traceability of services has to be improved and liabili-
ties of service providers raised.
• Reform bonus systems and top management remuneration: extraordinary incomes from invest-
ment banking are seen as one of the major reasons for the development of the financial bubbles.
Moreover, top management remuneration often does not include adequate malus components.
This needs to be changed in order to reflect long-term risks in remuneration systems.
9.2. Employment and human resource policies
Prevent high replacement demand with human resource investments
Regardless which scenario will become a reality by 2015, the number of employees in the sector
will certainly decrease in Europe. However, the population pyramid clearly shows that there is a
significant need for replacing retiring employees. In some cases, as in the UK and the NM10, the
need for recruitments also stems from high labour turnover.
Support active ageing policies
Companies will have to keep employees in their jobs for longer as national retirement regulations
are changing. This also represents an important instrument to avoid possible skill gaps. This can
happen in the following way:
• Abandon the possibilities for early retirement even when the crisis obliges to reduce staff.
• Develop special training programmes for seniors and make sure that permanent further training
programmes in the companies are also open for them.
• Establish lifelong career paths and management schemes.
• Reorient employees towards second careers within the company in either customer or service
oriented functions.
All these measures have to be prepared and negotiated with the representatives of the employ-
ees in the company and at sector level.
Support good practices of restructuring
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The restructuring process will become more severe in the course of the financial crisis. It will
therefore be important that the restructuring of the financial services will not simply be left to
market forces. Governments will have to support the emergence of a sustainable financial busi-
ness. They should promote pluralistic business models, safeguard competition among service
providers and support innovation. Public accountability of the financial system will have to be
reinforced.
9.3. Skills adjustment
Reinforce new competence standards to promote sustainable business models
The introduction of new competence standards is crucially important for rebuilding trust and con-
fidence. This is not only addressed to sales and consulting staff but reaches most if not all func-
tions: risk assessment, controlling, management. External and internal training should be com-
plemented with ethical standards and the principles of trust-based client relations. Training poli-
cies should be reoriented towards the economics of capital markets, the principles of decent
client consultation, controlling and risk assessment. Governments should take initiatives to im-
plement such new types of training in the financial business sector.
The European level can be useful for exchanging experiences and building partnerships. In this
context, the EBTN example is interesting: a network of banks for education and training with the
first concrete results in 2008 – the creation of a European Accreditation and Certification of
knowledge and competences.
Support R&D in financial services
As the tools of risk assessment failed to indicate long-term risks, R&D programmes should be
launched to improve these instruments. The application of approved risk assessment tools
should be mandatory. In all the companies self-control must be reinforced.
A second focus for R&D should be put on controlling principles. As controlling practices appear
to be inefficient for assessing strategic targets adequately, new methods should be reappraised
in order to develop strategic controlling.
Create sufficient training capacities
As skills requirements are increasing, companies will increasingly appeal for graduates with a
tertiary education. In some countries the number of graduates in study areas of “business”, “fi-
nance”, “banking management” and “insurance techniques” is not sufficient because these stud-
ies also have to supply graduates to other sectors. It is necessary that professional organisations,
decision makers in the education and training system and social partners are very attentive in this
respect and that they ensure that developments are monitored regularly. In the New Member
States it is necessary to strengthen study courses in universities and encourage the creation of
new training institutions.
Develop the middle office with apprenticeship training
It may also be important that social partners at sector level and companies take more initiatives to
develop apprenticeship training in financial services. In countries which apply apprenticeship
training this proved to be an efficient instrument for raising skills and competences at the inter-
mediate level. Moreover, internal training to professionalize young graduates coming from other
study courses will be important to improve their efficiency at intermediate functions.
Develop finance related ICT knowledge
In all countries the professions related to the financial services are directly connected to the de-
velopment of information and communication technology (ICT): these are the professions with
twofold competencies. That is the reason why all study courses for financial professions have ICT
training modules integrated. The function of ICT within the sector is of strategic importance: the
number of ICT employees and the required skills level is constantly growing: for these jobs there
are worries of shortages all the more so as the recruiting companies are in competition with the IT
companies or IT supplier companies. There will be a convergence concerning future employment
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 122
FINAL REPORT, 9 JUNE 2009
developments in the IT function of the financial sector and the sectors directly devoted to the IT
industry.
Raise training standards for intermediaries
The occupations executed in the sub-sector of the intermediates need a certified financial exper-
tise and entrepreneurial skills: this can represent opportunities for younger applicants with some
years of experience in the sector or the possibility of second careers. These occupations should
be better known and recognised in all countries.
A high level of financial specialisation continues to be required for a number of jobs for financial
activities and for all wholesale banking activities: the preparation for these specialisations re-
quires co-operation between higher education, research institutes and the companies in the sec-
tor. These networks should be developed in all countries where they do not exist yet.
9.4. Equal opportunities
In all the sectors there is a strong presence of female employment, and their share in employ-
ment is growing. In the New Member States female employment is even more important both in
absolute numbers and as regards their shares in management positions. But this is not the case
in all countries, yet. Spain and Italy are marked by substantial backwardness in this respect,
Moreover the jobs in IT functions still remain strongly male dominated. Programmes should there-
fore be engaged to open up the frontiers.
This should be done by encouraging female students to participate in IT courses and promote
women in management positions
The search for job equality for men and women still remains a strong need in many countries and
a demand of many trade unions. Social partners should therefore continue to emphasise this
point by negotiating equal treatment of men and women.
9.5. Regional aspects
The problems of regional developments are not decisive for the financial sector. However, the
following needs have to be considered:
• It is important to ensure a more balanced regional redistribution of the capacity for innovation,
which is currently strongly concentrated on agglomerations. This issue also concerns the divi-
sion of capacities between the MS15 and NMS.
• According to the scenarios, the development of client relations based on telephone and inter-
net, particularly in the case of a low-cost scenario, could lead to centralised processing in big
administrative units and call centres. Suburban regions should develop as regional centres for
supportive services. This might work if cost differentials are used in combination with upgrad-
ing skills.
• For rural areas, the persistence of semi-public or mutual banks will remain important. Area-
wide networks of local insurance agencies and banking branches in proximity with the client
will remain important if a sustainable finance strategy is implemented. The other scenarios,
however, will deprive numerous rural areas of financial services. The extension of internet ser-
vices and the privatisation of postal banks could reinforce such developments. More than in
the past, the territorial presence of financial services in link with the ageing population will be
important.
9.6. Developing knowledge of skills in the financial sector
The work conducted in this skills scenario study showed the importance of a profound knowledge
of evolutions in different functions, occupations, professions and skills. This knowledge needs to
be developed at different levels:
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 123
FINAL REPORT, 9 JUNE 2009
• At the European level, the introduction of sector-related monitoring systems in the area of
employment, skills and competences will be important. Common statistical standards and
harmonised statistics covering the entire financial services would be very much welcomed.
• A revision of ISCO and ISCED classifications could be thought of to take the specificities of
the services sector into account. In particular, occupational data should be classified by
multi-dimensional data, allowing to describe occupational tasks in more detail and make
them comparable across countries.
• There is a need to improve statistics on intermediaries.
• The work tools for obtaining sector-based analysis and prospects of future developments
should also be promoted at member state level. For the time being they are not developed in
the new members states in particular.
• The tools for the anticipation of change should be developed within the social dialogue.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 124
FINAL REPORT, 9 JUNE 2009
Literature
Aglietta, Michel (2007) : Vingt ans de mutations, in: La guerre mondiale des banques - Le Cercle des Economistes.
Aglietta, Michel, Pastré, de Boissieu (2006): La nouvelle économie bancaire, Economica.
Annendale-Massa D., Kaisergruber D. (1998): Banques et assurances en Europe: les enjeux sociaux d'un bouleverse-
ment, Cahiers du Groupe Bernard Brunhes.
Blommenstein H., Jeffers E., Pontbriand (de) G., Pastre O. (2005): La nouvelle économie bancaire, Economica.
Bureau of labor statisitics (2008): Career Guide to Industries.
www.bls.gov
Cazes S., Nesperova A. (2003): Labour markets in transition, Balancing flexibility and security in Central and Eastern
Europe, ILO.
CEDEFOP (2008): Skills needs for the future.
Centre d’études et de recherches sur les qualifications (2002) : Le CREDIT AGRICOLE acteur de ses mutations, Contrat
d'études prévisionnelles.
Colombeaux B., Saidane D., Cheynel H. (2007) :, Les métiers de front office de la Banque de financement et d'investis-
sement.
Comité Européen des Assurances (CEA) (2007) : Insurers in Europe, Statistics n° 31.
Cooper George (2008): The origin of the financial crisis, Credit bubbles and the Efficient Market fallacy, Petersfield,
Harriman House.
EACB (2006): Annual Report.
EBF, ESBG, EACB and UNI-Europa Finance (2007): Study on demography in the sector.
EBF Outlook n°28, (Dec. 2008): End-year Economic Outlook on the Euro area 2008-2009.
EBTN (European Banking and Financial services Association for Training) (November 2007): Internationalisation in retail
financial services. "New jobs, new skills, new organisations",. Paris.
EurActive.com, EU News (2006): Policy Positions and EU actors on line, Politique de l'UE dans le domaine des services
financiers pour la période 2005-2010.
EUROFI, Financial Services in Europe (2008): The 2008 Eurofi Conference Nice, 11 and 12 September 2008
EUROFOUND (2003): Sectore futures, Policies, issues and the future of financial services.
EUROFOUND (2003): Sector futures, Shaping the future of financial services.
European Association of Co-Operative Banks (ACB) (2005): Co-operative Banks on White Paper on Financial Services.
European Banking Federation (EBF) (2007): General statistics on the European Banking sector.
European Commission: DG Market, Financial Services Policy, 2005-2010.
European Commission: Green Paper, Financial Services Policy 2005-2010
European Commission (2009): Interim Forecast, 19 January 2009.
European Commission (2008): European Employment Observatory.
European Commission (2007): Commission staff Working document, Sector Inquiry under Article 17 of regulation (EC) N)
1/2003 on business Insurance (Final report).
European Commission (2005): Recent developments in the European Sectoral Social Dialogue.
European Federation of Intermediaries (BIPAR) (2007): Insurance mediation at the EU level.
Financial Stability Forum (April 2008): Report on the financial stability Forum on enhancing Market and Institutional Resil-
ience.
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Financial Services (2008): Overview, Prospects.ac.uk.
Financial Services Skills Council (FSSC)/ Oxford Research/ERM (2007): The view from Europe: productivity and change
in UK financial services.
Financial Services Skills Council (FSSC) (2004): UK - Futures skills, Scotland.
French Government (2007): Conseil d'analyse stratégique, Les métiers en 2015. www.travail.gouv.fr
IMF (International Monetary Fund) (2009): Global Financial Stability Report.
IMF (2009): World Economic Outlook.
IMF (2008): Global Economic Report, November.
IMF (International Monetary Fund) (November 2008): Global financial Stability Report.
IMF (International Monetary Fund) (October 2008): World Economic Outlook.
ISFOL (2008): Fabbisogni Professionali Online.
Japanese Bankers Association (2008): Changing banking industry.
Kaisergruber D. ed. (Bernard Brunhes Consultants, Tavistock Institute, SOFI) (1998) : Impact sur l'emploi des change-
ments structurels affectant les services financiers, analyse et réponses syndicales, Commission Européenne, Em-
ploi et Affaires sociales.
Mistral Jacques (2008) : La troisième revolution américaine, Perrin, Paris.
Observatoire de l’évolution des métiers de l’assurance (2008) : Quels métiers demain?, Paris.
Observatoire des métiers de l’assurance, Profil statistique prospectif (October 2008): « les métiers de la comptabilité et
du contrôle de gestion ».
Observatoire des métiers de l’Assurance (December 2008) : Baromètre Prospectif 2008-2012, Paris.
OECD (December 2008): Economic Outlook, n°84.
Orléan André (2003) : Le pouvoir de la finance, Ed. Odile Jacob, Paris.
Oxford Research and ERM (December 2008): A view from Europe : productivity and Change in the UK Financial Ser-
vices.
Pastre O. Ed. (2007): La guerre mondiale des banques, PUF.
Pricewaterhouse Coopers, EGFSN (“007): Expert Group on future skills needs, Dublin.
Rajan Raghuram, Gonzales Luigi (2003): Saving capitalism from the capitalists,NY Crown Business.
Roberts Paul Craig (September 30
th
2008): Financial Times.
Schmidt-Hebbel Klaus (November 2008): OECD Economic Outlook.
Stern Gary, Felman Ron (2004): Too big to fail, Washington Brookings institution Press.
UNI EUROPA Finance, EBF, ESBG and CEAP (November 2006): The impact of demography on the human resource
policies in the banking sector.
Wyman O. (2008): Co-operatives banks: customer champions.
Wyman O. (2008): State of the Financial Services Industry.
doc_457497112.pdf
The financial services make up a high-skill sector well above the standards of other industries. This, however, did not prevent the business from triggering the current world financial crisis which seems to be heading towards the worst economic depression for decades.
DG Employment, Social Affairs and Equal Opportunities
LOT 15
of
Comprehensive Analysis of Emerging Competences
and Economic Activities in the European Union
undertaken for the
European Commission
Employment, Social Affairs and Equal Opportunities DG
Unit Working Conditions, Adaptation to Change
VT/2007/090
by
Danielle Kaisergruber
Kurt Vogler-Ludwig
in cooperation with
Anna Kwiatkiewicz
Munich, 9 June 2009
Skills scenarios for the
Financial Services Sector
in the European Union
Final Report
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 2
This publication is commissioned under the European Community Programme for Employment
and Social Solidarity - PROGRESS (2007-2013).
This programme is managed by the Directorate-General for Employment, social affairs and equal
opportunities of the European Commission. It was established to financially support the imple-
mentation of the objectives of the European Union in the employment and social affairs area, as
set out in the Social Agenda, and thereby contribute to the achievement of the Lisbon Strategy
goals in these fields.
The seven-year Programme targets all stakeholders who can help shape the development of
appropriate and effective employment and social legislation and policies, across the EU-27,
EFTA-EEA and EU candidate and pre-candidate countries.
PROGRESS mission is to strengthen the EU contribution in support of Member States' commit-
ment. PROGRESS will be instrumental in:
• providing analysis and policy advice on PROGRESS policy areas;
• monitoring and reporting on the implementation of EU legislation and policies in PROGRESS
policy areas;
• promoting policy transfer, learning and support among Member States on EU objectives and
priorities; and
• relaying the views of the stakeholders and society at large
For more information see:
http://ec.europa.eu/employment_social/progress/index_en.html
The information contained in this publication does not necessarily reflect the position or opinion of
the European Commission.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 3
FINAL REPORT, 9 JUNE 2009
Contents
Executive summary ...........................................................................................................................................................11
Résumé ...............................................................................................................................................................................12
Kurzfassung .......................................................................................................................................................................13
Summary.............................................................................................................................................................................15
0. Introduction............................................................................................................................................................33
1. Mapping the sector ................................................................................................................................................33
1.1. Definition ......................................................................................................................................................... 33
1.2. Market development ....................................................................................................................................... 36
1.2.1. Banking industry.............................................................................................................................. 36
1.2.2. Insurance industry........................................................................................................................... 37
1.3. Financial services in Europe and in the rest of the world.............................................................................. 39
1.3.1. European banking industry in the world ......................................................................................... 40
1.3.2. European insurance industry in the world ...................................................................................... 40
1.3.3. Excursus: A look at the American and Japanese financial sectors ............................................... 41
1.3.4. New competitors.............................................................................................................................. 43
1.4. Employment .................................................................................................................................................... 43
1.4.1. Trends of total employment in the sector ....................................................................................... 43
1.4.2. Employment by countries................................................................................................................ 44
1.4.3. Total employment in the US............................................................................................................ 47
1.4.4. Occupational structure of workers .................................................................................................. 47
1.4.5. Employment by educational attainment ......................................................................................... 50
1.4.6. Employment by age group.............................................................................................................. 53
1.4.7. Employment by gender ................................................................................................................... 54
1.5. Excursus: review of forecasts for the sector .................................................................................................. 56
2. Main trends of change and drivers.......................................................................................................................57
2.1. Market growth in Europe ................................................................................................................................ 57
2.1.1. The impact of enlargement ............................................................................................................. 57
2.1.2. Diversification and search for new markets.................................................................................... 58
2.2. Globalisation of financial markets and international competition .................................................................. 58
2.2.1. Financial services and global market ............................................................................................. 59
2.2.2. Financial services groups are now European and global players ................................................. 60
2.3. European single market and rules ................................................................................................................. 61
2.4. Concentration in the financial services sector: mergers and acquisitions .................................................... 62
2.4.1. Competition versus "too big to fail" ................................................................................................. 62
2.4.2. Degree of consolidation in different countries and groups of countries......................................... 63
2.4.3. Relations between the three subsectors: the reality of "Bank-Insurance-Finance" ...................... 63
2.5. Technological changes................................................................................................................................... 64
2.5.1. Computer science and ICT ............................................................................................................. 64
2.5.2. ICT and customers habits............................................................................................................... 64
2.5.3. New tools for payment .................................................................................................................... 65
2.6. How financial products are delivered: the question of distribution ................................................................ 65
2.6.1. Insurance agents or brokers ........................................................................................................... 65
2.6.2. Product delivery by the insurance companies themselves ............................................................ 66
2.6.3. Product delivery by bank branches ................................................................................................ 66
2.7. SWOT Analysis............................................................................................................................................... 66
3. Emerging competences.........................................................................................................................................67
3.1. Competences for back office.......................................................................................................................... 68
3.2. Competences for the new middle office for control and financial operations................................................ 70
3.3. Competences for front office, marketing and sales related occupations ...................................................... 71
3.4. Research and development function – competences for innovation ............................................................ 72
3.5. Computer science and ICT competences...................................................................................................... 73
3.6. Competences for the management function.................................................................................................. 74
4. The financial crisis and its consequences ..........................................................................................................76
4.1. In the short run................................................................................................................................................ 78
4.2. Structural consequences for the financial services sector ............................................................................ 80
5. Scenarios for the European financial services sector........................................................................................81
5.1. Main drivers of the scenarios ......................................................................................................................... 82
5.1.1. Principal methodology..................................................................................................................... 82
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 4
FINAL REPORT, 9 JUNE 2009
5.1.2. Set of descriptors ............................................................................................................................ 82
5.1.3. Interdependence matrix .................................................................................................................. 85
5.2. The drivers ...................................................................................................................................................... 88
5.3. Three scenarios up to 2020............................................................................................................................ 89
5.3.1. Overview.......................................................................................................................................... 89
5.3.2. Scenario 1: Sustainable finance ..................................................................................................... 92
5.3.3. Scenario 2: Laissez-faire ................................................................................................................ 93
5.3.4. Scenario 3: State ownership........................................................................................................... 94
5.4. Employment effects ........................................................................................................................................ 96
5.4.1. Scenario 1: Sustainable finance ..................................................................................................... 96
5.4.2. Scenario 2: Laissez-faire ................................................................................................................ 97
5.4.3. Scenario 3: State-ownership........................................................................................................... 98
5.5. Impact on skills ............................................................................................................................................... 99
5.5.1. Scenario 1: Sustainable finance ..................................................................................................... 99
5.5.2. Scenario 2: Laissez-faire ................................................................................................................ 99
5.5.3. Scenario 3: State-ownership......................................................................................................... 100
6. Strategic impacts from the scenarios................................................................................................................101
6.1. Human resource policies in a declining industry.......................................................................................... 101
6.2. Adjustment strategies at company level ...................................................................................................... 102
6.3. Strategic choices for sector organisations, training institutions and governments ..................................... 105
6.4. Policy choices ............................................................................................................................................... 105
6.5. Critical competences .................................................................................................................................... 106
7. Human resource strategies to meet skill needs................................................................................................108
7.1. Facing the demographic challenge .............................................................................................................. 108
7.2. Hiring young people with university degrees ............................................................................................... 109
7.3. A possible answer: retrain older staff ........................................................................................................... 110
7.4. Vocational training for employees ................................................................................................................ 110
7.5. Relocation ..................................................................................................................................................... 112
8. Implications for education and training.............................................................................................................112
8.1. Implications for the initial vocational training system................................................................................... 112
8.1.1. Two different training streams for occupations in the financial services ..................................... 112
8.1.2. The increasing need for graduates with higher education........................................................... 113
8.1.3. Developing new apprenticeship systems ..................................................................................... 113
8.1.4. The controversial question on how to recruit and train the sales force ....................................... 114
8.1.5. Focus on the New Member States ............................................................................................... 115
8.1.6. The skills needs of intermediaries (insurance agents and brokers) ............................................ 115
8.2. The new needs for further training and lifelong learning ............................................................................. 116
8.2.1. Structural training needs in the New Member States................................................................... 116
8.2.2. Training needs in the context of structural changes and crisis.................................................... 116
9. Main recommendations.......................................................................................................................................117
9.1. Reform of the financial system..................................................................................................................... 119
9.2. Employment and human resource policies.................................................................................................. 120
9.3. Skills adjustment ........................................................................................................................................... 121
9.4. Equal opportunities....................................................................................................................................... 122
9.5. Regional aspects .......................................................................................................................................... 122
9.6. Developing knowledge of skills in the financial sector................................................................................. 122
Literature...........................................................................................................................................................................124
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 5
FINAL REPORT, 9 JUNE 2009
Tables
Table 1 Financial services by NACE classification 33
Table 2 Banking in Europe 37
Table 3 Non-life insurance (2006) 39
Table 4 The importance of financial markets activity 39
Table 5 Ranking of European financial groups 1990 / 2004 40
Table 6 Insurance premiums 41
Table 7 World market shares – insurance, 2006 41
Table 8 Commercial bank assets of the United States 42
Table 9 Life and non-life premiums in the United States 42
Table 10 Financial services employment by country 44
Table 11 Financial services employment shares by country 44
Table 12 Distribution of financial services employment within the EU27 45
Table 13 Division of employment by occupation 47
Table 14 Change in division of employment by occupation 48
Table 15 Employment in financial sector by education level 50
Table 16 Change in employment; financial services by level of education 51
Table 17 Employment by age group; financial services 53
Table 18 Change in employment by age group; financial services 54
Table 19 Employment by gender; financial services 55
Table 20 Change in employment by gender; financial services 55
Table 21 CEDEFOP forecast 56
Table 22 Strengths and weaknesses of EU financial services 66
Table 23 Main functions 68
Table 24 Trend changes in the volume of employment (1996-2007) 75
Table 25 New competences for occupational functions 75
Table 26 List of Descriptors 84
Table 27 Interdependence matrix 87
Table 28 Scenarios for the European financial sector up until 2020 91
Table 29 Change of occupational structures in the “sustainable finance” scenario 99
Table 30 Change of occupational structures in the “laissez-faire” scenario 100
Table 31 Change of occupational structures in the “state ownership” scenario 101
Table 32 Main adjustment strategies 103
Table 33 Adjustment measures of companies 104
Table 34 Adjustment measures of sector organisations, training institutions and governments 105
Table 35 Policy measures 106
Table 36 Critical competences 106
Table 37 List of recommendations 118
Charts
Chart 1 The different activities within the banking industry 34
Chart 2 Development of total premium income 37
Chart 3 Life premium income 38
Chart 4 Shares of financial services in total national employment 2006 46
Chart 5 Drivers 88
Chart 6 Links among drivers 89
Chart 7 Drivers and scenarios 90
Chart 8 Employment trends in the “Sustainable finance” scenario 96
Chart 9 Employment trends in the “Laissez-faire” scenario 97
Chart 10 Employment trends in the “State Ownership” scenario 98
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 6
FINAL REPORT, 9 JUNE 2009
Abbreviations
ATM Automatic Teller Machines
BIPAR European Federation of Insurance Intermediaries
CEA Comité Européen des Assurances
CEDEFOP European Centre for the Development of Vocational Training
CRM Customer Relation Management
EACB European Association of Co-operative Banks
EBF European Banking Federation
EBTN European Banking and Financial Services Training Network
ECB European Central Bank
ERP Enterprise Resources Planning
ESBG European Savings Banks Group
EMCC European Monitoring Centre of Change
EU15 Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Ireland, Luxembourg, Netherlands,
Portugal, Spain, Sweden, United kingdom
ICT Information and Communication Technologies
IFRS International Financial Reporting Standards
NMS Bulgaria, Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Romania, Slovakia,
Slovenia
NM10 NMS except Bulgaria and Romania
LFS Labour Force Survey
R&D Research and Development
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 7
FINAL REPORT, 9 JUNE 2009
Reference tables of the general methodology
Title in the general methodology Presented as: Page
Economic trends in the EU, USA and other countries Tables 6 and 7 42, 42
Output trends in the EU Table 2, Charts 2 and 3 38, 39, 39
Trade balance Not applicable
Knowledge intensity Not applicable
Employment trends in the EU Table 10 45
Employment trends by EU Member States Table 11, Chart 4 46, 48
Employment trends in vertical shares Table 12 47
Employment trends by occupation Tables 13 and 14 50, 51
Employment trends by educational level Tables 15 and 16 52, 53
Employment trends by age groups Tables 17 and 18 55, 56
Value chain Section 2.6 69 pp.
SWOT analysis Table 22 70
Main drivers of change Table 26, Charts 5, 6 and 7 87, 91, 92, 93
New critical competences by occupations Tables 25 and 36 78, 110
Main characteristics of scenarios Table 28 94
Scenarios and implications for employment Charts 8, 9 and 10 99, 100, 101
Scenarios and implications for competences and occupa-
tional profiles
Tables 29, 30 and 31 102, 103, 104
Main corporate strategies Table 33 107
Strategic choices Table 34 108
Policy measures Table 35 109
Recommendations Table 37 121
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 8
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SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 9
FINAL REPORT, 9 JUNE 2009
Acknowledgements
For this scenario study, we undertook a series of interviews in European countries, asked various
institutions for documentation and data, and discussed our results with the members of the work-
shops and the steering committee. We would like to thank all the persons for the valuable help
they provided and the time spent for this undertaking. We are also grateful for the analysis and
reactions we received after the financial turmoil of September 2008 that helped us finding our way
through a particularly intransparent terrain.
We would like to thank the European Banking Federation and the European Banking and Finan-
cial Services Training Network for giving us the opportunity to present the main findings of the
study on November 12
th
, 2008. Our thanks include the European Association of Co-Operative
Banks for inviting us to participate in their Social Commission meeting on January 12
th
, 2009, and
to the European Social Partners of the insurance sector for including us in their European Social
Dialog Committee on January 13
th
, 2009. We also want to thank the two French Employment and
Occupation Monitoring Centres for very valuable support.
Finally an experts panel meeting was organised by the European Commission on February 26
th
and 27
th
2009 in Brussels with 44 participants coming from different countries and institutions,
employers associations as well as unions and experts.
Interview partners
Ms Barbara BARENSKA (Polish Banking Association, Manager for the Human Resources Devel-
opment, Poland)
Ms Anna BUGALSKA (Kredyt Bank and Warta Insurance Human Resources Director, Poland)
Mr Sigitas BUBNYS (LKU – Lithuanian Central Credit Union CEO, Lithuania)
Mr Alfred BURKHART (BVR – National Association of German Co-operative Banks – Head of HR
development, Germany)
Ms Silvia CASSANO (UNICREDIT Head of International Industrial Relations, Italy)
Mr Henry CHEYNEL (Banking Employment and Occupations Monitoring Centre, France)
Mr Aivaras CICIELIS (SEB – Scandinavian Enskilda Banken - Head of Corporate Clients and
Institutions Department, Lithuania)
Mr Guillaume DESVIGNES (ING DIRECT Head of Human Resources, France)
Mr Sigute DINDAITE (DbN Nord Bankas Manager of Human resources Department, Lithuania)
Dr Daniel DIRKS (ALLIANZ Executive Vice President Group HR, Germany)
Mr Germain FEREC (GENERALI Human Resources Vice President, France)
Ms Katja HECHT (BVR – National Association of German Co-operative Banks – Senior Officer
HR Development, Germany)
Dr Thomas HEIMER (FRANKFURT School of finance and management Dean of the Faculty,
Germany)
Mr Stanislas IGNATOWICZ (Credit Union of Vilnius President, Lithuania)
Mr Jacek KLISZCZ (Association of Polish Insurance and Reinsurance Brokers President, Poland)
Mr Gérard LOBJEOIS (Insurance Employment and Occupations Monitoring Centre, France)
Mr Nic de MAESSCHALK (BIPAR Director, Bruxelles)
Ms Mihaela MINDRISTEANU (BANCPOST Head of training, Romania)
Mr Valentin PAUNA (BANCPOST HR Director, Romania)
Ms Gabriella TUDOR (Romanian Banking Institute Director, Romania)
Mr Fernando VOLPE (UNICREDIT, Department of Labour policies and industrial relations, Italy)
Scenario workshop participants
Mr Sigitas BUBNYS (LKU – Lithuanian Central Credit Union- CEO, Poland)
Mr Henry Cheynel (Banking Employment and occupations Monitoring Centre, France)
Mr Guillaume DESVIGNES (ING DIRECT Head of Human Resources, France)
Ms Katja HECHT (BVR – National Association of German Co-operative Banks- , Germany)
Mr Manuel HUBERT (DG Employment and Social Affairs)
Ms Joanna MIKOLAJCZAK (BPI Polska, Poland)
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 10
FINAL REPORT, 9 JUNE 2009
Ms Gabriella TUDOR (Banking Institute director, Romania)
Expert panel meeting (26
th
-27
th
February – Brussels)
Ms Gabriella ALMBERG (BIPAR)
Ms Barbara BARANSKA (Polish Bank Association)
Ms Barbara BENEDETTI (EBTN, European Banking and Financial Training Association)
Ms Marta CARVALHO (IFB, Portuguese Bank Training Association)
Mr Henry CHEYNEL (AFB, Association Française des Banques)
Mr Alberto CORRENTI (EWC, Generali Group Secretary)
Mr Guillaume DESVIGNES (ING Direct)
Mr Diarmuid BRADLEY (The Institute of Bankers in Ireland)
Mr Daniel DIRKS (Allianz SE)
Ms Mariane DISSING (FA, The Danish Employer’s Association for Financial Sector)
Mr Michael FAWCET (European Finanacial Planning Association)
Mr Michael GOLD (CEA, European Insurance and Re-insurance Federation)
Ms Birgitta HAMMARSTROM (KPA Pension)
Ms Katja HECHT (BVR, National Association of German co-operative banks))
Ms Catherine HOCK (AMICE)
Mr Renaud HUARD (MAIF)
Mr Manuel HUBERT (European Commission, DG Employment)
Mr Christian HYTTE (SECAFI-ALPHA group)
Mr Edgardo IOZIA (UILCA)
Mr Marek KUROWSKI (Polish Chamber of Insurance)
Mr Jean-François LEBRUN (European Commission, DG Employment)
Mr Gérard LOBJEOIS (Observatoire des Métiers de l’Assurance)
Mr Magnus LUNDBERG (The Confederation of the Nordi Bank, Finance and Insurance Unions)
Ms Vijenka MARKIC SIMONETI (The Bank Association of Slovenia)
Ms Bozica MATIC (European Parliament, Committee on Employement and Social Affairs)
Mr Radoslaw OWCZARZAK (Eurofound)
Mr Dominique PATY (Confédération Générale du Crédit Mutuel)
Mr Marco PERELLI (Generali Group)
Ms Sam REES-ADAMS (Financial Services Skills Council)
Mr Zdenek SIMEK (Czech Union of Banks and Insurance Companies)
Mr Josep SOLER-ALBERTI (European Financial Planning Association)
Ms Katrine SONDERGARD (UNI-EUROPA Finance)
Mr Mario SPATAFORA (EBTN, European Banking and Financial Training Association)
Mr Clemens SPOORENBERG (NIBE-SVV)
Mr Michael STEIN (Deutsche Bank AG, HR-Labour relations/Tarifpolitik)
Mr Peter SZOVICS (CEDEFOP)
Ms Gabriella TUDOR (Romanian Banking Institute)
Mr Johan VAN DEN BRANDEN (Febelfin Academy)
Mr Simon THOMSON (The Chartered Institute of Bankers in Scotland)
Mr Martin ULBRICH (European Commission,DG Employment)
Ms Sabrina WIEMENS (European Association of Co-operative Banks, EACB)
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 11
FINAL REPORT, 9 JUNE 2009
Executive summary
The financial services make up a high-skill sector well above the standards of other industries. This, how-
ever, did not prevent the business from triggering the current world financial crisis which seems to be head-
ing towards the worst economic depression for decades.
The failure of capital market liberalisation is starting to become apparent in these days of great trouble. The
financial sector was unable to establish a sustainable business model and assess the risks correctly. This is
the responsibility of management and public regulation. However, it also depends on the skills and compe-
tences of the workforce which needs a sound understanding of the financial markets and its risks. Finally,
markets were unable to correct themselves without a severe crisis – and this is the point we are at now.
The scenarios for the European financial services sector take the strategic responses to the challenges of
the financial crisis as their starting point. Three alternatives have been created:
• Scenario 1 – called “sustainable finance” – assumes that the sector will develop a completely new
business model, based on long-term investment strategies, consumer trust and high-quality consulting
services. This exerts a cultural shock to the business, as it means the reversal of profit targets, stan-
dardisation, and controlling instruments in favour of sustainability.
• Scenario 2 – called “laissez-faire” – draws less radical conclusions from the crisis, assuming the
continuation of short-term profit orientation from the past. Public control will remain weak, also due to
impediments at the international level. Standardisation of financial products will be fostered. Merger
and acquisitions will revive.
• Scenario 3 – called “state ownership” – assumes that neither government nor the big players in the
financial business will be able to keep control of the current crisis. Financial and economic turmoil will
accumulate into a wave of destructive power. This will result in a significant reduction of economic ac-
tivities for a long period, and force the financial services into an administrative role.
All scenarios are expected to cause strong employment losses in the financial sector of the European Union
at least in the near future. Later recovery depends on the strategic choices made. Moreover, the scenarios
have different impacts on competences and the occupational profiles of the workforce. In common they
expect the continuous upgrading of skills – however with different types of specialisation.
As the emergence of the financial crisis is strongly routed in competence profiles, the study recommends
employment-related policies to address the need for adequate training and increased R&D investments in
this sector. Among the comprehensive list of suggestions, two priorities emerge in this context:
• Training policies should be reoriented towards the principles of capital markets, decent client consulta-
tion, controlling and risk assessment. Governments should take initiatives to implement such new types
of training in the financial business sector.
• As the tools of risk assessment failed to indicate long-term risks, R&D programmes should be launched
to improve these instruments. Controlling principles should be reappraised in order to develop strategic
controlling.
Human capital appears to be the key to restructuring in this sector, and public institutions can raise the
pressure on the financial sector to develop a sustainable business model. Education and training is one
approach to proceed along this route.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 12
FINAL REPORT, 9 JUNE 2009
Résumé
Les services financiers représentent un secteur de niveau de qualification élevé, se situant bien au-dessus
de la moyenne des autres activités. Malgré cette caractéristique le secteur financier (bancaire surtout) est à
l’origine de la crise financière actuelle puis de la récession économique la plus importante depuis des dé-
cennies.
Cette période de grandes difficultés fait ressortir les échecs de la libéralisation totale des marchés. Le sec-
teur financier n’a pas instauré un modèle économique durable capable de prévoir les risques correctement.
C’est une question de régulation financière et de management, mais cela renvoie également à l’analyse des
marchés financiers et aux compétences présentes dans le secteur. Les marchés se sont avérés incapables
de se corriger eux-mêmes, sauf à penser que la crise est une correction. Telle est la situation actuelle.
Les scénarios d’avenir pour les services financiers européens partent des réponses stratégiques qui peu-
vent être apportées à la crise. Trois alternatives sont développées :
• Le scénario 1 – nommé « Finance durable » - propose un développement du secteur sur un modèle
complètement nouveau, basé sur des stratégies d’investissement à long terme, d’établissement de re-
lations de confiance avec les clients dans le cadre d’un service de conseil financier de qualité. C’est un
renversement culturel pour le secteur car cela signifie des objectifs de profit moindres, des produits
fiables et des outils de contrôle permettant une régulation.
• Le scénario 2 – nommé « Laissez-faire » - ne tire pas de leçons radicales de la crise et repose sur la
poursuite de l’orientation passée du secteur vers les profits de court terme. La régulation publique de-
meure faible, en partie à ca use des difficultés de coordination internationale. La standardisation des
produits devient générale, leur distribution se fait par des canaux « low cost », parfois externalisés et
les fusions-acquisitions se développent.
• Le scénario 3 – nommé « Actionnariat public » - suppose que ni les gouvernements ni les grands
acteurs du secteur n’ont été capables de juguler la crise actuelle. La tourmente financière et économi-
que est alors fortement destructrice et ne peut être stoppée que par des nationalisations. La réduction
drastique de la croissance des activités conduit les services financiers à n’avoir qu’un rôle administra-
tif.
On peut s’attendre à ce que tous les scénarios soient à l’origine de nombreuses pertes d’emplois pour le
secteur financier de l’Union européenne dans un futur proche. Les perspectives plus lointaines dépendent
des choix stratégiques. De plus, les trois scénarios ont un impact fortement différencié sur les compétences
et les profils de métiers. Néanmoins, tous les trois prévoient la nécessité d’augmenter continuellement le
niveau de qualifications avec pourtant des spécialisations différentes.
Dans la mesure où l’apparition de la crise financière est aussi liée aux types de compétences présentes
dans le secteur, l’étude recommande le développement de politiques de R&D et de formation adaptées aux
exigences de régulation et de responsabilité dans le secteur. Parmi les propositions, deux priorités ressor-
tent dans le contexte actuel:
• Les politiques de formation doivent être orientées vers la connaissance des marchés, le service et le
conseil responsable aux clients, le contrôle et la gestion du risque. Les gouvernements doivent pren-
dre des initiatives pour aller dans ce sens.
• Dans la mesure où les outils de prévision des risques ont échoué à prévoir les évolutions, des pro-
grammes de R&D devraient être lancés pour améliorer ces outils. Les principes de contrôle doivent
être réévalués dans le sens d’un management stratégique du risque.
Le capital humain apparaît comme une clé dans la réorganisation du secteur et les Pouvoirs Publics peu-
vent faire pression pour que le secteur aille dans le sens d’un développement responsable. La formation
initiale et la formation continue ont leur rôle à jouer dans cette évolution.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 13
FINAL REPORT, 9 JUNE 2009
Kurzfassung
Die Qualifikation der Beschäftigten im Finanzsektor liegt weit über den Standards anderer Wirtschaftszwei-
ge. Dies hat die Branche allerdings nicht davor bewahrt, die aktuelle weltweite Wirtschaftskrise auszulösen,
die im Begriff ist, sich zur tiefsten Depression seit Jahrzehnten zu entwickeln.
Das Scheitern der Kapitalmarktliberalisierung wird in diesen Tagen großer wirtschaftlicher Schwierigkeiten
offensichtlich. Der Finanzsektor war nicht in der Lage ein nachhaltiges Geschäftsmodell aufzubauen und die
Risiken des Marktes korrekt einzuschätzen. Dies lag in der Verantwortung von Management und staatlicher
Regulierung. Es hing aber auch von den Qualifikationen und Kompetenzen der Belegschaften ab, die ein
tiefes Verständnis der Finanzmärkte und ihrer Risiken benötigen. Auch die Märkte waren nicht in der Lage,
sich selbst zu korrigieren – außer durch eine schwere Krise. Dies ist der Punkt and dem wir jetzt angelangt
sind.
Die Szenarien für den europäischen Finanzsektor nehmen die strategischen Antworten auf die Herausforde-
rungen der Finanzkrise zum Ausgangspunkt. Drei Alternativen wurden entworfen:
• Szenario 1 – mit dem Titel „Nachhaltiges Finanzwesen“ – nimmt an, dass der Sektor ein völlig neues
Geschäftsmodell entwickeln wird, das auf langfristigen Investitionsentscheidungen, Konsumentenver-
trauen und hochwertigen Beratungsdienstleistungen beruht. Dies löst einen Kulturschock in der Bran-
che aus, da es die Abkehr von den Gewinnzielen, Standardprodukten und Kontrollmechanismen der
Vergangenheit zu Gunsten einer nachhaltigen Geschäftsentwicklung bedeutet.
• Szenario 2 – mit dem Titel „Laissez-faire“ – zieht weniger radikale Schlussfolgerungen aus der Krise
und nimmt an, dass sich die kurzfristige Gewinnorientierung der Vergangenheit fortsetzen wird. Die öf-
fentliche Kontrolle wird – auch wegen der Schwierigkeiten auf internationaler Ebene – schwach blei-
ben. Die Standardisierung der Finanzprodukte wird vorangetrieben. Unternehmenszusammenschlüsse
werden zunehmen.
• Szenario 3 – mit dem Titel „Staatseigentum“ – geht davon aus, dass weder die Regierungen noch die
großen Unternehmen der Finanzbranche in der Lage sein werden, die Finanzkrise unter Kontrolle zu
halten. Die finanziellen und wirtschaftlichen Turbulenzen werden sich zu einer zerstörerischen Welle
aufbauen und für lange Zeit einen signifikanten Rückgang der Geschäftstätigkeit bewirken. Dies wird
die Finanzdienste in eine administrative Rolle zwingen.
Alle Szenarien werden – zumindest auf die kürzere Frist – erhebliche Beschäftigungsverluste in den Finanz-
diensten der Europäischen Union mit sich ziehen. Die spätere Erholung hängt von der Wahl der strategi-
schen Antwort ab. Darüber hinaus werden die Szenarien deutliche Veränderungen in den Kompetenz- und
Qualifikationsprofilen bewirken. Gemeinsam sehen sie aber einen weiter steigenden Qualifikationsbedarf,
wenn auch mit unterschiedlicher Ausrichtung.
Da die Entstehung der Finanzkrise stark mit der Kompetenzbasis zusammenhängt, empfiehlt die Studie der
Beschäftigungspolitik, Ausbildung und Innovationen in den Fokus zu rücken. Aus der umfassenden Liste
von Empfehlungen ergeben sich zwei Prioritäten:
• Die Ausbildung sollte die Funktionsweise von Kapitalmärkten in den Vordergrund rücken, die nachhal-
tige Kundenbetreuung, das Controlling und die Risikoeinschätzung. Die Regierungen sollten die Initia-
tive ergreifen, solche Schwerpunkte für die Ausbildung im Finanzwesen zu setzen.
• Da die Instrumente der Risikoanalyse im Hinblick auf die langfristigen Risiken versagt haben, sollten
F&E-Programme zur Verbesserung der Risikoabschätzung aufgelegt werden. Das Controlling sollte zu
einem strategischen Instrument weiterentwickelt werden.
Das Humankapital ist der Schlüssel zur Umstrukturierung des Sektors, und öffentliche Institutionen können
den Druck auf den Finanzsektor erhöhen, ein nachhaltiges Geschäftsmodell zu entwickeln. Bildung und
Ausbildung sind ein Mittel, um auf diesem Weg Fortschritte zu erzielen.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 14
FINAL REPORT, 9 JUNE 2009
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 15
FINAL REPORT, 9 JUNE 2009
Summary
Taking the present world financial crisis into consideration, the endeavour to formulate skills
scenarios for the European financial services sector appears to be courageous, if not pretentious.
Little is still known about the real extent of financial risks and their potential effects on the world
economy. Nevertheless, thinking about the future of this sector is needed more than ever in such
a period of great trouble.
The scenarios, however, can hardly escape the actual uncertainties. Accepting this fact, the study
is designed as an input to the discussion about the European financial services by developing
alternative “worlds” for the future. These alternatives might become a reality under the selected
assumptions and thus strongly depend on the decisions actually taken by the actors involved –
banks and insurance companies, customers, and governments. The different pathways are then
extended by asking for the major policy options, in particular the adequate human resource poli-
cies and training policies which constitute the focus of this study.
Financial services, mainly the banks, will probably not remain the same after this crisis even if
some trends of the past are strong enough to continue in future. It is therefore particularly impor-
tant to develop a clear understanding of the numerous mechanisms of change and of the present
crisis. The first parts of the study therefore design the statistical map of the sector, identify main
trends and drivers of change, and look for emerging competences. Three alternative scenarios
are then developed on this basis up to 2020 taking the present financial crisis as a starting point
and asking for the possible structural answers to this challenge. Finally, the implications of these
alternatives on skills, education and training policies and sector-related policies are discussed
and condensed in recommendations for actors at EU level, Member States, regions and the sec-
tor itself.
Main characteristics of financial services
The European financial services sector
Financial services include three main sub-sectors:
• banking industry with retail banking and wholesale banking acting on the global financial
market
• insurance industry (life insurance, non-life products and re-insurance)
• insurance and financial intermediaries
The banking sector is pluralistic as it is
composed of private banks, co-operative
banks, and savings banks. Similarly, the
insurance industry consists of private and
mutual insurance companies. Public social
insurance is excluded.
Europe is one of the world leaders in finan-
cial services, comparable to the American
financial services industry. It is concentrated
in the main financial cities such as London,
Paris and Frankfurt. The sector remains
very diversified but some of the European
groups have become global players. In
2007, 7,345 banks with 218,000 branches were registered in the EU27 area.
Market performance of EU27 financial services
1998 2007 % change
Banking
Number of banks 2,996 7,345 145
Number of branches 103,188 218,234 111
Commercial bank assets (bn
euros)
12,517 40,403 223
Commercial bank loans (bn
euros)
6,222 17,232 177
Insurance
Premium per inhabitant
(euros)*
1,100 2,145 95
* 1996-2006
Source: EBF
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 16
FINAL REPORT, 9 JUNE 2009
The European banking market has tripled
since 1998 with regards to both assets and
loans. The insurance market showed a
similar performance with a 95 % increase of
average premiums per inhabitant between
1996 and 2006. Growth rates are close to
US developments while Asia only grew by 8
%. This is also due to the slow expansion in
Japan. New competitors should not be ig-
nored: China and India are starting to de-
velop this sector, Russia will take a serious
share in Eastern European markets, and
Australia has large financial groups which
are expected to improve the relative impor-
tance of this market place.
Employment
5.6 million persons were employed in EU27
financial services in 2007. 65% of these
worked in banks, 20% in the insurance
industry and 15% for intermediaries. The
sector represented 2.7% of total employ-
ment in Europe. This appears to be a small
share in comparison to the USA where the
sector had a share of 4.7% of total employ-
ment.
In contrast to market growth, the increase of
employment was very slow. Overall, EU27
employment only grew by 0.5% annually
between 1996 and 2006. Compared to this,
service sectors expanded employment by
3% per annum in total. The difference can
be explained by internal re-organisation and
productivity gains. Slow employment growth
was due to the creation of big players from
mergers and acquisitions. Economies of scale are very important in the sector and opened a wide
field for productivity increase. A strong impact came from ICT technologies and automation in
back office administration, increasing use of the internet, and outsourcing internal support ser-
vices.
Most of the employees were full-time workers. However, their share decreased from 90.5% in
1994 to 87.2% in 2006.
Employment expanded in a series of EU countries: Ireland, UK, Greece, Spain, France, Luxem-
bourg, Denmark, Slovenia and Sweden. Employment volumes declined in Germany, Portugal and
Finland, and were stable in Italy, Austria and Belgium. We must note that not all New Member
States publish employment figures.
The relative importance of financial services strongly differs between countries. The greatest
importance of the sector can be observed in the UK where it represents a share of 4.8% of na-
tional employment. Just behind are the Netherlands with a share of 3.9%, Germany and France
both with 3.4%. Luxembourg is a specific case with a very large financial services sector (11.9%).
It must be noted that Great Britain, Germany, France, the Netherlands, Spain and Italy together
employ 75% of the EU27 financial services workforce.
Employment in financial services by country
(‘000 persons)
0 200 400 600 800 1000 1200 1400
Estonia
Malta
Lithuania
Cyprus
Luxembourg
Slovenia
Latvia
Bulgaria
Slovakia
Finland
Czech Republic
Hungary
Sweden
Portugal
Ireland
Romania
Denmark
Greece
Austria
Belgium
Netherlands
Poland
Spain
Italy
France
Germany
United Kingdom
1996
2006
Source: Eurostat
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 17
FINAL REPORT, 9 JUNE 2009
Occupations and educational levels
Financial services make up a
sector of professionals which
employs high shares of finance
and business experts, technicians
and IT specialists. The shares
significantly exceed the propor-
tions that can be observed in the
countries’ total labour force.
Staff in the New Member States
show a bigger share of highly
skilled workers than in Western
Europe. This can be seen in all
occupational groups and can be
traced back to age structure: the
financial services sector in these
countries is younger, more highly
skilled and with more women,
even in management positions.
However, the borderlines be-
tween occupational groups of the
ISCO classification are rather
vague. Similar jobs are classified
as different groups by different
countries, depending on lan-
guage traditions and different
structures of training systems.
Therefore, occupational data
should be interpreted with great
caution.
Between 2000 and 2006, data from the Labour Force Survey shows a shift of occupational struc-
ture from medium-skilled persons to highly-skilled persons. This is visible in IT occupations, busi-
ness and finance professionals, and for the technicians and other professionals. This increasing
share of highly-skilled employees can also be observed in the recently available LFS data for
2007. The need for a highly educated and trained workforce appears to be evident in all parts of
the financial services sector and all European countries.
Division of employment by age and gender
The sector is younger in the New Member States (NM10) than in the EU15, which points out the
importance of recruiting new young graduates in the sector during the catch-up period. In all the
countries the IT occupational group is younger than the average workforce.
Nevertheless, the age distribution reveals the importance of retirement and the need of replace-
ment over the next few years. The sector-specific age structure is close to total population (ex-
cept for the UK and some of the New Member States). The countries with the highest share of
older staff are France and Germany.
Female employment is very important in the sector. It is higher in the NM10, and has increased
from 2000 to 2007. Financial services are thus becoming a female sector with the exception of IT
occupations. It is worth noting that in the New Member States women are more numerous in
senior management positions.
Main drivers of change
Change of occupational structures
Differences of percentage shares 2000-2006
-10 -5 0 5 10 15 20 25
Elementary
occupations
Craft and related trades
workers
Service workers, shop
and market sales
workers
Clerks
Professionals,
technicians and
associate professionals
Business professionals,
finance and sales
associate professionals
Computing
professionals and
computer associate
professionals
Legislators, senior
officials and managers
NM 10
EU 15
NM10: New Member States except Bulgaria and Romania
Source: Eurostat
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 18
FINAL REPORT, 9 JUNE 2009
Market growth
As indicated above the banking industry grew rapidly. Growth was strongly supported by the
enlargement of Europe, the expansion of traditional markets such as health insurance, and –
most importantly – the development of new markets in the area investment banking, private eq-
uity, and asset management. Even if the European single market is not yet a reality, common
standards for banks (Basel I and II) and insurance (Solvency I and II) have brought important
integration steps.
Drivers
Active and passive sums of descriptors
Wealth distribution
Training system
Skills structure
Self-control
Risk management
control
Retail channels
Rescue programs
Rebuilding trust
R&D knowledge
Public supervision
Product innovation
Process innovation
Outsourcing of services
Mergers & Acquisitions
LS professionals
LS administrators
Internet banking
Global capital markets
FS Value added
FS Employment
Emerging countries
Economic growth
Demography
Consumer confidence
Back office relocation
0
5
10
15
20
25
30
35
40
45
50
0 5 10 15 20 25 30 35 40 45 50
Passive Sum
A
c
t
i
v
e
S
u
m
Knowledge base
Control system
Sector organisation
Output
Markets
Source: DKRC/Economix
As a large part of the population in the New Member States is not yet “bancarised” and not cov-
ered by housing, motor or property insurance contracts, substantial growth potentials are still
available in these countries, at least in the long-run.
Globalisation
Financial services are now acting on global capital markets. Financial markets of today can be
defined as the global interconnection of all different assets: loans and inter-bank credits, real
estate, exchange rates, shares, materials etc. Global trading in these areas has experienced
tremendous growth in recent years and yielded huge profits.
It was the liberalisation of international capital markets which opened the doors for the develop-
ment of a global financial system. ICT networks have given rapid access to updated information
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 19
FINAL REPORT, 9 JUNE 2009
and have opened up the opportunity of “real-time“ trading. Even smaller banks and investors
have been in the position to manage assets on global markets. However, it has raised financial
and economic dependencies, as the present financial turmoil has revealed.
Meanwhile, global investments have become an important market segment of the sector which
has contributed substantially to overall profits of financial institutions. Capacities were redirected
towards investment banking, partly at the expense of domestic consumer markets. Supported by
a “cheap money“ monetary policy in the USA, strong leverage effects stimulated the expansion of
financial investments worldwide.
Restructuring and sector organisation
Economies of scale have had an important impact on the game. Consolidation thus became an
important driver of change. The big players were those who looked for expansion into new coun-
tries, created large “bank-insurance” groups, mergers and acquisitions in order to strengthen their
already strong market position. As an example, 52.5 % of the European insurance market is in
the hands of 20 companies. At the same time, co-operative banks, savings banks and mutual
insurance companies are developing both their regional basis and their European cooperation.
Knowledge-based technological change
Technologies – in particular ICT applications in back office processes and the internet as a sub-
stitute for front office activities – have had a major impact on the banking and insurance indus-
tries. Due to the presence of a high number of intermediaries, IT application processes were
faster in banks than in insurance companies. A new step incorporated the internet which allowed
direct distribution of financial products and opened up the possibility for clients to manage ac-
counts, savings, investments and insurance contracts. Although internet banking was not suc-
cessful at the beginning, the development of direct operating systems, new payment tools (e.g.
via mobile phones), and improved internet security will certainly be an important driver for both
market growth and the organisational restructuring of financial operations.
The global financial crisis
The strong growth of financial services came to a sudden end with the present financial crisis.
Triggered off by the US mortgages bubble, it now appears to be much more than that: the failure
of worldwide capital market liberalisation. This was caused by
• the opening of capital markets to various investment funds with an unmanageable number of
new products. This restricted the transparency of financial products and opened the doors
for irregular activities.
• the reorientation of financial business management towards short-term profit maximisation
which took the focus away from long-term risks.
• the failure of public supervision over capital markets and the misjudgements of rating agen-
cies supported the belief of secure financial markets.
• the risk of an economic expansion which was based on rising debt levels with important
leverage effects.
Even if some experts warned against the unhealthy developments on capital markets, the major-
ity of actors felt confident about the new business models and thus could not see the deterioration
of fundamental facts. Markets were not able to correct themselves without a severe crisis – and
this is the point we are at now.
Strengths and weaknesses of European financial services
Burdened by the current financial crisis, European financial services are unable to profit from their
strengths adequately. In the long-run however, market potentials are available in the New Mem-
ber States and in emerging countries. These can be used as the European financial services is a
strong player on international capital markets, disposing of a pluralistic system which now ap-
pears to be a strength rather than a weakness. Distribution is flexible because of the use of multi-
channels, and covers the whole EU area. The business can rely on a broad skills basis with a
high share of professionals possessing high and medium skills. The social dialogue works in most
of the countries.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 20
FINAL REPORT, 9 JUNE 2009
Weaknesses can be found in demographic change which may be a burden to market expansion.
The economic strength of companies was weakened considerably by the financial crisis and
consolidation has not yet been achieved. This has resulted in the loss of consumer trust. The
heterogeneity of distribution channels can push the struggle between banks and insurance com-
panies. Skills shortages may arise even in a period of declining employment, particularly in stra-
tegic competences which are important for restructuring the business (ICT, controlling, risk as-
sessment, management). Training capacities are underdeveloped in the NMS.
Emerging competences
The knowledge base of the sector has changed significantly during the past decade. New compe-
tences have been developed for new jobs. Requirements for a high-level of education have been
raised for many functions. Functional requirements have been extended along the value chain.
The usual distinction between back office jobs without customer contacts and front of-
fice/commercial jobs has been weakened.
Competences for back office jobs
Employment in administrative back offices is declining and the proportion of medium and high-
skilled persons is going to be upgraded. A double competence profile is emerging with strong
financial and IT knowledge.
Large administrative platforms and shared services centres are being established, which are
changing the back office function into highly specialised technical functions. Routine functions,
however, are being relocated to low-cost countries.
Competences for the new middle office jobs
Middle office functions are experiencing a revival in many companies of the sector. These jobs
are occupied by highly skilled persons with a deep knowledge of financial processes, more legal
expertise, an international background, language skills, and a good knowledge of IT applications.
These functions will have to be more recognised by human resource policies and remuneration
schemes.
Competences for commercial and front office jobs
Counselling functions for face-to-face communication with clients are being reorganised into
multi-functional activities: counselling clients, executing just-in-time administrative operations, and
selling new products. This requires rich competences: financial knowledge of the products, soft
competences in order to be able to discuss with the client, listen to the client’s needs and find the
correct answer, IT self-possession.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 21
FINAL REPORT, 9 JUNE 2009
Strengths and weaknesses – opportunities and threats
Strengths Weaknesses Opportunities Threats
M
a
r
k
e
t
s
• The European market
share assures a good
position in the world
• Strong dependency on
global capital markets
• Substantial amounts of
risky products
• EU15: new markets
for health care and pen-
sions schemes
• NMS: new markets for
all products
• Expanding markets in
emerging countries
• Financial crisis will lead
to a severe downturn
• Decreasing population
represents a risk of
downsizing the markets
• Economic risks in the
NMS
S
t
r
u
c
t
u
r
e
o
f
b
u
s
i
n
e
s
s
• Global players acting in
different local markets
• A pluralistic financial
system with different
types of ownership
• For the most part,
banking institutions are
commercial banks with a
high level of deposits
• Strong needs for re-
capitalisation but compa-
nies are weakened
• Consolidation must be
achieved in many coun-
tries
• Global players can
take the opportunity to
buy companies all over
the world
• Many companies can
face difficulties due to the
financial crisis
• Not enough capital for
saving banks, co-
operative banks and
mutual insurance groups
D
i
s
t
r
i
b
u
t
i
o
n
• High flexibility based on
different channels provid-
ing products, advice, and
services
• Large distribution
networks
• Bancassurance: banks
using their networks to
distribute insurance
products
• Particular experience
with internet banking
• Lack of customer
confidence
• Conflict between direct
banking, insurance distri-
bution and value-added
services in proximity to
the client
• Financial management
needs trust, transparency
and information
• New offices and
branches to be created in
NMS
• Promoting new distri-
bution channels according
to a new generation of
customers
• Internet banking and
internet insurance lack
customer trust and need
to be based on a new
financial culture
I
n
n
o
v
a
t
i
o
n
• Some of the most
innovative clusters in the
world (UK-London, Lux-
embourg, Ireland)
• “Brains in Europe”:
high-skilled persons for
innovation
• Loss of confidence in
innovation capacities: the
crisis is partly due to
innovative financial
products
• Lack of adequate risk
management
• Lack of strategic
controlling
• To practise mass-
customisation on one
hand and high value
added personal service on
the other
• NMS are dependant on
the western companies
and their innovation
policies
S
k
i
l
l
s
• Sound knowledge base
due to high-skilled staff
• Strong links between
companies and educa-
tional institutions in the
EU15 countries
• Potential skills short-
ages for highly skilled
personnel
• Underdeveloped
training capacities in NMS
• Demographic change
allows the renewal of staff
• Reinforce the qualifi-
cation level to deliver
more advice and services
• Loss of attractiveness
as an employer
S
o
c
i
a
l
d
i
a
l
o
g
u
e
• High level of unionisa-
tion in the EU15 and a fair
dialogue in western
countries
• Some innovative
studies at the European
level
• The social dialogue in
the financial services
sector was built in a
growth period with bene-
fits for wage and career
development
• Develop social dia-
logue in the crisis
• Anticipate the social
impacts of employment
change
• Develop negotiation
on career paths and
lifelong training
• Lack of social dialogue
in companies in the NMS
Source: DKRC/Economix
The choice between hard-selling standardised products or individual counselling will be strategic
for companies. Sales in call centres employ more and more temporary staff for different publish-
ing campaigns. Labour turnover is high as is the share of younger workers with instable careers.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 22
FINAL REPORT, 9 JUNE 2009
Competences for IT jobs
They are at the very heart of the business, present in Customer Relation Management (CRM) as
well as in daily administrative operations, finance and refinance, and wholesale activities. As they
encompass different tasks such as studies for new products and processes, design and man-
agement of data bases, network architectures, marketing, IT safety, CRM etc, the requirements
include IT knowledge but also knowledge of financial processes. Companies looking for budget
economies are externalising mass processes.
Competences for the R&D functions
Most financial groups have R&D departments. The professionals are economists, mathemati-
cians, actuaries, market and finance experts, and IT designers. It is not a very large group of
specialists but they play an important role in the innovation process.
Competences for the management function
Managers in the financial services sector are always finance specialists. Their role is the same as
in the rest of the economy, but the evolution of the sector requires enhanced competences: tech-
nical expertise and financial knowledge, human resource management and change management,
management of transversal projects, language skills and inter-cultural management. Managers in
branches have a commercial as well as a communicative role.
Three scenarios up to 2020
Starting from the financial crisis in 2008
The trends observed over the past ten years will certainly continue to have a strong impact on the
future. However, the financial crisis will change the financial business fundamentally:
• The liquidity crisis of financial institutions has meanwhile transformed into a solvency crisis
with a worldwide dimension. The compensation of these strains will take many years.
• The severe depreciation of property and the worldwide economic recession is on the way to
reducing the volume of financial markets substantially. Not all financial institutions will sur-
vive, and the others will see limited growth due to the long-term effects of the recession.
• Governments are planning to reinforce financial supervision at different levels: national,
European, and international. By means of rescue programmes, public intervention is already
being extended – in some cases by means of nationalisation.
• Consumer confidence is at its lowest level whilst banks are detecting the importance of
consumer markets again. It is a question of how they will be able to rebuild confidence and
which parts of the banking system will succeed with such efforts.
• A new step involving mergers and acquisitions in the whole sector may occur. Market forces
and public regulation, however, may force the industry to think about alternative approaches.
The future of the sector appears to be open and widespread options for alternative developments
are being discussed. The scenarios start from both the fundamental drivers identified in the previ-
ous sections, and the present knowledge about the financial crisis. They take the organisational
response of financial suppliers into the focus of considerations, by asking:
• how the European financial services sector will reorganise its activities and markets after the
crisis,
• how governments will develop their supervisory instruments,
• how banking clients and financial investors will react.
Three scenarios have been developed on this basis:
• Scenario 1 – “sustainable finance”
• Scenario 2 – “laissez-faire”
• Scenario 3 – “state ownership”
Scenarios and drivers
strong liberal
strong
1
Sustainable
finance
2
Laissez-faire
Sector restructuring
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 23
FINAL REPORT, 9 JUNE 2009
Source: DKRC/Economix
The scenarios are combinations of the most important drivers identified in the previous analysis:
Scenario 1: “Sustainable finance”
This starts with the assumption that the financial business will identify short-term profit maximisa-
tion strategies as one of the major reasons for the crisis. Forced by strong customer reactions, a
new business model will be developed which optimises the long-term profitability of investments.
It will require considerable efforts to rebuild consumer confidence through self-enforced control-
ling and investments into the quality of financial consulting. A strong client-orientation will be the
key to market success. Government regulation will strengthen self-controlling and re-enforce the
liabilities of financial services providers.
This will result in a “cultural shock“ for the financial business as it means a complete reversal of
prevailing business models. Large parts of investment banking will be abandoned due to the high
risks involved in that business. Product innovation in the sense of “security optimisation” will be
more important than process innovation. Improved controlling and risk assessment systems will
be established.
This will not be an advantage for the big players, as they will lose large parts of their investment
banking business in the long-run. Savings banks and co-operative banks will have comparative
advantages due to their proximity to consumer markets and public owners. Insurance companies
less concerned by the crisis will follow the same trend towards customer oriented services.
Basic characteristics of scenarios
Driver Scenario 1
Sustainable finance
Scenario 2
Laissez-faire
Scenario 3
State ownership
Business model
Trust oriented and
consumer oriented
Profit oriented Control oriented
Self-control by the sector Strong Weak Strong
Public control Restrictive Liberal Very restrictive
Mergers & acquisitions Weak Strong Strong
Market growth Restrained Unstable Weak
Product innovation Strong Strong Weak
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 24
FINAL REPORT, 9 JUNE 2009
Product
Standardisation
Low High High
Process innovation Medium Strong Strong
Globalisation Controlled Uncontrolled Restricted
Outsourcing/relocation Medium High Low
Training activities Strong Strong Weak
Employment
Recovery after
recession
Short-term
fluctuations after
recession
Long-term
reduction with late
recovery
Source: DKRC/Economix
Scenario 2 “Laissez-faire”
This will draw less radical conclusions from the present crisis. In contrast, financial actors will try
to blur the consequences of the crisis and continue with the present business model. The crisis
will be interpreted as the accumulation of unfavourable market developments. The financial busi-
ness will therefore avoid significant restructuring of the sector and more or less continue with the
business model of the past. Public control will remain liberal, particularly on global markets, as
international agreements on capital market control will be difficult to achieve.
New products will continuously be developed for investment rather than for consumer markets.
Financial services will become increasingly standardised. The sector will be segmented into a
business and asset management market with high-value services and a standardised mass-
market for the majority of consumers. Mergers & acquisitions will be undertaken on a large scale
in order to profit from economies of scale. It is the scenario which successfully returns to trends
that dominated before the crisis.
Profit orientation will remain strong with a focus on economies of scale to restore the industry’s
margins. Direct distribution of products and internet banking will be very important as will call
centres for sales and customers information. Big service providers will perform the administrative
back office tasks, while banks and insurance companies will concentrate on the front office tasks
of marketing and strategic management.
Scenario 3 “State ownership”
This emerges from the fact that neither governments nor the big players of the financial business
will be able to keep control of the current crisis. Financial and economic turmoil will accumulate
into a wave of destructive power. This will result in a significant reduction of economic activity for
a long period of time.
Governments will be forced to take control of the financial system in order to guarantee its basic
functions. The sector will return to an administrative business model with effective public control
of national capital markets. Markets will only gradually recover after the crisis and innovation will
remain restricted to the areas of organisation and controlling. The banking system will be saved
by the governments at the price of nationalisation. Public budgets will see a considerable in-
crease of debts. Economic growth will be burdened for the whole scenario period up to 2020.
Similar to the financial crisis which happened in Japan during the1990s, the economies will suffer
from the losses of property and market volumes for a long time.
Banking institutions will make no efforts to adjust to clients’ needs. In contrast, they will only pro-
vide the minimum functions of financial services and will concentrate on operational functions
rather than on new products. It will be lean banking under the direction of austerity, focussing on
surviving a difficult period, not on being efficient.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 25
FINAL REPORT, 9 JUNE 2009
Large parts of investment banking will be abandoned and there will be a clear separation of
wholesale banking and retail banking. In parallel, insurance and banking activities will be sepa-
rated. Recession and state control will dry up new markets almost completely.
Global impact on employment
Scenario 1 – Sustainable
finance: Like for all other
scenarios, employment
must be expected to
decline considerably in
the course of the finan-
cial crisis. A gradual re-
covery, however, can be
expected after 2012-
2013 due to the expan-
sion of consumer and
business markets. Re-
covery will be accom-
plished with the restruc-
turing process based on
sustainable products,
services and customer
relations. Insurance com-
panies will particularly be
able to profit from these
changes as they applied
this long-term approach
in the past.
Scenario 2 – Laissez
faire: In this scenario, the
major forces that generated the financial crisis will not be removed. Public authorities will not
come to an international agreement about capital markets supervisions. Employment will there-
fore remain unstable in the
course of the after-crisis period. Financial services will join the group of economic sectors where
employment levels are strongly determined by cyclical fluctuations.
Scenario 3 – State-ownership: Employment will remain at a depressed level for a long time. Even
insurance companies will be negatively affected. Semi-public mutual and saving banks will
achieve greater importance in the sector, encouraged by governments and local authorities. A
gradual recovery can be expected at the end of the scenario horizon.
Implications for competences and occupational profiles
The required skills associated with the three scenarios clearly differ as regards the changes of
skills and occupational structures:
Scenario 1 – Sustainable finance:
Skill needs will be high and there will be the demand for a new type of banker: client-orientation
and a sound understanding of long-term investment strategies will be important. Skill needs will
be influenced by the customer oriented organisations requiring:
• Highly-skilled persons able to analyse client needs and deliver financial advice with risk
estimation
• R&D specialists, creating new products and controlling systems
• Controllers, risks analysts and managers with a strong international orientation and a strong
ethic behaviour
• IT professionals for back office reorganisation
Employment levels
Financial services, EU27; million persons
3
3,5
4
4,5
5
5,5
6
2000 2005 2010 2015 2020
Scenario 1
Scenario 2
Scenario 3
Source: DKRC/Economix
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 26
FINAL REPORT, 9 JUNE 2009
The scenario will develop a strong need for sales and marketing specialists who will be needed to
establish the new marketing strategies and to intensify customer relations. Moreover, organisa-
tion and controlling specialists in middle office jobs will be important for developing and applying
the new rules for financial self-control.
Scenario 2 – Laissez faire:
The skills profile will reinforce the dual structure known from former industrialisation processes:
• Low and medium-skilled workers will be needed for call centres and administrative platforms.
These jobs will experience poor working conditions and strong performance oriented remu-
neration. Flexible working hours and a high share of part-time and agency work will be visi-
ble in combination with high performance demands.
• Highly skilled workers will be needed in marketing, trading business, as financial analysts,
business process specialists, and – in particular – as R&D experts who will have to develop
new products and increase the short-term flexibility of business processes. Performance re-
quirements will also be strong but remuneration will be good.
In contrast to scenario 1, scenario 2 will focus on specialists for new products, including R&D
experts for financial products and process engineering. Controlling and sales will see a lower
increase. Administrative work in back office will be strongly reduced due to increased efficiency
and outsourcing.
Scenario 3 – State-ownership:
The skills structure will shift towards:
• Medium-skilled persons for middle office jobs: accounting, reporting, controlling and risk
management
• Lawyers and regulation specialists for establishing the new regime of public banking
• Clerks and back office administrative staff due to the role of general administration
• Lean management specialists in order to improve cost efficiency
The scenario will imply a strong increase of labour demand for organisation and controlling spe-
cialists. Sales and marketing specialists, however, will see a relative decrease in demand, to-
gether with experts for new financial products.
Impact on occupational profiles
Change of occupational shares in total financial services employment 2007-2020; EU27
Occupation
Scenario 1
Sustainable
finance
Scenario 2
Laissez-faire
Scenario 3
State ownership
Managers = = ?
Computing professionals = ++ +
Business and finance professionals (sales and
marketing)
++ + ? ?
Business and finance professionals (new products) + ++ ? ?
Business and finance professionals (organisation,
controlling)
++ + ++
Clerks ? ? ? =
Service and sales workers + + ?
Craft and related trades workers ? ? =
Elementary occupations = ? =
* Change of % shares of area total:
++ strong increase; + increase
= no change
? ? strong decrease; ? decrease
Source: DKRC/Economix
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 27
FINAL REPORT, 9 JUNE 2009
Critical competences
Regarding the different functions, the scenarios imply significant changes of competence profiles:
• Managers will have to master the financial crisis in all of the three scenarios. They will need
excellent knowledge of financial markets and crisis management. Most importantly, however,
they will need to be experts in change management in order to reorient staff towards new
market conditions, business targets and public rules.
• Marketing and sales experts will have to apply completely different strategies in scenarios 1
and 2. Scenario 1 will require experts who will be able to establish long-lasting customer re-
lations in proximity with clients. Scenario 2, however, this expertise will be restricted to high
value-added markets. Standard consumer markets will be served by low or medium skilled
sales agents who will need excellent communication skills rather than a deep knowledge of
financial products. Marketing and sales experts will need excellent knowledge of the financial
markets and products in all scenarios.
• Middle office staff will have a strong position in both scenario 1 and 3. In scenario 1 they will
have an independent position, being responsible for risk analysis and strategic controlling.
They will process large amounts of information in order to identify risks among clients. They
will continuously report to the management in order to keep track of change strategies. In
scenario 3 their position will also be strong as the “masters of the rules”. They will be re-
sponsible for the strict controlling of business processes and will continuously assess risk
portfolios.
• Back office staff will decline in scenarios 1 and 2 but will remain at the same level in sce-
nario 3.
• R&D specialists will be particularly important in scenario 2. They will be needed to develop
both sophisticated financial products and standardised consumer products for different mar-
kets. Mathematical and statistical expertise will be required as well as a good knowledge in
computer science. In scenarios 1 and 3, R&D experts will mainly be used for the improve-
ment of risk assessment and controlling instruments.
• Process engineers and IT jobs will be needed in all three scenarios, but again with strongly
different profiles. In scenario 1 business processes will be reorganised in order to achieve
the flexibility to adjust to a growing variety of customer demands. In scenario 2 the stan-
dardisation of consumer products will be the main focus, while flexibility will be required for
the high-value activities in the upper market segments. In scenario 3 process re-engineering
will also be concentrated on standardisation and low-cost provision of services. The upper
segment, however, is not relevant any more. ICT experts will therefore be important for all
scenarios.
Critical competences
Scenario 1
Sustainable finance
Scenario 2
Laissez-faire
Scenario 3
State ownership
General management Risk oriented rather than
profit oriented
Long-term vision
Change management
Global orientation,
Strong profit orientation
Short-term flexibility
Security oriented
Low-cost oriented
Change management
Marketing and sales Financial professionals
Strongly client oriented
Socially responsible
Market oriented sales
specialists
Product oriented
Communication skills for
sales agents
Limited marketing efforts
Administration Strict monitoring and
controlling
Rapid adaptation to product
changes
Strict controlling according
to administrative rules
Research & development Risk assessment
Controlling instruments
New financial products
Internet-based sales
Standardisation of products
Standardisation of
products
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 28
FINAL REPORT, 9 JUNE 2009
Process engineering High flexibility of processes
due to customised products
Standardisation of
processes
Relocation of back office
services
Standardisation of
processes
Source: DKRC/Economix
Strategic impacts from the scenarios
Adjustment strategies at company level
Five principal strategic orientations might determine the prevailing business models in the long-
run:
• Diversification strategy: universal banks are the ideal business model of this strategy, dis-
tributing bank and insurance products through their network. Insurance companies provide
new day-to-day services with complex contracts.
• Trust oriented and security oriented strategy: requiring an orientation for long-term rather
than short-term profitability. It results in a fundamental change of product development, in-
vestment consulting, and investment decisions.
• Globalisation strategy: The crisis reinforces the need for huge capitalisation which makes
mergers attractive. This creates big institutions on inter-bank markets and re-insurance, but
also in private equity, asset management, and back office services.
• Specialisation strategy: this is the institutional specialisation on different markets – mort-
gages, business credits, asset management, investment banking and other market seg-
ments. The economies of this strategy are based on specialisation rather than size. A high
degree of professionalism is required for market success.
• Standardisation strategy: products for mass consumer markets are standardised and proc-
esses are automated. The internet plays a dominant role. Big back office service providers
execute the administrative tasks. Individual services are an exemption.
The scenarios will use different combinations of these strategies:
• Scenario 1 will lead the companies towards a customer-oriented organisation, putting a
strong weight on “face-to-face” work situations. This organisation is based on a high level of
competences for the counsellors, loan officers, insurance agents, and intermediaries. Their
motivation needs to be strengthened by serious career management, knowledge transfer
measures and the experience of internal and external networking.
• Scenario 2 is based on an indus-
trialised organisation and on lean
production models with large
service centres and big call cen-
tres for product sales and client
services. Turnover will be en-
couraged by profit-based remu-
neration. Young persons will be
hired on low wages to work on
sales platforms and in call cen-
tres, but also for highly profes-
sional jobs in investment bank-
ing. New products will continu-
ously be developed by special
R&D staff. Training courses will
be used to continuously update
employees’ knowledge about in-
novative products. Particular at-
tention will be paid to soft com-
petences and communication.
• Scenario 3 will lead to an admin-
istrative sector demanding rein-
forced controlling skills and persons with a strong knowledge of regulations and general law
in order to apply national and international rules. The middle office will be the most devel-
Adjustment strategies
Adjustment strategy Scenario 1
Sustainable
finance
Scenario 2
Laissez-faire
Scenario 3
State
ownership
Diversification
strategy •
Trust and security
oriented strategy •
•
Globalisation strat-
egy
•
Specialisation
strategy
•
Standardisation
strategy
• •
Source: Economix.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 29
FINAL REPORT, 9 JUNE 2009
oped function. Employees will have to participate in training courses to develop their regula-
tion and law knowledge.
Strategic choices for sector organisation, training institutions and governments
These organisations will have a strong role, particularly in scenarios 1 and 3:
• In scenario 1, sector organisation will support the image of a sustainable sector with a high
degree of public accountability. Communication skills will be particularly promoted by training
institutions together with the principles of a trust oriented and security oriented financial
business. Regional labour markets will be developed because direct communication with lo-
cal clients is important.
• Scenario 2 will present the sector as a modern and dynamic business which calls for flexible,
innovative and profit oriented professionals. Vocational training should train specialists for
various financial products, global financial markets, and business organisations. Lifelong
learning will be particularly important to keep professionals updated with the rapid paths of
innovation. Open labour markets will be important as specialists will be recruited from inter-
national rather than local labour markets.
• For scenario 3 an image campaign is not really needed as the sector is reduced to basic
financial operations. Nevertheless, it appears to be a security oriented business which aims
to provide financial services at low costs. Career promotion will select strictly task oriented
employees. Vocational training will be reoriented towards business administration and con-
trolling. Training centres will focus on law and public administration. The majority of recruits
will be from internal rather than external labour markets.
Human resource strategies to meet skill needs
The financial sector in most EU countries expanded for many years, but the present financial
crisis is going to radically change that. With the downturn of employment, human resource poli-
cies will face new conditions in internal and external labour markets. The reduction of employ-
ment will affect both labour supply and labour demand in a significant way. It will result in:
• high unemployment risks for the staff employed
• a smaller number of job openings for those entering the sector
• a stagnation of wages due to wide spread losses and rising unemployment
• a generally poorer attractiveness of the sector
This will not make human resource policies easier. While labour supply will be more than suffi-
cient due to the rising number of lay-offs, it will become difficult to recruit specialists from the non-
banking sector. Moreover, financial experts will look for job opportunities outside the financial
sector. The human resource policy in companies will be determined by low labour turnover, a
rising relevance of internal labour markets, and an ageing work force. Particular skills shortages
may appear among critical skills.
Even with declining employment, however, the sector will be faced with the need to replace due
to ageing staff in many countries. With the requirement of a higher level of formal education and
the declining attractiveness of the sector, the following measures will have to be undertaken to
meet the skills needs:
• recruiting new young graduates
• retaining older persons (even by refusing the easy solution of early retirement), particularly in
the counsellor function in order to rebuild customer trust
• updating the skills of older staff
• utilization of „lifelong training” and career paths to reduce labour turnover and to attract new-
comers
For a knowledge intensive industry like financial services it will be particularly important to guar-
antee the knowledge transfer from older to younger workers. Client trust and high quality consult-
ing services can only be established with the broad knowledge base of the workforce.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 30
FINAL REPORT, 9 JUNE 2009
Implications for education and training
All scenarios show an increasing need for graduates with higher education. A broad educational
training structure is available in the western countries including universities, business schools and
companies. In the New Member States, however, there are shortages of qualified persons. This
requires the extension of training capacities and training efforts in these countries.
While the sector increasingly emphasised the necessity for graduates with post-secondary de-
grees, human resources managers partly doubted that skills will be needed to that extent. For
example, often less skilled persons were recruited for sales-related activities. Many training ex-
perts therefore favour apprenticeships.
Intermediaries dispose of differentiated initial education and training profiles. The staff of these
SMEs can possess all forms of education. Nevertheless, the need for more qualifications is also
visible in this activity.
The development of the sector will lead to increased training needs as regards to quality and
training content. The overall capacities, however, will be more than sufficient in face of the ex-
pected downturn of employment and recruitment.
In the New Member States, training facilities are not developed sufficiently and therefore require a
different approach: in the upcoming years, companies, social partners and training institutions will
have to be much more involved in developing training structures which will provide the new skills
needs.
Beyond the need for updating skills with regard to new technologies, laws and regulations, and
customer relations, the crisis will lead to severe structural changes in the sector. Training for new
occupations and sometimes for new jobs will be required in agreement with the employees’ rep-
resentatives.
Recommendations
While European governments are actually combating for the survival of the financial system, this
report develops a longer perspective. Our recommendations for human resource related policies
for the European financial sector therefore suggest a long-term strategy for skills and compe-
tences which is able to reduce the risks of a further replication of such a crisis.
We are convinced that human resource policies play a pivotal role in the reform of the financial
systems. The financial sector was obviously unable to establish a sustainable business model
and assess risks correctly. This is the responsibility of management and public business regula-
tion. However, it also depends on the deep understanding of the way financial markets function.
Employment related policies should therefore address the need for adequate training and in-
creased R&D investments in this sector. Two priorities emerge in this context:
• Training policies should be reoriented towards the economics of capital markets, the princi-
ples of decent client consultation, controlling and risk assessment. Governments should take
initiatives to implement such new types of training in the financial business sector.
• As the tools of risk assessment failed to indicate long-term risks, R&D programmes should
be launched to improve these instruments. Controlling principles should be reappraised in
order to develop strategic controlling.
Human capital appears to be the key to restructuring in this sector, and public institutions can
raise the pressure on the financial sector to develop a sustainable business model. Education
and training is one approach to proceed along this route.
A comprehensive list of recommendations with six headings, has been developed for human
resource policies in the European financial services. They address policy actors at European,
national and regional level, as well as companies and social partners.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 31
FINAL REPORT, 9 JUNE 2009
List of recommendations
Topic 1: Reform of the financial system
EU
• make European regulatory systems more efficient
• maintain and develop a pluralistic financial sector
• develop a supervision culture in Europe
• protect customers and investors by introducing more rigorous liability rules
National authorities
• participate in the international regulation of financial markets
• reinforce national regulations
• improve market transparency and obligatory client information
• reform bonus systems and top management remuneration
Companies
• rebuild trust with clients
• develop self-controlling and reinforce the middle office function
• promote transparency and provide liable information to customers
• reform bonus payments and top management remuneration
Topic 2: Employment and human resource policies
EU
• prevent high replacement demand
• contribute to human resource investment
• support active ageing policies
• support good practices in restructuring
National authorities
• contribute to human resource investment
• support active ageing policies
• support good practices in restructuring
Companies
• preserve the knowledge base
• refuse early retirement schemes
• set up good HR practices and career path developments to struggle against labour
turnover and attract newcomers in the sector
• build mobility solutions within the sector instead of lay-offs
Social partners
• support HR policies without early retirements and an effective ageing policy, new
career paths
• promote agreements about employment, restructuring, ageing policies
Topic 3: Skills adjustment
EU
• re-enforce new competence standards to promote sustainable business models
• promote R&D in financial services in the areas of risk assessment and strategic
controlling
National authorities
• promote the introduction of sustainable business models by improved training stan-
dards
• reinforce training institutions in the sector
• promote R&D in financial services in the areas of risk assessment and strategic
controlling
• raise training standards for intermediaries
• support cooperation between companies and training institutions
Companies
• develop lifelong learning
• develop middle office apprenticeship training and trainee periods for newcomers
• develop finance-related ICT knowledge
• adapt labour force to the principles of sustainable finance
• invest in R&D in the areas of risk assessment and strategic controlling
Social partners
• reinforce involvement in training issues
Topic 4: Equal opportunities
EU
• encourage female students towards scientific studies and IT courses
National authorities
• encourage female students towards scientific studies and IT courses
Companies
• promote women in management positions
• improve the proportion of women in IT jobs
Social partners
• support and negotiate agreements about equal treatment of men and women
Topic 5: Regional policies
Regional authorities
• support decentralised banking and insurance services
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 32
FINAL REPORT, 9 JUNE 2009
• attract innovative capacities
• develop regional centres for supportive services
• address restructuring in financial services and avoid risks of high specialisation in a
single sector
Social partners
• address the employment issues at the local level
Topic 6: Knowledge about skills
EU
• develop a monitoring activity for employment and skills in the sector
• improve the European classification and statistics so they are more relevant for the
services sector (ISCO, ISCED)
National authorities
• support prospective sector studies
Regional authorities
• support prospective sector studies
Companies
• support skills monitoring
• present regular and transparent information
Social partners
• develop social dialogue about employment, skills and training needs
• promote a common understanding of the sector and develop a strategic view
Source: DKRC/Economix
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 33
FINAL REPORT, 9 JUNE 2009
0. Introduction
The objective of the study is to identify skills scenarios for the European financial services sector.
The study is based on a specific methodology developed by Rodrigues
1
. It contains:
• An economic and statistical mapping of the sector, with a focus on the structure and trends
in output and employment, the regional distribution of output and employment, other relevant
factors such as the size of enterprises, the age, gender, skills and occupational breakdown
of the workforce, as well as the competitiveness of the sectors internationally (steps 3 of the
prescribed methodology);
• An analysis of the main drivers of change so far as the sectors are concerned and their
implications for employment and competence, with a particular focus on the main skill needs
and skill gaps that can be identified (steps 4 and 5);
• A presentation of plausible scenarios concerning the future development of these industries
in the period up to 2020, focusing on the implications for employment and competences
(steps 6 and 7);
• The main strategic choices to meet these skill needs (step 8), including the implications for
education and training provisions (step 9);
• Recommendations with respect to the above (step 10).
The methodology was adapted to the specificities of financial services as far as necessary.
1. Mapping the sector
1.1. Definition
The financial services sector encompasses not only all financial operations and banking activities
but also all insurance and reinsurance activities together with their intermediaries.
Table 1 Financial services by NACE classification
Aggregation of NACE Rev 1.1
41-industry [NACE] NACE Rev.1.1 [NACE]
Banking activities ( financial intermediation) NACE 1-1-65
Insurance and pension funding ( except social security) NACE 1-1-66
Activities auxiliary to financial intermediation NACE 1-1-67
Source: Eurostat
In the scope of this study we shall analyse these three "sub-sectors" and consider their economic
performance, their potential for innovation, and their employment aspects. We shall also examine
occupational profiles, relevant skills and human resources solutions. This analysis does not in-
clude the European Central Bank, diverse national banks, the stock exchange institutions nor
regulating bodies. It should be noted that the scope of this analysis does not include compulsory
social security programmes or pension programmes.
1
See M.J. Rodiguez (2008): Innovation, Skills and Jobs.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 34
FINAL REPORT, 9 JUNE 2009
Expert panel views:
The expert panel discussed the necessity of
disaggregating the industry into sub-sectors
and by Member States. In particular the
separation between banking and insurance
was requested as the two sub-sectors are
operating on different markets.
Moreover, markets are still nationally regu-
lated and segmented. Different business
models exist in the banking industry with a
wide range of company sizes, principles and
strategies.
This is acknowledged in principle. The study
therefore uses all available empirical evidence
for the sub-sectors without presenting full
statistical information at the disaggregated
level. It also separates scenarios and strate-
gic options as far as possible. However, the
study remains a study which covers the entity
of financial services in Europe.
Back office
Financial services represent an essential part of the
European economy as a macrocosm and of each
individual national economy as a microcosm. A well
developed financial system is present in every
European country, regardless of its size. This system
works both for individual customers, for enterprises
and for local authorities. These financial activities are
linked to the stock exchange and the money market.
As for financial companies, they act as a service
provider, a credit provider and an investor in all the
economic sectors. Dependent upon the country,
financial services have very tight links with enterprise
development.
It must be said that the financial services are a basic
necessity for business activity and for enterprises and
thus a stakeholder in European national markets and
economies: the “cardiovascular system” of the econ-
omy.
Banking industry
From an ownership point of view, there are three types of banks in Europe:
• private banks (working with different stock exchanges)
• saving banks
• co-operative banks (or credit unions in certain countries in the mortgage credit sector)
The differences between these three types of banks are mainly linked to their capital structure.
However, we will see that there are also differences in the degree of decentralisation of organisa-
tions and management, risk policies, customer relations and human resources management.
Chart 1 The different activities within the banking industry
Source: "La nouvelle économie bancaire", Le Cercle des économistes, 2007 (sous la direction d'Olivier Pastré)
Internal banking activities are separated into (Chart 1):
• retail or domestic banking
Asset and liability
management
Retail banking and
insurance distribu-
tion
Assets
management
Financial
market
activities
Business banking:
mergers and acqui-
sitions
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 35
FINAL REPORT, 9 JUNE 2009
• business and investment banking: this industry is deemed "wholesale banking". It includes
corporate banking, assets management, merger and acquisition management, and operations
in the global capital market.
All banks can be active in both fields with specific subsidiaries. Insurers are also active in whole-
sale banking.
We must note that banks and insurers work within the framework of the financial system. One
bank cannot work without the others as their relationship is reciprocal. Interbank credit is a basic
need for a major part of the business. At the same time, the banking industry cannot work without
regulatory bodies i.e.: the FSA (Financial Sector Authority) in Great Britain, the AMF (Autorité des
marchés Financiers) in France, and the regulations of the Basel I and Basel II Agreements which
were accorded at the European level. The same holds true for the insurance industry. We shall
analyse the influence of prudent regulations in the Section headed "Drivers of Change".
Insurance industry
The insurance industry is a key sector in the business world but similarly serves the public inter-
est by protecting an ample amount of a country’s wealth. The insurance industry provides risk
transfer mechanisms for business activities and protects individuals and families from the uncer-
tainties of daily life, such as health problems or loss/damage of property. One might assert that
insurance is a financial product which compels the insurance companies to compensate the
losses of a policy holder when a specific event occurs. When an individual or a company under-
writes an insurance policy he pays a premium. In order to compensate policy holders for their
losses, insurance companies invest their income from premiums in financial assets and some-
times in real estate.
An insurance company cannot work alone. It must relinquish some of the risk to other insurers or
reinsurers. Similar to the banking industry, the insurance industry needs prudent national and
international regulations.
The concept of risk management is at the heart of business insurance. New risks appear on the
horizon on a daily basis; environmental risks, medical malpractice suits and the like. The insur-
ance industry is also closely linked to the social security system of the welfare state.
The insurance industry is divided into:
• life insurance and private pension funds,
• non-life insurance (motor, health, causality, property, general liability, and marine aviation and
transport or MAT)
• reinsurance.
The retail of insurance policies is handled in a number of ways: i.e. independent agents, brokers,
private companies, banks or post networks and direct or internet distribution.
It must be taken into account that most of the banking companies deliver insurance products
through their branch networks. Meanwhile, insurance groups sometimes acquire banks, including
their network of branches, and develop business banking activities. This phenomenon is called
“bancassurance”. Additionally, insurance companies now sell financial products such as securi-
ties, mutual funds and various retirement plans.
Data concerning this sub-sector will be provided with NACE 2, 66 which closely covers the sector.
This includes life insurance and some of the pension savings but does not include compulsory
social security.
Insurance and financial intermediaries
This sector is more composite.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 36
FINAL REPORT, 9 JUNE 2009
Firstly, it includes what can be deemed as either insurance "brokers", "agents" or “producers".
These agents are either self-employed, are employed by small companies or by different insur-
ance brands. They act as mediators between companies seeking to sell insurance policies and
consumers seeking to procure insurance coverage. Over the past two decades many intermediar-
ies have developed other services such as risk management strategies and claims management.
Secondly, it provides advice for individuals and companies including large international brokerage
firms.
The main data is provided by NACE 2, 67. There are manifold opinions and studies about the
relevance of the data available in this sub-sector.
The financial service industry is present in all European countries and is diffused in its scope and
breadth. However, its size is usually proportional to the size of the population and that of the
national industry. Thus the highest density of financial services can be found in cities. Banks are
usually located near the economic decision centres; London, Frankfurt, and Paris are the three
main financial capitals of Europe.
Institutional structure
The representation of employers in the sector follows the divisions previously alluded to:
• Private banks in EU Member States, and in some non-Member States like Norway, Iceland,
and Switzerland, are regrouped in the EBF (European Bank Federation). Set up in 1960, the
EBF represents the interests of 5,000 banks from twenty national associations, with assets of
more than 2 trillion euros and comprises over 2.3 million employees.
• Savings banks (like Caisses d'Epargne in France, Sparkasse in Germany, Caja de Ahorros
in Spain) are represented by ESBG (European Savings Banks Group).
• Co-operative banks are represented by EACB (European Association for Cooperative
Banks) which is a part of ICMIF (International Cooperative and Mutual Insurance Federa-
tion). EACB also represents the credit unions and the so called “building societies". They
have 47 million members in Europe, employ 730,000 persons and have an average market
share of 20%.
• Insurance companies are represented by CEA, the European Insurance and Reinsurance
Federation (Comité Européen des Assurances) with 33 national member associations (EU
27, including Switzerland, Lichtenstein, Norway, and Croatia). It represents around 5,500
companies and one million employees.
• The mutual and co-operative insurance companies are now represented by AMICE (Associa-
tion for Mutual Insurers and Co-operatives in Europe) which consists of 120 direct members
and 2,700 non-direct members.
• The insurance intermediaries are represented by BIPAR (European Federation of Insurance
Intermediaries) which forms 47 national associations of insurance agents and brokers in a to-
tal of 32 countries. This represents around 80,000 insurance intermediary companies and
250,000 individuals. Initially BIPAR represented only insurance intermediaries, but now they
also represent some of the activities of financial advisers.
Employees are represented by Uni-Europa Finance, which is a very important stakeholder for the
industry. One can find specific forms of representation in each individual country depending on
the structure of the social dialogue. In Scandinavian countries (Sweden and Denmark) and in
Great Britain, unions currently tend to merge in order to represent the whole financial services
sector and to be more efficient.
1.2. Market development
1.2.1. Banking industry
The banking industry grew continuously from 1998 to 2007. The number of banks increased by
145 % and the number of branches expanded by 112 % (Table 2). Total assets and loans also
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 37
FINAL REPORT, 9 JUNE 2009
increased even stronger, particularly bank assets (+ 223 %). This market increase was largely
due to the non-euro area.
Table 2 Banking in Europe
1998 2007
% change
1996-2007
Commercial bank assets (bn euro)
EU15 12,286 39,549 221.9
NM12 223 753 238.0
EU27 12,517 40,403 222.8
Commercial bank loans (bn euro)
EU15 6,121 15,656 155.8
NM12 98 412 318.2
EU27 6,222 17,232 177.0
Number of banks
EU15 2,639 6,220 135.7
NM12 324 1,054 225.3
EU27 2,996 7,345 145.2
Table 2 continued
Number of branches
EU15 94,407 185,485 96.5
NM12 8,236 20,582 149.9
EU27 103,188 218,234 111.5
Source: EBF Statistics 2006, 2007
1.2.2. Insurance industry
The European insurance market also doubled during the 1996 to 2006 period. It can be meas-
ured with the average premium per inhabitant: 1,100 euros in 1996 and 2,174 in 2006 (CEA,
Annual Report 2007). Comparing premium insurance income accounts to the number of inhabi-
tants is a good indicator of insurance development (except for Luxembourg where insurers largely
benefit from the freedom to provide foreign services).
The decline in 2001, a year with a lower increase of growth linked to the financial crises’ so called
"internet speculative bubble”. The European insurance market grew by 4.8% in 2006. This in-
cluded 5.3% for non-life insurance, thanks to the privatisation of the Dutch health care system,
and 4.4% for life insurance. Total premium income has increased in Europe from 2006 to 2007,
but not by the same percentage as previous developments.
This growth was higher than in America for the same year, a negligible 2.7%. However, a growth
of 9.5% was observed in Asia, including Japan and newly industrialised countries in the area.
Chart 2 Development of total premium income
Billion euro, annual growth rates in %; EU27
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 38
FINAL REPORT, 9 JUNE 2009
3,7%
5,2%
6,5%
4,6%
10,1%
13,1%
-1,8%
2,9%
2,5%
3,6%
6,5%
4,8%
0
200
400
600
800
1000
1200
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
Total premium (left-hand scale)
Growth rate (right-hand scale)
Source: CEA Statistics, August 2007
Chart 3 Life premium income
Annual growth rates in %
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
EU10
EU15
Source: CEA Annual Statistics, August 2007
Considering life-insurance: the development of new pension insurance products, such as is found
in Sweden, Slovenia and France, or individual pensions. The Annual CEA Report of 2007 also
observes the development of "unit-linked products" in life-insurance, combined with options to
allow for a capital guarantee. However, the performance of the life-insurance market is closely
linked to the different fiscal incentives in each country and can be more difficult with the financial
turmoil.
Concerning non-life insurance: the shares of different markets are as follows:
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 39
FINAL REPORT, 9 JUNE 2009
Table 3 Non-life insurance (2006)
Percentage of market shares; EU27
Non-life insurance %
Motor insurance 33.7
Health-accident 25.0
Property 21.0
General liability 8.7
MAT(Marine and Transport) 3.4
Legal expenses 1.5
Others 6.7
Source: CEA, 2007
1.3. Financial services in Europe and in the rest of the world
The European financial services industry has gained greater importance on the world stage.
However, the most developed industry still remains in the United States while the centre for busi-
ness banking is Great Britain. Meanwhile, one should not ignore new competitors in Asia, the
Middle East and Australia.
A global appreciation of Europe’s placing could be illustrated by its share of activities within the
financial market (Table 4):
Table 4 The importance of financial markets activity
Percentage share of world, 2006
Activity EUROPE US Rest of the world Total
Investment banking revenue 33 43 24 100
Cross border bank landing 68 9 23 100
Commercial banking assets 70 16 14 100
Insurance global premium 40 31 29 100
Marine insurance 62 11 27 100
Funds under management 33 52 15 100
Assets of high net worth individuals 27 30 43 100
Hedge funds 27 65 8 100
Private equity, amounts invested 44 47 9 100
Source: a synthesis from OECD,CEA, Investment Company Institute and IFSL estimates (2006)
Europe and the United States are often evenly matched. However, concerning banking income
and global insurance premium income, Europe shows a higher level of income.
Europe has a market share of 33% for banking income, while the US represent 43% and the rest
of the world 24%.
Europe has a market share of 40% for insurance income, while the US and the rest of the world
represent 31% and 29%, respectively.
The securities market is larger in the United States than in Europe. Before the last subprime
mortgage crisis, the United States’ financial services industry was the most important in the world.
The United States are also represented by a large proportion of its population as being share-
holders; this proportion is much larger as opposed to the proportion of shareholders in other
nations. That said, a large percent of its population is in debt and this was a driver for both finan-
cial service growth yet also for the financial crisis.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 40
FINAL REPORT, 9 JUNE 2009
1.3.1. European banking industry in the world
Some European financial groups are in the global top ten and the position of European banks in
the world improved between 1990 and 2004, as seen in Table 5.
In 1990 the top 20 banking groups in the world were distributed as follows:
• 12 banks from Japan
• 7 from EU
• 1 from the USA
In 2004 the proportions were the following:
• 12 banks from Europe
• 4 from Japan
• 3 from the USA
• 1 from China.
Table 5 Ranking of European financial groups 1990 / 2004
Billion US $
1990 2004
Rank Bank (country) Total bal-
ance
Bank (country)
Total bal-
ance
1 Dai-Ichi Bank (Japan) 408.025 Mizuho Financial Group (Japan) 1,285.471
2 Sumitomo Bank (Japan) 372.401 Citigroup (USA) 1,264.032
3 Fuji Bank (Japan) 366.745 UBS (Switzerland) 1,205.430
4 Mitsubishi Bank (Japan) 364.100 Crédit Agricole Groupe (France) 1,105.378
5 Sanwa Bank (Japan) 357.760 HSBC Holdings (Great Britain) 1,034.216
6 Industrial Bank of Japan (Japan) 259.860 Deutsche Bank (Germany) 1,014.845
7 Crédit Agricole (France) 241.992 BNP Paribas (France) 988.982
8 Banque Nationale de Paris (France) 231.463 Mitsubishi Tokyo Financial Group (Japan) 974.950
9 Tokai Bank (Japan) 230.358 Sumitomo Mitsui Financial Group (Japan) 950.448
10 Citicorp (USA) 227.037 Royal Bank of Scotland (United Kingdom) 806.207
11 Norinchukin Bank (Japan) 222.300 Barclays Bank (United Kingdom) 791.292
12 Credit Lyonnais (France) 210.727 Crédit Suisse Group (Switzerland) 777.849
13 Mitsui Bank (Japan) 205.629 JP Morgan Chase (USA) 770.912
14 Barclays Bank (United Kingdom) 204.907 UFJ holdings (Japan) 753.631
15 Bank of Tokyo (Japan) 202.854 Bank of America Corp (USA) 736.445
16 Deutsche Bank (Germany) 202.263 ING Bank (Netherlands) 684.004
17
National Westminster Bank (United
Kingdom)
186.559 Société Générale (France) 681.216
18 Long-Term Credit Bank of Japan (Japan) 176.240 ABN AMRO Bank (Netherlands) 667.636
19 Taiyo Kobe Bank (Japan) 174.967 HBOS (United Kingdom) 650.721
20 Société Générale (France) 164.741
Industrial and Commercial Bank of China
(China)
637.829
Source: The Banker, 2004
1.3.2. European insurance industry in the world
It can be observed that while premium income doubled in Europe and North America, it grew
marginally by 8% in Asia over the same period (Table 6). For the time being, the growth of the
financial groups in Asia (except that of Japan which only resolved the big crisis from the end of
the 1990s in 2004) is quite low. The reasons for this poor development can be seen in the impor-
tance of administrative regulatory regulations, for example in India. This is the case for a large
part of Chinese financial groups; during different banking crises some of the Chinese banks have
had non-performing loans and today they are not allowed to take part in foreign groups above 5%
of the capital. In China the total amount of savings is very high and it is one of the reasons that
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 41
FINAL REPORT, 9 JUNE 2009
Chinese financial groups are partly financially secure. Yet these savings are used more for con-
sumption i.e. construction and public works (infrastructure) than for industrial investments.
Table 6 Insurance premiums
Billion euros
Continent 1996 2005
Europe 675 1332
North America 689 1247
Asia 647 765
Others 95 98
Source: Annual Report CEA 2007
One can ascertain that Europe and the USA have nearly the same market share, amounting to
twice that of Japan (Table 7). With a share of 0.3%, Poland is the only new European Member
State with a relatively high share among these countries. This means that the growth potential of
the insurance sector could remain important for both foreign and domestic companies in the New
Member States and in emerging countries.
Table 7 World market shares – insurance, 2006
Region
Market share
%
EU 25 38.7
USA: 34.0
Japan 14.6
China 2.4
Brazil 0.7
Russia 0.5
Others 9.1
Total 100.0
Source: Annual Report CEA 2007
1.3.3. Excursus: A look at the American and Japanese financial sectors
Between 1996 and 2006 the American sector had a very large and continuous growth of markets,
revenues and profitability. Together with the British financial sector it was considered as one of
the strongest financial systems in the world.
For example, commercial bank assets more than doubled between 1996 and 2006:
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 42
FINAL REPORT, 9 JUNE 2009
Table 8 Commercial bank assets of the United States
trillion US-dollars
Year Assets
1996 5.32
1998 6.87
2000 7.46
2002 8.44
2004 10.11
2006 11.86
Source: European Banking Federation, Federal Deposit Insurance Corporation
The American insurance industry shows a continuous growth with, for example, the total premium
indicator:
Table 9 Life and non-life premiums in the United States
billion US-dollars
Year Life and non-life premiums
1996 624
1998 656
2000 765
2002 847
2004 1206
2006 1485
Source: Swiss Re (IFSL, London, 2007)
The growth of the American financial services was driven by the credit and debt of the population,
of course in the mortgage business and also in consumption credit. One of the main mottos was a
sentence from a George Bush adviser: “To make an American ownership society”. This policy,
along with the American growth, was strongly pushed by the Federal Reserve Bank’s policy of
low interest rates (1% in 2007) and the government’s public deficit policy (around 7% in 2007).
Japan
The Japanese financial services sector was preoccupied with a severe crisis in the 1990s. This
was due to bad loans which caused the economic bubble to burst. This period witnessed the
failure of large and small banks, which led to a large amount of public funds being injected into
bank capital and bank management being drastically streamlined (shedding business, mergers
and consolidation). The crisis changed the whole sector. This in turn led not only to mergers and
acquisitions but also to failures and later to the creation of new low-cost banks - particularly new
types of banks created in the year 2000 which included an internet bank called Japan Net Bank
and E-Bank which specialised in internet payments, portable phones and delivering standardised
insurance products.
The major industrial companies created banks and financial institutions. Some of these include
Sony Bank in cooperation with JPMorgan, the Nippon Shinko Bank, Mitsubishi Bank and pres-
ently Incubator Bank of Japan which was created in 2004 by owners of emerging companies to
finance SMEs and start-ups.
It took a very long time to resolve the banking crisis in Japan; around 12 years in total. As Japa-
nese banks had to be very careful and concentrated on their domestic market during this recov-
ery period, they were less affected by “toxic products” and the subprime mortgage crisis. In the
Autumn of 2008 some financial institutions, such as the insurance company Nomura or the Mit-
subishi UFG Financial Group, took capital shares in American companies. Even if Japan has not
been at the epicentre of the financial crisis, it is involved in the economic crisis and its financial
system is suffering too.
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FINAL REPORT, 9 JUNE 2009
1.3.4. New competitors
The Oliver Wyman Report 2008, The State of the Financial Industry, pointed out that Russian
state-owned firms are taking the lead in Eastern Europe where previously only European firms
like the Italian group Unicredit held sway. Russia has gained significant economic influence
across CIS (Commonwealth of Independent States) in the telecom, dairy, machinery and financial
services sectors. This is particularly the case in the Ukrainian financial services. Though not yet
cohesive, the Russian industry is becoming a major player by expanding into Eastern Europe.
As for Chinese companies, "… they have risen to the top of the league of most valuable financial
services players around the world, flushed by trillions of dollars in households’ savings. They now
threaten established players in western economies." (Oliver Wyman, Report 2008). As the Chi-
nese market is not able to absorb such financial investment, they invest abroad, seeking access
to global expertise.
We should not, however, neglect other countries such as New Zealand and Australia, who are
willing to compete against the best in the sector. The Australian Agency for Development com-
pares the growth of financial services in Australia and in the rest of the world. The financial ser-
vices sector is the third largest industry in Australia with an annual growth of 9% between 2000
and 2005. In turn, the financial market doubled between 2001-2002 and again between 2005-
2006. However, it should be noted that Sydney’s market is half the size of London’s and a 40
th
the size of New York City's. As of November 2006, the sector employs some 392,500 people.
India: Though it promises to change slowly, public banks still manage 75% of the country’s assets
and the sector remains strongly regulated. Thus, despite WTO (World Trade Organisation) re-
quirements it is currently difficult for a foreign bank to penetrate the Indian market.
Latin America is in a period of growth with solid deposits and investments in information technol-
ogy and has the support of large European groups such as the Spanish Santander.
1.4. Employment
1.4.1. Trends of total employment in the sector
Financial services represent 5,629,600 employees in the EU27 (Source: Labour Force Survey,
LFS, 2007), 65% of whom work in the banking industry, 20% in the insurance industry and 15%
are intermediaries (agents and brokers).
CEDEFOP (European Centre for the Development of Vocational Training) provided the figure of
6,014,000 employees in 2006. Assuming that total employment amounts to about 223 million
people, the financial services sector represents 2.69% of total EU employment. The data reveal a
small increase of 0.5% p.a. between 1996 and 2006. At the same time the increase in employ-
ment for the whole service sector was 3% p.a.
The Associations of the Representatives furnishes us with statistics for different types of compa-
nies:
• The EBF(European Banking Federation) statistics for the European private banks sector
demonstrate that by December 31, 2006 there were 3,000,000 people working in 204,446
branches for 7,126 banks.
• 730,000 people were working for savings banks
• 747,000 for co-operative banks.
• 1,000,000 persons were employed by insurers
• 250,000 in different small intermediary companies.
These employees are mostly part of a full-time workforce: 90.5% in 1994, although this figure is
slowly changing: 87.2% in 2005 (CEDEFOP).
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 44
FINAL REPORT, 9 JUNE 2009
1.4.2. Employment by countries
The LFS (Labour Force Survey) data between 1996 and 2006 discloses countries which had an
employment increase in the financial sector during the fore mentioned period: Ireland, United
Kingdom, Greece, Spain, France, Luxembourg, Netherlands, Denmark, Slovenia and Sweden.
Table 10 Financial services employment by country
1,000 persons, 1996 to 2006
Country 1996 2006
Belgium 140.9 140.6
Bulgaria — 38.4
Czech Republic — 71.1
Denmark 82.5 91.7
Germany 1,174.9 1,113.8
Estonia — 7.0
Ireland 48.8 83.9
Greece 87.0 104.0
Spain 328.0 399.7
France 674.0 770.1
Italy 561.7 561.6
Cyprus — 17.7
Latvia — 23.9
Lithuania — 15.4
Luxembourg 16.0 21.5
Hungary 81.1 71.7
Malta — 9.2
Netherlands 215.8 262.3
Austria 120.8 125.7
Poland — 299.4
Portugal 122.4 82.8
Romania — 90.6
Slovenia 19.2 22.1
Slovakia — 38.6
Finland 47.0 44.1
Sweden 72.6 82.4
United Kingdom 1,088.8 1,172.3
Source: Eurostat 2006
Contrary to this period of augmentation, we can see a decline in employment in this sector from
1996 to 2006 in Germany, Portugal and Finland.
The volume of employment remained steady in Italy, Austria and Belgium. Data was not provided
for certain countries which have not been mentioned, thus no conclusion can be drawn.
Shares in the financial service employment sector as a percentage of total employment, listed by
country:
Table 11 Financial services employment shares by country
% share of total national employment, 2006
Country %
Belgium 3.88
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 45
FINAL REPORT, 9 JUNE 2009
Bulgaria 1.42
Czech Republic 1.75
Denmark 3.57
Germany 3.39
Estonia 1.17
Ireland 4.92
Greece 3.69
Spain 2.46
France 3.44
Italy 3.32
Cyprus 3.31
Latvia 2.48
Lithuania 1.21
Luxembourg 11.94
Hungary 2.08
Malta 4.71
Netherlands 3.68
Austria 3.70
Poland 2.71
Portugal 2.12
Romania 1.47
Slovenia 2.74
Slovakia 1.92
Finland 2.07
Sweden 2.08
United Kingdom 4.77
Source: Eurostat 2006
Looking at employment, the most comprehensive countries in 2006 were the United Kingdom
with 1.2 million persons working in the sector (4.77% of the total employment), Germany with 1.1
million (3.39%) and France with 0.7 million (3.44%). The Netherlands is also an important country
for the sector at 3.94%.
Luxembourg has the largest share of employment in the sector at 11.94% of the total employment
because there are specific liberal exchange regulations for financial business with international
clients in this country.
For Germany and France the employment figures are in almost the same relation to that of the
total population, but for Great Britain the relation is much higher. This establishes Great Britain as
the leader in the European financial services, represented by 14% of the GDP as opposed to only
8% for the European Union as a whole.
Spain, Italy, Austria and Poland rank medially in financial services with 0.4 million, 0.3 million and
0.1 million employees working in the sector, respectively.
Scandinavia can be seen as one geographical region with strong cross border links between
companies: it represents a total of 257,500 employees in Sweden, Denmark, Finland, Latvia and
Lithuania. Data is not available for Estonia.
Individual share of employment within the financial services sector for each European nation:
Table 12 Distribution of financial services employment within the EU27
Percentage share of total EU27 employment in financial services, 2006
Country Share
United Kigdom 20.35
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 46
FINAL REPORT, 9 JUNE 2009
Germany 19.33
France 13.36
Italy 9.75
Spain 6.93
Portugal 5.20
Netherlands 4.55
Poland 5.20
Belgium 2.44
Austria 2.18
Greece 1.80
Ireland 1.45
Denmark 1.59
Romania 1.59
Sweden 1.42
Hungary 1.24
Czech Republic 1.24
Finland 0.77
Slovakia 0.67
Bulgaria 0.66
Latvia 0.42
Slovenia 0.38
Luxembourg 0.37
Cyprus
Estonia
0.30
0.29
Lithuania 0.26
Malta 0.16
Source: FLS 2006
Three countries have the lion’s share of more than half of the total European employment in the
financial services sector: the United Kingdom, Germany and France together total 53%.
The group of Western European large countries including the United Kingdom, Germany, France,
the Netherlands, Spain and Italy represent 75% of total employment in the financial services in
Europe.
The Scandinavian countries Sweden, Denmark, Finland, Estonia, Latvia and Lithuania represent
only 4.56%.
Chart 4 Shares of financial services in total national employment 2006
CC
3 6
1.2
2.5
2.1
2.1
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 47
FINAL REPORT, 9 JUNE 2009
1.4.3. Total employment in the US
From the Bureau of Labor Statistics (2006), employment in the US financial services sector rep-
resented 4.7% of total employment, compared to 2.69% in Europe (5,629,600 / 14,070,000).
4.1 million persons are employed in the American financial services sector: 1.8 million people
work in the banking industry (44%) and 2.3 million people in the insurance industry (56%): 62% in
companies and 38% in small insurance agencies, brokerage and providers of other insurance
services. However, it must be noted that the distribution is not the same: in the United States, the
insurance sector is bigger than that of the banking sector. It encompasses more occupations
such as claims adjusters, examiners, and investigators. This also reflects a feature of the Ameri-
can society with a strong legal and insurance system. The sub-sector of intermediaries is very
developed.
1.4.4. Occupational structure of workers
The following Tables present the structure of occupational profiles, the education level for each
group of occupational profiles, the distribution by age of the workforce, and the distribution be-
tween men and women. The Eurostat occupational structure of workers is the basis of this analy-
sis (ISCO): as the definition of occupational groups is not always suitable with the functions or-
ganisation in the financial services sector, these findings should be interpreted carefully.
2
We have chosen to present only the statistics of countries which have the most important share
of employment in the financial services sector. These countries are: Germany, Spain, France,
Italy, Poland and Great Britain. Likewise, the totals for the EU15 and for NM10 are assessed.
As the primary shares for occupational groups, education level, age distribution and the propor-
tion of male/female distribution differ only slightly in the three sub-sectors, statistics for the whole
of the financial service sector are presented. The only exception is the sub-sector of intermediar-
ies which has a very large proportion of business and finance professionals who are either self-
employed or employees.
Differences between countries must be taken into account; for example, a larger share of clerks
in some countries and thus a lower percentage of professionals and vice versa, cannot be ex-
plained simply by the organisation of work and the real structure of the workforce, but by the fact
that similar jobs require different qualifications in different countries or are defined differently.
Note that this occupational profiles’ nomenclature is more suitable for the manufacturing industry
than for the services industry.
While analysing the division of employment by occupation it is worthwhile to point out that the
highest number of senior managers can be found in France followed by the UK. If one compares
France with Germany, where the share of senior managers is the smallest (4.7%), an astonishing
difference of 25.1 percentage points exist. Furthermore, this category is slightly larger (by some 5
percentage points) in the EU15 as opposed to the NM10, and the share of this category is larger
than that of the total economy (by 6 percentage points for EU15 and for NM10).
Table 13 Division of employment by occupation
Percentage of total persons employed in the sector, 2006
Financial services
Total
economy ISCO
occupations
DE ES FR IT NL PL UK EU 15
NM
10
EU 15
NM
10
2
This Chapter uses the occupational classification ISCO. The link of occupational groups to functional activities is
given in Table 23.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 48
FINAL REPORT, 9 JUNE 2009
Legislators, senior officials and
managers
4.4 13.8 29.5 7.6 9.5 10.4 25.5 15.2 10.1 9.0 6.0
Computing professionals and
computer associate profes-
sionals
3.5 3.6 4.5 1.8 7.9 5.0 5.5 4.2 4.1 1.9 1.2
Business professionals, fi-
nance and sales associate
professionals
8.8 23.7 9.6 42.1 29.4 47.7 23.5 21.4 44.1 4.6 3.6
Professionals, technicians and
associate professionals
29.6 18.9 17.8 10.8 22.6 10.8 3.3 15.7 15.0 24.4 20.6
Clerks 51.0 37.3 31.0 34.9 28.5 23.6 37.8 39.7 22.7 11.9 6.6
Service workers and shop and
market sales workers
0.4 0.7 6.2 0.9 0.8 0.8 1.5 1.6 1.2 14.2 12.5
Craft and related trade workers 0.5 0.7 0.4 0.7 0.3 0.3 0.6 0.5 0.8 21.5 28.8
Elementary occupations 1.8 1.2 1.0 1.1 0.9 1.4 2.3 1.7 2.0 12.6 20.8
Total employment
100
100 100 100 100 100 100 100
100
100 100
Source: Eurostat, 2008
The highest number of IT specialists can be found in the Netherlands, followed by the UK and
Poland. The smallest number of IT specialists prevails in Italy. While analysing data from the New
Member States as opposed to that of the old, it can be surmised that the number of IT specialists
is neither dependent on its time of induction into the European Union nor on its size. Indeed the
amount of IT specialists is similar across the board.
The largest share of occupations in the whole sector are in the groups of "professionals of finance
and sales professionals", and "professionals, technicians and associated".
The most numerous group of professionals and technicians can be found in Germany and in the
Netherlands, with the smallest share in Poland. Yet Germany additionally possesses the largest
share of clerks, significantly more than in other countries – the difference can reach up to 22.5
percentage points (in comparison with the Netherlands) or 27.4 in comparison with Poland. In this
respect, Germany is high above the average for both old and New Member States. It will be more
conspicuous later that Germany also has the highest percentage of "medially skilled" workers.
This is related to the organisational structure of German financial institutions with big companies
in both banking and insurance, but also to the training system which promotes intermediary skills
in particular.
If one considers finance, sales and other professionals, one ascertains that the countries with a
large share of clerks, such as Germany, have smaller shares of professionals and vice versa, as
is the case in France and Poland. All the New Member States have a larger share of profession-
als than clerks compared to the share of professionals in the old member states. This is due in
large to a younger and more professional population which can be found in the New Member
States. If "clerks" refers to back office and administrative occupations, it could mean that old
member states have sometimes kept an old work organisation with a high number of back office
employees. Studies show that this is the case in France, Greece, Portugal, Spain and Italy.
Table 14 Change in division of employment by occupation
Percentage point difference of occupational shares, 2000 to 2006
Financial services
Total
economy
DE ES FR IT NL PL* UK EU NM EU NM
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 49
FINAL REPORT, 9 JUNE 2009
15 10 15 10
Legislators, senior officials and mana-
gers
-0.8 0.7 4.4 0.1 -1.4 — 3.4 1.6 2.6 0.5 0.9
Computing professionals and com-
puter associate professionals
0.6 1.8 0.2 1.2 0.2 — 0.1 0.6 1.0 0.4 0.6
Business professionals, finance and
sales associate professionals
1.7 4.8 2.2 4 -3.1 — 3.4 2.9 19.6 -0.7 1.6
Professionals, technicians and as-
sociate professionals
1.8 3.6 -0.2 2.7 0.2 — 1.1 1.0 -4.7 -1.4 1.6
Clerks -2,8 -11 -11.5 -7.6 4.5 — 6.4 -6.6 -0.8 -1.8 0.5
Service workers, shop and market sa-
les workers
0 0.1 5.4 0.1 0 — 0.6 0.6 -1.0 -0.2 1.9
Craft and related trade workers -0.2 0.3 -0.4 -0.2 0 — -0.3 -0.2 -1.7 -2.4 0.2
Elementary occupations -0.3 -0.3 -0.1 -0.1 -0.5 — 1.4 0.1 — 0.4 1.3
* data available only from 2006
Source: Eurostat, 2008
Regardless of whether they are old or New Member States in lower categories of occupations,
the differences are not that striking between the EU members. In general, the three groups ("Ser-
vice workers and shop and market sales workers", "Craft and related trade workers" and "Ele-
mentary occupations") have a very small share in the occupations: 3.8% in the EU15 and 4% in
NM10, compared to 48.3 and 62.1 for the total economy.
While analysing the changes in the division of employment by occupation between 2000 and
2006, it can be seen that the share of employment had been rising in the category of senior man-
agers in France and the UK, while it had been decreasing in Germany and the Netherlands. The
difference reached 5.8 percentage points. The share of IT professionals slowly increased in all
countries studied, but the increase was slightly larger in the New Member States.
The category of business, finance and sales professionals is increasing in the majority of member
states. The largest increase has been in Spain. The difference between the EU15 and the NM10
is conspicuous: in the NM10 the rise of employment in this occupational category is at 19.6% as
opposed to a negligible 2.9% in the EU15. The contrary can be observed in the category of pro-
fessionals: there is a decrease in their number in the NM10, while in EU15 there is a slight rise. In
the category of clerks there is a visible decrease of their share in all EU15; in the NM10 the de-
crease is also visible although not that significant.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 50
FINAL REPORT, 9 JUNE 2009
1.4.5. Employment by educational attainment
Table 15 Employment in financial sector by education level
Percentage of total employed in each occupation in the sector, 2006
Source: Eurostat, 2008
Analysing the financial sector based on educational prowess, one can see that there is a rela-
tively large number of managers and senior managers with a high level of education in countries
such as Spain and the Netherlands. The largest number can be found in Poland. Interestingly, the
proportion of senior managers with high education is much higher in the NM10 than in EU15 (the
difference reaches 25.5 percentage points). Therefore one can conclude that only graduates
attain high managerial positions in the NM10 but in the old member states there remains some
possibility to be promoted from the ground up.
There are remarkable dissimilarities regarding IT employees. This concerns the number of em-
ployees with an intermediate level of education; there is a divergence of some 63.6 percentage
points between France and Italy. Likewise, this reflects the category of employees with higher
education: there are countries which possess a high number of such employees, such as Spain
or France, and those with a significantly lower level of IT employment like Italy. Moreover, there is
a difference of some 10 percentage points between the EU15 and the NM10.
However, there are sizable variances, for example between Italy and Poland which reaches al-
most 30 percentage points.
Financial services
Total
economy
DE ES FR IT NL PL UK
EU
15
NM
10
EU
15
NM
10
Low 3.5 5.3 10.0 2.4 2.9 — 8.5 7.0 0.7 22.0 1.5
Medium 39.1 24.8 29.4 66.7 26.7 17.6 44.4 37.7 18.6 40.2 48.9
Legislators, senior
officials and managers
High 57.4 69.9 60.6 30.8 70.3 82.4 47.1 55.2 80.7 37.8 49.7
Low 1.6 1.1 4.5 — 4.2 — 7.7 4.4 0.1 5.1 0.8
Medium 45.0 21.2 14.5 78.1 41.4 23.1 39.0 36.4 29.2 36.0 40.8
Computing professio-
nals and computer as-
sociate professionals
High 53.5 77.7 81.0 21.9 54.5 76.9 53.3 59.2 70.7 58.9 58.4
Low 5.1 11.9 10.9 5.3 6.0 — 8.9 7.3 0.5 12.7 0.9
Medium 57.2 28.8 42.1 65.4 42.0 38.7 47.3 50.7 45.4 46.0 44.6
Business professionals,
finance and sales as-
sociate professionals
High 37.7 59.3 47.0 29.2 52.0 61.3 43.7 42.0 54.1 41.2 54.5
Low 5.8 5.5 11.2 7.7 7.4 — 8.2 6.9 0.3 6.0 0.5
Medium 67.1 21.3 41.3 61.2 39.8 37.2 42.8 51.7 39.8 33.8 43.6
Professionals, techni-
cians and associate pro-
fessionals
High 27.1 73.1 47.4 31.3 52.7 62.8 49.0 41.3 59.9 60.2 55.8
Low 6.4 9.7 17.6 10.9 19.0 0.6 20.4 11.9 0.8 21.2 3.7
Medium 75.5 35.2 46.8 68.9 58.7 74.7 60.0 61.7 76.4 59.9 81.2 Clerks
High 18.1 55.1 35.6 20.2 22.3 24.7 19.5 26.3 22.7 18.9 15.1
Low 21.3 31.6 6.0 30.8 25.7 17.3 11.7 11.8 9.1 34.6 8.4
Medium 68.2 60.5 35.1 44.9 43.5 74.2 65.1 46.8 79.0 54.6 84.7
Service workers, shop
and market sales wor-
kers
High 10.4 7.9 58.9 24.2 30.7 8.5 23.2 41.4 11.9 10.8 6.9
Low 12.0 44.5 15.9 31.3 38.7 — 26.3 28.5 — 43.9 11.3
Medium 78.3 34.0 50.9 56.0 33.5 — 40.6 49.5 98.3 49.2 86.8
Craft and related trade
workers
High 9.8 21.4 33.3 12.7 27.8 — 33.1 22.0 1.7 6.9 1.9
Low 48.6 81.9 57.0 50.3 63.0 35.0 47.7 55.0 27.9 57.0 42.5
Medium 45.9 10.4 34.6 36.8 33.4 65.0 41.5 37.2 71.1 37.4 55.8 Elementary occupations
High 5.5 7.7 8.4 12.8 3.6 — 10.8 7.8 1.1 5.7 1.7
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 51
FINAL REPORT, 9 JUNE 2009
Table 16 Change in employment; financial services by level of education
Percentage point change, 2000 to 2006
Financial services
Total
economy
DE ES FR IT NL PL* UK
EU
15
NM
10
EU
15
NM 10
Low 0 -3 -2.9 -0.4 1.8 — -0.8 -1.4 -0.8 -1.8 1.5
Medium 2.8 -14.1 -3 -3 -11.5 — -2 -4.3 -13.3 -0.3 -0.6
Legislators, senior offi-
cials and managers
High -2.8 17.1 5.9 3.4 13.2 — 2.8 5.6 14.1 2.1 2.2
Low -0.3 — -2.9 — -1.7 — -2.8 -1.8 -0.9 -0.6 -0.5
Medium -2.9 10.9 -10.8 -19 -0.6 — 4.1 -3.1 -9.3 -1.4 -8.2
Computing professionals
and computer associate
professionals
High -3.2 12 13.7 19 2.4 — -1.3 4.9 9.2 -2.0 8.7
Low 0.3 -15.2 0.2 0.1 -2.2 — -5 -3 0 -1.4 -1.0
Medium 0.6 -3.5 -1.5 -4.8 -12.2 — -1.5 -3.8 -14.9 -2.4 -14.9
Business professionals,
finance and sales as-
sociate professionals
High -0.8 -18.7 1.3 4.9 14.4 — 6.4 6.8 15.4 3.7 15.9
Low -1.4 -5.7 0.2 2.6 -2.4 — 1.0 -1.1 -2.0 -0.9 -0.9
Medium 1.7 5.4 -4.7 -9.6 -18 — 5.8 -2.9 -17.2 0.3 -6.4
Professionals, techni-
cians and associate
professionals
High -0.3 10.9 4.4 7 20.3 — -6.8 3.9 17.4 0.6 7.3
Low -2.2 -6.3 -1.7 0.4 -1.2 — -7.4 -3.4 0 -3.9 -3.1
Medium 3.1 -5.8 -6.2 -7.2 -4.2 — 3.5 -1.4 -8.5 0.2 -3.0 Clerks
High -1.3 12.2 7.9 -8.1 5.3 — 3.8 4.7 9.9 3.7 6.1
Low 34.3 16.1 8.8 1.9 -41.7 — -15.2 -15.3 -2.4 -6.9 -3.4
Medium 32.4 40.9 -29.3 -8.4 20.7 — 9.6 -5.2 -9.1 3.9 2.5
Service workers, shop
and market sales workers
High 17.2 57 38.1 5.2 20.9 — 5.6 21.4 0.7 3.0 0.9
Low -0.7 10.2 14.7 19.8 11.8 — -29 -8 — -4.2 -4.1
Medium 3.1 -21.9 -6.5 6.6 -39.6 — 4.2 -4.9 13.2 3.3 5.0
Craft and related trade
workers
High -3.7 11.6 21.3 — — — 24.8 12.9 -1.8 0.8 -0.9
Low 5.4 -1.4 15.1 29.0 -25.1 — -14.0 -8.4 1.9 -8.7 -17.6
Medium 6.0 -4.9 6.7 16.1 21.5 — 3.2 2.7 -2.9 7.2 17.6 Elementary occupations
High 0.6 6.2 — — — — — 5.6 — 1.6 -0.1
* data available only from 2006
Source: Eurostat, 2008
In the category of professionals and technicians, the major observation is that there are more
employees with an intermediate skill level in EU15, while the contrary is true for those possessing
qualifications that reflect a higher level of education. A greater number of employees with a high
skill level can be found in the NM10. These figures need to be assessed with the distribution by
age. A significant number of young highly skilled graduates are entering the sector.
In the category of clerks there are more employees with a medial skill level employed in the
NM10. However, one remarks that the percentage of this group is indeed smaller in proportion to
that of employees with a higher skill level in a similar group. In the clerk group, there are signifi-
cant differences among countries: for example in Germany the majority of clerks have a medial
level of education, while in Spain the majority of clerks have high level of education.
Although in contrast they do not represent a large share of occupations, an interesting observa-
tion can be made by analysing service, shop, and sales workers. It is striking that the number of
employees in this group with higher education is significantly lower in NM10 than that of the EU15
which represents a divergence of 29.5 percentage points.
By looking at the difference in the educational level in the group of senior managers between
2000 and 2006, the general observation is that the number of employees with a medial level of
education is decreasing in the NM10 to an even greater degree than in the EU15. At the same
time, the number of senior managers with a higher level of education is increasing, again to a
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 52
FINAL REPORT, 9 JUNE 2009
greater extent in the NM10. However, the largest increase of high skilled senior managers has
been observed in Spain.
The change in qualification levels can also be acutely seen within the IT group. The number of
employees with medial skills is decreasing, while the number of employees with high skills is
increasing. The only country where the share of IT employees with a medial level of education
increased was in Spain. The biggest increase in the share of the employed with a high level of
education was observed in Italy, followed by France. Often increases and decreases are exactly
or nearly proportional; a decline of 10.8% of medially skilled workers in France is contrasted by
an augmentation of 13.7% of highly skilled workers. One can see a mirror image in Italy where a
decrease of 19% is contrasted by an increase of 19%.
With the growth of highly educated employees, employment of low skilled and medially skilled
employees in the category of business, finance, and sales professionals is slowly diminishing in
all EU countries. This trend is even more evident in the NM10.
In the category of professionals and technicians in all the European countries, there is a shift
between medially skilled employees and highly skilled employees. In the NM10 the shift is more
pronounced. This mirrored effect is present in the entire economy, but more acute in the financial
services sector. The biggest decrease in medially educated employees, distinguished by the
largest increase of highly educated employees, is found in the Netherlands. There was likewise a
significant decrease of the employment of medially skilled employees in the NM10.
It is astonishing that the number of employees with a high level of education also increased in
service, shop and sales activities, though to a greater extent in the EU15 than in the NM10. A
possible explanation for this is that one has come to expect higher competencies among these
personnel.
From these trends one can conclude that there is an inclination to upgrade occupational skills.
The major change is in the increase of the share of highly skilled personnel in IT, finance, busi-
ness, sales professionals and in the clerks group sectors.
If we consider the LFS 2007 figures, we can see that the share of low-skilled employees and
people with basic schooling is still decreasing amongst all the groups, as well as in EU15 and the
NM10. We can also see that the percentage of medium-skilled people is decreasing within the
group of “managers” and within the two groups of professionals and clerks. The workforce struc-
ture is changing towards a high-skill profile.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 53
FINAL REPORT, 9 JUNE 2009
1.4.6. Employment by age group
Table 17 Employment by age group; financial services
Percentage of total employed in each occupation, 2006
Financial services
Total
economy
Age
group
DE ES FR IT NL PL UK
EU
15
NM
10
EU
15
NM
10
15-39 36.2 39.3 35.4 19.4 41.0 46.0 53.3 40.8 46.9 35.1 39.1
40-49 34.1 35.3 33.9 37.6 38.4 29.4 31.4 34.3 30.8 32.4 30.7
Legislators, senior officials
and managers
50+ 29.7 25.4 30.7 43.0 20.6 24.6 15.2 24.9 22.2 32.5 30.2
15-39 45.9 55.0 51.0 34.7 47.6 69.6 62.6 52.8 67.7 61.8 73.9
40-49 34.6 30.7 27.7 38.6 36.6 18.6 28.0 31.0 18.4 26.1 15.6
Computing professionals
and computer associate
professionals
50+ 19.5 14.3 21.4 26.7 15.8 11.8 9.4 16.2 13.9 12.2 10.5
15-39 43.4 51.9 49.2 43.2 57.3 62.9 63.8 51.5 60.4 55.8 60.5
40-49 31.6 26.2 36.1 30.9 24.8 23.0 21.4 27.2 23.5 23.7 21.8
Business professionals,
finance and sales associ-
ate professionals
50+ 25.0 22.0 14.7 26.0 17.9 14.2 14.9 21.3 16.2 20.6 17.7
15-39 44.5 54.5 39.1 50.4 59.4 52.3 60.8 47.7 55.0 45.1 47.5
40-49 31.8 26.0 25.5 35.9 24.0 20.6 25.2 29.3 22.0 28.6 27.0
Professionals, technicians
and associate profession-
als
50+ 23.6 19.5 35.4 13.7 16.6 27.1 14.0 23.0 22.9 26.3 25.5
15-39 49.2 57.9 45.6 50.9 58.6 61.7 66.4 54.3 60.8 50.9 54.6
40-49 28.1 22.5 24.9 31.3 25.7 22.8 19.2 25.4 23.4 26.7 25.4 Clerks
50+ 22.6 19.6 29.6 17.8 15.7 15.5 14.6 20.3 15.8 22.4 19.9
15-39 28.6 66.2 76.8 79.3 48.5 59.8 72.3 71.3 56.9 57.6 60.9
40-49 30.1 27.9 10.9 16.9 20.5 31.7 7.9 13.5 25.2 23.8 22.8
Service workers, shop and
market sales workers
50+ 41.3 5.9 12.3 3.8 31.0 8.5 19.8 15.2 17.9 18.7 16.4
15-39 23.8 55.1 53.2 42.1 63.5 — 40.4 39.4 27.8 49.5 51.9
40-49 28.7 17.5 32.1 29.5 — 11.8 22.8 27.1 25.2 27.6 27.7
Craft and related trade
workers
50+ 47.5 27.5 14.7 28.3 36.5 88.2 36.8 33.4 47.0 22.8 20.4
15-39 20.2 22.6 63.3 28.6 42.1 38.9 45.6 34.9 26.2 42.8 41.2
40-49 31.8 36.7 21.7 51.3 15.0 26.7 20.1 26.8 29.4 27.1 23.9 Elementary occupations
50+ 48.0 40.7 15.0 20.1 42.9 34.5 34.3 38.4 44.5 30.1 34.9
Source: Eurostat, 2008
By looking at the age structure of the financial sector in 2006 in the EU27, one can observe that
this sector is “younger” in the NM10 than in the EU15. Likewise there is a more than 50 point
difference in the NM10 of personnel employed in the lower occupational level than in the EU15.
The greatest number of young people aged 15 to 39 in the senior management positions are
employed in Poland and the UK. The oldest senior managers can be found in France, Germany
and Italy – the majority of whom are over 50.
Similar observations concern IT employees. This youthful group totals 52.8 % of its employees
between the ages of 15 and 39 in the EU15. In the NM10, this predisposition is even starker at
67.7%. There is almost a 15 percentage point difference in favour of the NM10 in the age cate-
gory 15-39 and 40-49. The smallest number of “young” IT personnel are employed in Italy, which
also counts proportionally less IT employees.
One finds a similar pattern across different age categories among business, finance and sales
professionals. However, these groups are inclined to be even younger in the NM10 whose pro-
fessionals and technicians have a median age between 15 and 39 compared to a median age
between 40 and 49 in the EU15.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 54
FINAL REPORT, 9 JUNE 2009
In the category of clerks the age pattern tends to be quite similar between EU15 and NM10,
though there are still more numerous clerks over 50 in the EU15.
With the exceptions of Germany and France, the age distribution for all professional and clerk
groups mirrors that of the total economy.
Table 18 Change in employment by age group; financial services
Percentage point change, 2000 to 2006
Financial services
Total
economy
DE ES FR IT NL PL* UK
EU
15
NM
10
EU
15
NM 10
15-39 -8.9 3.6 2.4 -9.6 -0.3 — -5.1 -3.3 9.2 -5.4 0.8
40-49 -7.0 -5.1 3.6 1.9 -5.0 — -4.7 4.0 -14.7 3.5 -5.8
Legislators, senior officials
and managers
50+ -3.5 1.4 -5.9 7.7 -2.1 — 0.3 -0.7 5.4 1.9 5.0
15-39 -13.8 -34.2 0.1 -47.0 -13.8 — -15.4 -14.7 2.0 -7.6 4.5
40-49 5.0 20.2 -5.0 20.3 -25.9 — 9.7 8.1 -0.3 5.3 -5.3
Computing professionals
and computer associate
professionals
50+ 19.6 — 5.0 — -1.1 — 5.6 6.6 -1.7 2.4 0.8
15-39 -0.2 -7.8 -14.4 -9.2 -8.3 — -1.5 -5.8 1.0 0.3 7.1
40-49 1.3 1.6 12.2 3.1 -38.3 — 1.5 2.8 -3.2 -0.2 -6.6
Business professionals,
finance and sales associ-
ate professionals
50+ 10.8 6.3 2.2 6.3 -2.5 — 0.1 3.0 2.3 0.0 0.5
15-39 -6.6 -3.8 -9.2 0.5 -8.5 — 3.4 -5.9 0.3 -3.2 1.6
40-49 7.2 -2.5 -6.9 2.6 -37.9 — -6.5 2.5 -7.9 -0.4 -4.6
Professionals, technicians
and associate profession-
als
50+ 3.8 6.3 16.1 -3.1 6.0 — 3.0 3.4 7.6 3.6 3.1
15-39 -7.7 8.4 -1.8 -4.7 -10.5 — -4.7 -4.0 -3.3 -4.7 2.8
40-49 3.8 -12.3 -10.3 1.8 -42.6 — 2.0 -0.4 -1.1 1.1 -5.6 Clerks
50+ 10.0 3.9 12.2 3.0 0.9 — 2.8 4.4 4.4 3.5 2.6
15-39 -9.8 -13.4 -2.4 -1.8 -24.9 — -4.3 2.4 -11.6 -2.5 -2.0
40-49 -5.4 14.1 -3.1 4.0 -41.6 — -10.3 -4.2 4.0 1.7 -2.2
Service workers, shop and
market sales workers
50+ -1.5 -0.7 5.4 -2.2 11.3 — 6.0 1.8 7.6 0.9 4.3
15-39 -10.4 10.9 5.1 -7.3 14.7 — -10.3 -3.7 -23.5 -4.9 -2.8
40-49 -11.3 -30.4 17.8 -18.3 -27.6 — -4.2 -5.9 -12.0 2.2 -2.4
Craft and related trade
workers
50+ — 19.5 -22.9 25.5 21.3 — 14.5 9.4 35.4 2.6 5.2
15-39 -5.3 -18.3 14.4 -6.4 24.2 — 15.9 4.4 -16,5 -3.7 2.5
40-49 9.4 10.0 0.8 26.4 -7.4 — -2.7 1.8 -0.1 2.6 4.5 Elementary occupations
50+ 37.5 8.3 -11.7 -19.9 -4.5 — -13.3 -6.0 16.8 1.1 -7.0
* data available only from 2006
Source: Eurostat, 2008
The most significant changes were observed in Germany and the Netherlands, particularly in the
over 50 category.
1.4.7. Employment by gender
In general, senior managers are more likely to be men in the EU15 – the highest disparity can be
observed in Italy where 81.6% are men and 18.4% are women; and in Spain 84.8% men and
15.2% women. The lowest gender gap is found in France. In the case of New Member States the
proportion of male and female employees is more equal at 53.3% men and 46.7% women. Pro-
portionally there are more women employed in senior positions in the financial sector than in the
whole economy both in the EU15 and the NM10.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 55
FINAL REPORT, 9 JUNE 2009
The share of men employed in IT jobs amounts to 80% both in the EU15 and NM10.
In the categories of business, finance and sales the majority of female employment can be ob-
served in France and Poland. Again, in the NM10 the majority of employees in these occupations
are women. Regarding professionals and technicians, there is a visible trend of prevailing male
employment in the EU15 and female employment in the NM10.
The same situation can be found in the category of clerks: there is predominant female employ-
ment both in EU15 and NM10; however in NM10 there are many more women employed in this
occupation than men (difference of more than 20 percentage points).
Table 19 Employment by gender; financial services
Percentage of total employed in each occupation in sector
Financial services
Total
economy
Sex DE ES FR IT NL PL UK
EU
15
NM
10
EU
15
NM
10
Men 70.0 81.6 58.7 84.8 75.2 50.3 64.6 67.0 53.3 67.4 66.3
Legislators, senior
officials and managers
Women 30.0 18.4 41.3 15.2 24.8 49.7 35.4 33.0 46.7 32.6 33.7
Men 78.4 80.0 63.6 82.6 84.3 88.4 87.3 79.0 82.2 82.7 79.5
Computing profession-
als and computer
associate professionals
Women 21.6 19.9 36.4 17.4 15.7 11.6 12.7 21.0 17.8 17.3 20.5
Men 75.1 56.2 38.0 70.2 60.9 28.4 59.7 61.6 33.0 59.3 42.4
Business professionals,
finance and sales
associate professionals
Women 24.9 43.8 62.0 29.8 39.1 71.6 40.3 38.4 67.0 40.7 57.6
Men 54.9 42.8 44.3 41.8 52.6 19.1 50.8 49.9 25.3 46.6 38.6
Professionals, techni-
cians and associate
professionals
Women 45.1 57.2 55.7 58.2 47.4 80.9 49.2 50.1 74.7 53.4 61.4
Men 39.3 45.7 25.7 46.8 30.8 12.5 26.5 35.7 14.8 30.6 28.7
Clerks
Women 60.7 54.3 74.3 53.2 69.2 87.5 73.5 64.3 85.2 69.4 71.3
Men 36.0 40.9 20.2 44.4 41.4 71.7 42.7 31.3 81.4 31.3 35.2
Service workers, shop
and market sales work-
ers
Women 64.0 59.1 79.8 55.6 58.6 28.3 57.3 68.9 18.6 68.7 64.8
Men 84.8 77.5 73.1 64.3 88.0 100.0 87.6 81.2 97.6 88.4 79.6
Craft and related trade
workers
Women 15.2 22.5 26.9 35.7 12.0 — 12.4 18.8 2.4 11.6 20.4
Men 25.1 22.8 7.5 57.2 7.0 28.0 46.3 31.4 20.2 53.0 52.8
Elementary occupations
Women 74.9 77.2 92.5 42.8 93.0 72.0 53.7 68.6 79.8 47.0 47.2
Source: Eurostat, 2008
Consequently, as of 2006 there were more women employed in the occupational categories
sector. The most pronounced change can be seen in both the senior management category and
the elementary occupations. The only occupation category where the proportion of male employ-
ment increased was IT jobs; moreover, the increase was more significant in the NM10 than in the
EU15.
Table 20 Change in employment by gender; financial services
Percentage point change, 2000 to 2006
Financial services
Total
economy
Sex DE ES FR IT NL PL* UK EU NM EU NM
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 56
FINAL REPORT, 9 JUNE 2009
15 10 15 10
Men -9.9 -4.8 -12.4 -4.9 -3.6 — -0.8 -5.8 -10.3 -2.5 -2.8
Legislators, senior officials
and managers
Women 9.9 4.8 12.4 4.9 3.6 — 0.8 5.8 10.3 2.5 2.8
Men -2.5 7.0 -13.2 14.4 -0.8 — 10.5 0.7 18.3 0.3 8.3
Computing professionals and
computer associate profes-
sionals
Women 2.5 -7.0 13.2 14.4 0.8 — -10.5 -0.7 -18.3 -0.3 -8.3
Men 1.7 -10.3 -4.2 0.4 -8.0 — -6.8 -3.9 -6.0 -5.9 -0.8
Business professionals,
finance and sales associate
professionals
Women -1.7 10.3 4.2 -0.4 8.0 — 6.8 3.9 6.0 5.9 0.8
Men 1.8 -11.3 -4.7 -7.4 0.2 — -5.6 -2.2 -3.9 -1.6 -1.6
Professionals, technicians
and associate professionals
Women -1.8 11.3 4.7 7.4 -0.2 — 5.6 2.2 3.9 1.6 1.6
Men 0.7 -13.7 -2.2 -6.8 1.2 — 3.1 -2.0 -1.5 -1.8 5.2
Clerks
Women -0.7 13.7 2.2 6.8 -1.2 — 3.1 2.0 1.5 1.8 -5.2
Men 5.8 -20.2 -14.3 5.1 -5.2 — 12.4 -8.0 7.6 -2.6 1.1
Service workers, shop and
market sales workers
Women -5.8 20.2 14.2 -5.1 5.2 — -12.4 8.0 -7.6 2.6 -1.1
Men 6.0 -22.5 -2.0 -23.7 12.0 — 9.0 -6.0 3.8 -1.3 2.8
Craft and related trade
workers
Women -6.0 — 2.0 23.7 — — 9.0 6.0 -3.8 -1.3 -2.8
Men -3.3 -15.8 -25.9 -5.8 -23.0 — -7.1 -3.7 -22.8 -1.0 2.9
Elementary occupations
Women 3.3 15.8 25.9 5.8 23.0 — 7.1 3.7 22.8 1.0 -2.9
* data available only from 2006
Source: Eurostat, 2008
1.5. Excursus: review of forecasts for the sector
A few forecasts exist for financial services. As part of the skill needs projections, CEDEFOP re-
cently presented data for the European financial services sector among the complete set of sec-
toral forecasts. Moreover, the Bureau of Labour Statistics continuously publishes data of occupa-
tional change in the US.
CEDEFOP
The Synthesis Report "Future skill needs in Europe, medium-term forecasts" (2008) expected a
flat situation for financial services sector until 2015 with no growth for this period: in relation to
overall employment the sector that represented 3% of total employment in 1996 will only have a
share of 2.7% in 2015. The figures for banking and insurance are given by Table 21.
It can be noted that with these forecasts, made before the financial crisis, the trend for employ-
ment in the banking and insurance industry will be lower than in the whole sector of services.
“Business and miscellaneous services” have the best prospects with almost 9 million additional
jobs being created between 2006 and 2015.
Table 21 CEDEFOP forecast
Levels (‘000) Percentage change
1996 2006 2015 1996-06 2006-15
Business and other services 34 022 34 568 54 559 3.0 2.0
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 57
FINAL REPORT, 9 JUNE 2009
Banking and insurance 5 743 6 014 6 032 O.5 0.0
Other business and defence 17 424 26 140 33 079 4.1 2.7
Miscellaneous services 10 855 13 485 15 448 2.2 1.5
All sectors 192 714 210 656 223 936 0.9 0.7
Source: CEDEFOP/IER (2008)
Bureau of Labour Statistics (USA)
According to the "Career guide to industries" (Bureau of Labour Statistics, 2008), the banking
sector in the USA will increase by 4% until 2011 (while 11% are expected for all the industries)
and the insurance sector (including brokerage and self-employed experts) will increase by 7.4%.
A long-term reduction of employment is expected in the banking industry for:
• back office jobs and all sorts of administrative support jobs,
• for general management and corporate jobs,
• for credit analysts (because of the development of credit scoring)
• for data entry keyers
Increases are forecasted for:
• financial analysis
• personal financial advisers
• computer specialists
• tellers
As for the insurance sector, that represents the larger share of employment in the US, „job growth
… will be limited by corporate downsizing, new technology and increasing direct mail, telephone
and Internet sales, but numerous job openings will arise from the need to replace workers who
leave or retire. Growing areas of the insurance industry are medical services and health insur-
ance, and its expansion into other financial services such as securities and mutual funds.“
Employment reduction could be expected in the insurance sector from 2006 to 2016 for:
• computer programmers
• file clerks
• data entry keyers
and increases for:
• computer system analysis
• insurance sales agents
• customer service representatives
• financial analysts.
2. Main trends of change and drivers
2.1. Market growth in Europe
European financial services experienced exceptional growth during the last ten years. This was
already presented in detail in Section 1.2. In addition to the strong and worldwide economic up-
swing during that period, the explanation for this rapid expansion has to searched in the enlarge-
ment of the European Union and the creation of new products on financial markets.
2.1.1. The impact of enlargement
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FINAL REPORT, 9 JUNE 2009
The growth of financial service markets in the New Member States has been and continues to be
crucial since the mid-1990s. It has represented a way of external growth for western companies.
This current started at the end of the 1990s.
During the catch-up phase in eastern European countries, the insurance market was character-
ised by strong growth: over 26% on average in 2006. This demonstrates that in several countries
new pension schemes are now managed by insurers.
That said, for the time being, a great share of the financial service sector in the New Member
States is still dependent upon western European companies: some 85% of the banking sector in
Hungary for example, or 90% of the banking sector in Slovakia.
Example: One evokes the following example of the Hungarian insurance group, the bank OTP
Garancia formerly known as the single public bank during the communist regime, OTP Bank.
After being privatised, the financial group developed retail banking activities, non-life insurance
products and life insurance products. Then the group expanded in six eastern European coun-
tries: Romania, Slovakia, Bulgaria, Ukraine and Russia., As of 2007 OTP has 1,432 branches,
30,532 people and 32 million euros of assets. In 2008, the group sold its insurance activities (with
an increased growth of 13% a year since 2004) in order to concentrate on its central business
segment. It is suspected that will be acquired by the French insurance group GROUPAMA keep-
ing true to their strategy of external eastern European expansion. The Hungarian market has
been growing rapidly since 1998: premiums were tripled. GROUPAMA will become the second
insurance group in Hungary.
What will the growth in eastern European countries be after the present crisis? It is sure that
margins for further developments exist: only a part of the population is “bancarised”, there are
people with no insurance for motor cars, property and of course life insurance. A large share of
the Polish population lacks bank deposits (Belgian network for alternative financing; European
Commission, May 2008).
2.1.2. Diversification and search for new markets
Over the past ten years, some examples of the constant effort of the sector to invent new prod-
ucts can be given. In the insurance sector, there is a constant search for new markets and new
products according to the changes of welfare state benefits. This mainly concerns health care
and pension funds. The expanding areas for the insurance industry are primarily in medical ser-
vices and health care. Insurance companies are trying to provide new services: not only reim-
bursement but services.
In the banking sector the search was for direct banking activities and a wide range of speculative
investment products ranging from hedge funds to credit default swaps and other options on the
future.
Regarding direct banking, low cost products in order to address the ”non bancarised” people.
Many are looking towards microfinance. The market is also constantly devising new products to
attract the consumption of young people, such as "pay-as you-drive" car insurance. In Sweden
the youth are looking to be the recipients of SMS loans, another example of this type of marketing
based on consumer demand.
The real estate sector was seen not only as a guarantee but as an investment. The Dutch group
ING has a real estate subsidiary which recently bought a property developer in Lyon to construct
offices and commercial centres. The French group Credit Agricole, under the brand "Square
Habitat", has bought 480 real estate agencies as of 2005 - that is nearly the same number of
agencies as real estate companies such as the German Hypo Real Estate.
2.2. Globalisation of financial markets and international competition
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 59
FINAL REPORT, 9 JUNE 2009
The concept of "globalisation" has a wide range of meanings, but in step with the problematic
aspect of employment and skills, we should stress two points:
• financial services are now more dependent on global money and capital markets;
• most firms are now global players; they seek to develop activities in a wide range of countries
and seek to grow externally by employing an international strategy.
2.2.1. Financial services and global market
Description: for a considerable time in the banking industry, companies secured loans mainly with
their customers’ bank deposits and partly with interbank credit. In the meantime, insurers invested
in the economy and in the real estate sector in order to insure their risks. This period was charac-
terised by separation of retail activities and business activities. Currently, a substantial share of
coverage is based on a large range of financial products depending on the stock exchange and
global financial market. Thus, every company benefits from doing its job and by acting methodi-
cally on the global financial market. The worldwide market can be defined as a global intercon-
nection of all assets: real estate, loans and interbank credits, exchange rates, shares, materials
etc.
This represents hope for quick benefits and a certain fragility for the whole sector.
Example: the recent subprime and systemic crisis
The following is to better understand the value and risk chain in this part of financial activity which
unleashed a credit domino effect, risk of failures and thus giving rise to what experts deem the
credit crunch. Business or market banking is linked to retail banking activities and credits. While
the prices of real estate were increasing, building brokers and credit institutions, mainly in the
USA, but also in Great Britain and Spain, took to selling construction credits with a high degree of
risk. Firstly, because they were sold to high risk borrowers, secondly because they were guaran-
teed by "commercial papers" and derivatives out of the normal accounts of the companies and
balance sheet. In this way, in the run-up to the crisis, a lot of financial companies became
strongly over-leveraged: in 2006, the derivatives represented 6 times the world GDP, $286,000
billions (International Swap and Derivatives Association, 2007). It was in 2000 that derivatives
and credit default swaps (CDS) were excluded from regulation and in 2004 the SEC (Securities
and Exchange Commission) exempted the investment banks from maintaining reserves to cover
losses on investments. The "subprime" crisis has been forecasted by economists since 2005 by
analysing the risk externalisation of new sophisticated products.
The debt was very high and American banks were strengthened by having the highest level of
capitalisation. Some experts concluded that they faced better conditions for the globalisation and
liberalisation of markets. Yet when a financial crisis appears, or if American households become
insolvable, the crisis could be systemic and involve all types of financial businesses. This burdens
other financial institutions, and sometimes even households, with risks.
The impact of such a crisis hits credit institutions first: some of them were near bankruptcy (such
as the British Northern Rock which was nationalised by the British Government) or in urgent need
of capital (such as Merrill Lynch or JP Morgan Chase). The turmoil that affected financial markets
in the summer of 2007 turned for the worse in September 2008.
This crisis is acuter than that of 1991; banks and construction companies are racked by heavy
losses (note CBI/Price Water House, London, 2008) and it spread worldwide when equity prices
were felt all around the word.
The consequences for the whole sector are very important and as yet unknown:
• The risk of bankruptcy for some large banks has obliged them to look quickly for ways of
increasing their capital. This is accomplished with the assistance of the United States which
buy preference shares, or guarantee their debt, by wealth of sovereign funds or from foreign
companies in emerging countries. These foreign companies can take advantage of the
weakness of American or European companies in order to inject their capital.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 60
FINAL REPORT, 9 JUNE 2009
• This cyclical weakness could lead to a new concentrated movement within the sector. This
can be seen mainly in countries where the consolidation of the sector is yet to be realised.
Mergers and acquisitions could have negative effects on the volume of employment.
• The credit squeeze: activity of credit and loans in banks will be reduced. With a general
recession looming, such a limit is expected for individuals and companies. Therefore the
whole economy could be affected by the effects of employment in all sectors. One can re-
mark that all the banks are not concerned by the credit crunch: some of the co-operative
banks for example still give loans to individuals and SMEs. On the other hand, some saving
banks or mutual insurance groups are concerned because they bought “toxic products” .
The subprime crisis is not a new phenomenon: experts concede approximately 24 such financial
crises since 1980. But it has capsized not only banks but money mutual funds, hedge funds,
manufacturers and all sorts of companies, and even countries such as Iceland, Hungary and
Ukraine. It has spread to a wider range of markets and institutions than others, including emerg-
ing countries, which until quite recently seemed to have been saved and now the fall in financial
wealth is general.
We shall examine the economical and social consequences of the crisis at the beginning of the
Chapter “Scenarios”.
2.2.2. Financial services groups are now European and global players
Previously held strategies for growth did not incorporate cross-border mergers, but were relatively
confined as a national affair. This is mainly due to the financial sector being under the authority of
active national government regulations.
Today, experts notice that the whole banking and insurance industry in Great Britain, Benelux,
France, Spain, and in Scandinavia are acting beyond their own administrative and national bor-
ders; the majority of financial groups are not reticent to become global players. This is the result
of a long-lasting deregulation policy at national levels and at the European level. Deregulation
enhances the possibility for financial companies to access all European markets and to acquire
various financial groups. More precisely, it marked the end of the dividing lines between the bank-
ing industry and the insurance industry as well as between retail banking and whole sale banking,
though the current crisis now calls many of these deregulatory actions into question.
As was the case in Sweden in 1990, the deregulation in some countries meant that new financial
activities, like brokering, became legal. As a result, there are now 800 brokers in just 300 small
companies. One acknowledges that solely the Italian and German financial services still have to
institute strategic changes to liberalise due to the continued limitation of their financial service
sector by active regulation of national and regional authorities. Will this be protection?
The following indicators give examples of the new global players and their size: in 2007, large
financial companies had employees throughout the world. Some of these included:
• HSBC- 312,000 employees worldwide: 57,000 in Great Britain, 50,000 in the United States,
29,000 in Brazil, 28,000 in Hong Kong etc.
• UNICREDIT-HBV- 120,000 employees worldwide: 38,000 in Italy, 27,000 in Poland, 25,000 in
Germany, 15,500 in Turkey, 12,500 in Austria.
• Société Générale- 120,000 people worldwide: 58,200 in France, 9,700 in Czech Republic,
7,200 in Russia, 7,100 in Romania, 2,100 in Asia and 3,000 in the United States.
• Credit Agricole Group- 157,000 employees worldwide: 116,000 in France, 7,600 in Italy, 7,000
in Greece, 5,300 in Poland, 3,300 in Ukraine.
• BNP-PARIBAS- 155,000 employees worldwide: 63,000 in France, 20,300 in Italy, 10,400 in
Ukraine, 6,400 in Great Britain, 14,500 in the United States.
Source: Internationalisation in retail financial services. "New jobs, new skills, new organisations",
EBTN (European Banking and Financial services Association for Training. Paris 15-16 November
2007.)
Of course, smaller groups are still present in regional areas.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 61
FINAL REPORT, 9 JUNE 2009
The following developments illustrate the new strategy: European financial groups are expanding
into China. Inversely, Chinese funds are being introduced into the capital of western groups, like
other international sovereign wealth funds:
• In 2007, the Spanish group CAIXA acquired the private banking activities of the American
group Morgan Stanley. The group also took a share in The Bank of East Asia, an Asiatic
group well organised in China. Hence CAIXA now has subsidiaries in Poland, Romania, and
elsewhere.
• In November 2007, the Chinese group PING AN, the second most important on the Chinese
market, became the primary shareholder for the Belgian and Dutch group FORTIS perhaps
partly due to FORTIS being well developed in combination with Taiping Life in Asia. This fact
has two important consequences: firstly, it proves that the Chinese groups are taking advan-
tage of the subprime crisis in order to enter into the western market. Secondly, they are
seeking strategic partnerships with European groups to develop innovations and new prod-
ucts for their own domestic market.
Increased international competition could arise from the crisis and from this great new game. This
needs to be viewed against the backdrop of the high profitability of the “Anglo-Saxon” banking
and insurance system countered by the German, and as of late, Japanese banking crises. The
highest profitability is obtained in countries where there is an economic policy in favour of a large
household debt. However, the risks are at their maximum. (Michel Aglietta, Vingt ans de muta-
tions, in: La guerre mondiale des banques - Le Cercle des Economistes, 2007). The main ques-
tion for the future will be the credit policy.
The internationalisation of the financial service sector could have several consequences for em-
ployment patterns:
• It is difficult to avoid the fallout of the global crisis leading to further restructuring and layoffs.
The crisis reinforces the need for profitability: several British companies are looking for a low
cost model to face the crisis. This is the case for the insurance Group AVIVA (cutting 10% of
jobs in its non-life insurance company Northern Rock) and for ZFS.
• The large size of companies could lead them to a more industrious organisation with stan-
dardised products; easily delivered and a minority of skilled employees (we will examine this
issue in the Chapter 4 about scenarios and competences implications).
• The worldwide organisation of firms could lead them to relocate support functions and back
office jobs.
• The advantage of being a global player lies with weakened links between financial groups
acting as investors and the national industry (this is the case in Germany where more than
50% of DAX companies are now under non-German control).
2.3. European single market and rules
Since 1990, national controls have to a large extent been abolished and have been replaced by
European regulations, such as Basel I and II for the banking industry. Central banks in each
country and the ECB are independent bodies. The rules laid down in the so called Basel I and
Basel II aim to ensure a liable relation between the capital and the volume of loans dependent
upon their risk degree. This has replaced the so called "ratio Cooke". Basel II encompasses a
more economical approach: the level of risks would be calculated by the banks themselves as a
result of their own risk evaluation. Some of the experts for the sector are now in favour of this new
system because they lack confidence in their own risk management internal system. However,
the latest philosophy of Basel II is relatively new and not without its failings. Under it, the conse-
quences of new industrial regulations, like the new IFRS accounting rules, cannot be completely
analysed, but some of the experts think that these new accounting rules had a “pro-cyclic” role
and made the crisis worse.
For the insurance sector, the directive "Solvency I" was set up in July 2007: it requires a more
solid capital basis for companies in order to assume risks and to encourage them to go to the
stock exchange to raise money. However, it also established that the companies’ value will be
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 62
FINAL REPORT, 9 JUNE 2009
estimated from the current market value (“fair value”), which increases the volatility of the market:
this is a rule which is now being discussed among experts and company managers.
The question of the diversity of ownership in the financial services sector is also on the table for
some experts and company representatives. Among the main conclusions of a recent study con-
ducted by Oliver Wyman, published at the convention for co-operative banks: "they should have
been seen as a safe haven in the current times of turbulence and uncertainty, and as a customer
champion" (2007 Report for EACB). That is an important issue for employment which is better
protected in the co-operative or mutual sector than in the private sector which demands a higher
return ratio.
The European market (for the 27 EU Member States) is now open and in each state the barriers
between the different sub-sectors have been abolished. Deregulation allowed financial service
institutions to offer a wider range of products.
CEBS is the European Committee for supervisors in the banking sector. It is a body of the Euro-
pean Commission which is responsible for the implementation of the Basel II regulations. How-
ever, the “vision” of a single EU financial service market is being delayed by heterogeneous local
market conditions such as differences in tax incentives and consumer preferences (Oliver Wyman
Report, State of Financial Services Sector -2008). That is why a multitude of companies attempt
to have both a decentralised organisation suitable for each county’s rules and customer habits,
and common industrial platforms for standardised activities.
CEIOPS is in charge of prudential rules and regulations for the insurance sector. It groups the EU
27 national control bodies and is now preparing the directive "Solvency II" for 2012 (also known
as the Lamfussy Process). In July 2007, a European directive on insurance was adopted (for a
survey: European Commission 's Green Paper in Financial Services Policy 2005-2010).
It is evident that in the upcoming months and years new rules will have to be established at dif-
ferent levels in order to answer to and to anticipate crisis.
2.4. Concentration in the financial services sector: mergers and
acquisitions
2.4.1. Competition versus "too big to fail"
There may be several reasons for the process of concentration in the sector:
• The wish to enter new markets where an important growth can be expected. For example, in
the New Member States western European companies are well established. Or for example
in large market companies such as the English HSBC Holdings plc. (Hongkong and Shang-
hai Business Corporation), the Scottish RBS (Royal Bank of Scotland), or the French Axa
which are all important players.
• Looking for sales economies: experts continue to debate the subject. They mostly conclude
that there were no serious economic reasons to expand other than power and reputation.
"The first driver for gigantic size is the struggle for power” (Michel Aglietta, Pastré, de Bois-
sieu in La nouvelle économie bancaire, Economica, 2006).
• In order to expand into one another’s markets: insurance groups, banks, and security firms
are engaged in numerous mergers. This allows the merging companies to access each
other's client base and geographical markets. In the USA there have been plenty of mergers
since 1994. This is largely due to the abolition of both the Mcfadden Act, which accepted
banks to collect only in the State where they were registered, and the Glass-Steagall Act in
1999, which separated banking and insurance activities. Seeking wider markets to spread
their risk efficiently, particularly in the insurance industry, is a further rationale for mergers.
Cross-selling products means that banks and insurance groups spread costs and risks
across products and services. "Diversified risk spreading is positive" said Charlie McCreevy,
the European Commissioner for Internal Market at the EBF dinner, September 24, 2007.
• Mergers may be perceived as help in resolving a financial crisis. After the big bank crisis of
1997, the Japanese government encouraged mergers in order to increase the consolidation
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FINAL REPORT, 9 JUNE 2009
of the sector and a large number of secondary banks were closed. The government also re-
acted by creating a regulatory body based on the English model. Mergers resulting from the
present crisis are already underway: BNP Paribas with Fortis, Barclays buying a part of
Merryl Linch etc.
• New mergers and acquisitions will certainly continue as a consequence of the financial crisis,
although there is now a “risk of TBTF” (too big to fail): “huge financial groups cannot fail”. “It
is not inconceivable that the US will end up with four giant banks. If defaulting credit card
debt then assaults these banks’ balance sheets, who is there to take them over?” (Paul Craig
Roberts, Financial Times September 30
th
2008).
2.4.2. Degree of consolidation in different countries and groups of countries
Firstly, it must be noted that there is a wide range of financial institutions in Europe: for example
there are 7,196 different private banks (European Banking Federation general statistics on the
European banking sector as at 31.12.2006).
The degree of concentration on the market varies significantly, contingent on the European coun-
try. Some of the representatives of the sector underline that diverse credit institutions are useful
for each type of customer. It can also be reckoned that decentralised countries and their econo-
mies invite a wide variety of institutions from different countries and regions into their own.
The Annual CEA Report for 2007 states that the highest degree of concentration (in insurance
business) can be observed in the Baltic and Scandinavian countries. The explanation is that
insurers need a portfolio of a minimal size in order to spread their risk efficiency: thus smaller
markets have higher concentration ratios. Indeed, the largest financial markets, such as in Great
Britain, Germany, Spain and France, are less concentrated.
Medium-sized firms can be found in non life insurance companies, sometimes with so-called
"mono-liners".
The top 20 insurance companies in Europe represented 52.5% of the market in 2005 (50% in
2004): the degree of consolidation in the insurance sector has slightly risen to a share of 75% of
their income coming from Europe, followed by America (16%) and Asia (9%). Therefore they are
"European groups" with external growth onto other continents.
Great Britain, which is the most important country for financial services, can be named as having
72% of its market concentrated in the hands of the top 10 firms in the insurance sector.
Mergers do have consequences on employment volumes and structures: there are no global
statistics, but many important mergers have led to layoffs, e.g. 1,800 jobs were cut when Crédit
Agricole merged with Crédit Lyonnais. When HVB merged with UNICREDIT there were 1,500 lay-
offs. Exceptionally, in the case of Crédit Agricole and Credit Lyonnais, 1,000 new sales related
personnel were hired.
2.4.3. Relations between the three subsectors: the reality of "Bank-Insurance-Finance"
Ten years ago the main trend was the so called "bancassurance". Banks started to deliver insur-
ance products through their numerous branches covering all parts of the country, to set up new
life-insurance products. Insurance companies began investing in business banking activities.
Banks had been willing to offer a larger range of saving products, to increase their assets under
management, and to diversify their income sources. Over the last decade this trend has given
rise to large financial conglomerates offering insurance as well as bank products. On the con-
sumer side, the propensity to consult the bank about investing or saving money is very strong.
The difference between insurance and bank products is not always obvious to the consumer,
particularly between savings and life insurance products. Moreover, the wide variety of savings
products offered by financial institutions and the central location of all financial services within a
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 64
FINAL REPORT, 9 JUNE 2009
bank can be seen as an advantage for the customer (see Financial Services: Overview, Pros-
pects.ac.uk, 2008).
Today, in the context of financial globalisation, the majority of financial groups are both banks and
insurers. They are players on the global stock exchange and in the financial market. The financial
industry has become and continues to be more integrated, encompassing bank activities, insur-
ance activities, assets, property management, securities enterprises and brokerage activities. We
should examine if this new reality has consequences on skills and training at different educational
levels.
2.5. Technological changes
2.5.1. Computer science and ICT
Technology has a major impact on the banking and insurance industries. Electronic transfer pay-
ments, debits cards and ATMs (automatic teller machines) have influenced all the activities in the
sector.
Meanwhile, technical and high value-added activities, including daily management, continue to be
outsourced. The financial services sector is one of the first users of IT companies; the IT ex-
penses for banks increased by 6% in 2006 alone (survey form the IDC company, January 2007).
The main expenses are security of IT systems, fraud, payment systems and customer relation
management.
However, it is worth noting that during the past ten years the banking sector has been more apt
than the insurance sector to utilise IT processes such as the installation of automates. This is
largely due to the presence of a high number of insurance intermediaries. Some experts state
that the “new technologies were not applied in order to keep employment" (see interview with Mr
Lobjeois, Director of the French Insurance Employment and Occupations Monitoring Centre).
Advancements in technology have also led to improvements in the ways in which banks and
insurers process information. Some new developments are:
• Software package development
• IT processes
• Network architectures
• Computer science security
• Designing databases
• Customer relations management (CRM)
2.5.2. ICT and customers habits
Firstly, it must be understood that the different national markets remain very specific for retail
banking because of the different laws in each country. Different pension and health care systems
influence the life insurance market and other insurance products. Customers likewise retain cer-
tain habits regarding payment and financing. All the experts insist on this aspect.
Another characteristic is the “inertia” of customers’ habits. Experts explain that the low propensity
to change their financial services provider is more important than for other services.
For insurance and banking companies it is an innovative discovery that the internet can poten-
tially be a powerful tool for reaching existing and new customers. Not only to post company in-
formation but also to enable customers to access their account and billing information online. For
the time being, direct internet banking or insurance products distribution on the internet is well
developed in Great Britain and in Scandinavia. Whether this trend will catch on in other countries
will be a question for our forecast scenarios.
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FINAL REPORT, 9 JUNE 2009
Online services change a great part of the activities and distribution channels for financial prod-
ucts. A recent study conducted by Cap Gemini and Novamétrie predicts that by 2011 European
banks will deliver one third of their products via the internet.
For the time being, the widespread uptake of e-banking cannot be confirmed and “brick and mor-
tar” banks will continue to function, according to the Interim Report on ICT in the financial ser-
vices sector from e.Business Watch (June 2008). The first period of internet banking was not a
success. Zee Bank/ING Direct attempted to set up such a network in 2000 which floundered.
However, today the internet has logically become a true channel for various banks in multi-
channel distribution. This is the case for the British and international group HSBC. This develop-
ment has important consequences on skill needs (see interview with M. Desvignes, Human Re-
sources Manager, ING Direct).
Examples
ING Direct, Axabanque, Monabanq, develop direct services, and Groupama created in 2008 a
direct channel for delivering insurance products, deemed AMAGUIZ.COM. It aimed at having
100,000 clients within four years and it succeeded (Les Echos, March 19th 2009). This new
channel will complete all the traditional ones. The new subsidiary will be economically viable with
jobs and intermediation costs ("low cost" said its director).
We can separate the main consequences of direct distribution for financial products as follows:
• Distribution is the driving force for the development of the whole of the financial service indus-
try
• Standardisation of financial products
• Transparency of new problems and information for clients
• Segmentation of services by customers groups with specific databases
• Weak job creation
• Risks for the intermediaries (see interviews with Nic de Maesschalck, director for the BIPAR
and the Polish Association for brokers)
• Skills needed for specialists in different channels (internet, call centres and branch tellers).
• Design of branches. Note that while online banking and the direct insurance are continuing,
new branches are opening everywhere in Europe.
Will clients with major private assets demand more financial advice from banks or financial con-
sultants? The answer is yes, but from a small number of advisers.
2.5.3. New tools for payment
• ATMs are now well developed in Europe. There are many heterogeneous methods of auto-
matic payment, for example with credit cards.
• Europe’s new "SEPA" (Single Euro Payments Area): adopted in January 2008 and concerns
the euro zone and other countries such as Liechtenstein, Switzerland, Ireland and Norway.
Thus, roughly 4,500 banks will now be able to use the same means of payment as on a na-
tional market (bank transfers, cards etc.) within a window of three open days.
• Payment via mobile phone cards which currently exists in Estonia and Latvia and France is in
the experimental stage. Electronic pocket money is already well developed in Japan.
2.6. How financial products are delivered: the question of distribution
2.6.1. Insurance agents or brokers
In most European markets insurance distribution is organised through professional intermediaries
such as agents and brokers. Their relative market share differs however per country and in the
function of market segments: life or non-life, commercial lines or large industrial risks.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 66
FINAL REPORT, 9 JUNE 2009
In terms of market share, insurance agents and brokers represent a great majority of EU markets
currently over 50% of market share in non-life insurance. Since the 1990s, alternative forms of
insurance distribution, such as direct banks and internet sales, have been in strong competition
with agents and brokers in the private lines insurance business.
In commercial business lines, agents and brokers continue to have the majority of the market
share. In life insurance the market share of insurance agents and brokers is lower than their
market share in non-life within the majority of EU Member States. In the private lines life insur-
ance, banks and bancassurance networks compete with professional insurance agents and bro-
kers.
Though few statistics exist about the precise market share of the main distribution channels for
insurance (namely direct sales by insurance companies, sales through agents and sales through
brokers) the information available demonstrates a great deal of variation across Member States.
The number of intermediary firms present in each country varies widely. In Finland there are just
70 brokers, whereas in the UK there are some 10,000 authorised intermediaries. The number of
intermediary firms does not appear to be related to the size and income level of the country. This
is because, in some countries, there has been a longer tradition for intermediaries to provide
services to customers than in others.
The broad picture emerging from the intermediaries is of a sector populated by a large number of
very small firms and a relatively limited number of large broker firms.
• In Italy there are a few big firms (100 to 1,000 employees) and many small brokers (2 to 4
employees). The top ten brokers are estimated by AIBA (Italian Association of Insurance
Brokers) to have a market share of about 40%.
• In Sweden there are just three non-life firms with more than 50 employees. There are about
35 medium-sized firms (5-20 employees) and 550 small firms (1-4 employees) covering both
life and non-life insurance.
With the insurance intermediary channel, the agent channel is the largest in countries such as
France, Germany, Greece, Luxembourg, Portugal and Spain while in countries such as Belgium,
the Netherlands and the UK, brokers are by far the largest non-life distribution channel.
2.6.2. Product delivery by the insurance companies themselves
Insurance companies deliver their products directly with a market share of 43% in Austria, 40% in
Denmark and 70% in Finland (source: BIPAR, 2007).
2.6.3. Product delivery by bank branches
The Netherlands has the most important share of products delivered by banks and post offices
(16%). In Portugal and Estonia their shares are 11% and 10%, respectively. Shares are, how-
ever, generally increasing; in Great Britain 5% of the insurance products were delivered by banks
in 1996 and 17% in 2006 (Bipar Information, November 2007).
2.7. SWOT Analysis
We deem the financial services sector to be integrated, hence we shall present the SWOT analy-
sis for the whole sector.
Table 22 Strengths and weaknesses of EU financial services
Strengths Weaknesses Opportunities Threats
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 67
FINAL REPORT, 9 JUNE 2009
M
a
r
k
e
t
s
• The European market
share assures a good
position in the world
• Strong dependency on
global capital markets
• Substantial amounts of
risky products
• EU15: new markets
for health care and pen-
sions schemes
• NMS: new markets for
all products
• Expanding markets in
emerging countries
• Financial crisis will lead
to a severe downturn
• Decreasing population
represents a risk of
downsizing the markets
• Economic risks in the
NMS
S
t
r
u
c
t
u
r
e
o
f
b
u
s
i
n
e
s
s
• Global players acting in
different local markets
• A pluralistic financial
system with different
types of ownership
• For the most part,
banking institutions are
commercial banks with a
high level of deposits
• Strong needs for re-
capitalisation but compa-
nies are weakened
• Consolidation must be
achieved in many coun-
tries
• Global players can
take the opportunity to
buy companies all over
the world
• Many companies can
face difficulties due to the
financial crisis
• Not enough capital for
saving banks, co-
operative banks and
mutual insurance groups
D
i
s
t
r
i
b
u
t
i
o
n
• High flexibility based on
different channels provid-
ing products, advice, and
services
• Large distribution
networks
• Banc-assurance: banks
using their networks to
distribute insurance
products
• Particular experience
with internet banking
• Lack of customer
confidence
• Conflict between direct
banking, insurance distri-
bution and value-added
services in proximity to
the client
• Financial management
needs trust, transparency
and information
• New offices and
branches to be created in
NMS
• Promoting new distri-
bution channels according
to a new generation of
customers
• Internet banking and
internet insurance lack
customer trust and need
to be based on a new
financial culture
I
n
n
o
v
a
t
i
o
n
• Some of the most
innovative clusters in the
world (UK-London, Lux-
embourg, Ireland)
• “Brains in Europe”:
high-skilled people for
innovation
• Loss of confidence in
innovation capacities: the
crisis is partly due to
innovative financial
products
• Lack of adequate risk
management
• Lack of strategic
controlling
• To practise mass-
customisation on one
hand and high value
added personal service on
the other
• NMS are depending on
the western companies
and their innovation
policies
S
k
i
l
l
s
• Sound knowledge base
due to high-skilled staffs
• Strong links between
companies and educa-
tional institutions in the
EU15 countries
• Potential skills short-
ages for highly skilled
personnel
• Underdeveloped
training capacities in NMS
• Demographic change
allows renewing staffs
• Reinforce the qualifi-
cation level to deliver
more advice and services
• Loss of attractiveness
as an employer
S
o
c
i
a
l
d
i
a
l
o
g
u
e
• High level of unionisa-
tion in the EU15 and a fair
dialogue in western
countries
• Some innovative
studies at the European
level
• The social dialogue in
the financial services
sector was built in a
growth period with bene-
fits for wage and career
development
• Develop social dia-
logue in the crisis
• Anticipate the social
impacts of employment
change
• Develop negotiation
on career paths and
lifelong training
• Lack of social dialogue
in companies in the
NMS
Source: DKRC/Economix
3. Emerging competences
At the backdrop of a low volume of employment development or of declining employment in the
sector, there are multiple changes in the structure of occupational profiles. There are new re-
quirements for a higher level of formal education and new competences which are required to do
the jobs. These needs are to fulfil a customer oriented organisation in all the businesses.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 68
FINAL REPORT, 9 JUNE 2009
We can describe six main functions in the financial services sector with new skills needs and new
emerging competences for the occupational profiles in each function. For details see Table 23.
Firstly though, we must repeat that in every sector each function is becoming "customer ori-
ented". This comprises likewise IT jobs (except for some jobs in "logistic" and support functions),
so the usual distinction between front office jobs and back office jobs is less distinct.
The six main functions are the following according to the ISCO classification of EUROSTAT:
Table 23 Main functions
FUNCTIONS OCCUPATIONAL GROUPS (ISCO)
Back office
• Professionals, technicians and associate profes-
sionals
• Clerks
Front office
• Business professionals, finance and sales
associate professionals
• Professionals, technicians and associate profes-
sionals
Middle office
• Legislators, senior officers and managers
• Business professionals, finance professionals
• Professionals, technicians and associate profes-
sionals
R & D
• Legislators, senior officers and managers
• Business professionals, finance professionals
IT
• Business professionals, finance professionals
• Professionals, technicians
Management
• Legislators, senior officers and managers
• Business professionals, finance professionals
Source: DKRC/Economix
3.1. Competences for back office
Back office can be divided into four specific functions:
• the traditional administrative and secretarial back office
• the back office for sales and managing insurance contracts
• the wholesale bank back office
• the back office in intermediaries and small companies.
For the insurance industry, the back office function is broad: it includes all operations for under-
writing contracts and policies, answering and resolution of claims and liquidation. The banking
industry is concerned with the handling of information, which is primarily controlled by IT.
Over the past ten years, employment in the financial services sector has remained stable but
there are two major changes in the structure of the workforce which are still taking place:
• The traditional administrative and secretarial back office is acutely declining in all countries.
The proportion between commercial or sales related jobs and back office administrative jobs
has changed. We can see from the EUROSTAT statistics (Chapter "Mapping" 1-2) that in
the EU15, the share of clerks in the total employment of the sector had decreased while the
share of professionals had increased.
• As a consequence, the proportion between medially skilled employees and highly skilled
ones has also changed, as we can see with the Chart about "level of education". In the
banking industry, the French Monitoring Centre for Banking Employment notes that the
share of technicians decreased from 72.1% in 1996 to 58.9% in 2006, while the share of
"cadres" (a high level of education and five years of academic studies or equivalent by inter-
nal training and promotion) increased from 27.9% in 1996 to 41.1% in 2006.
SKILLS SCENARIOS FOR THE EUROPEAN FINANCIAL SERVICES SECTOR 69
FINAL REPORT, 9 JUNE 2009
• If there is no contact with the "insured" or the bank customer, the work can be done any-
where, with big platforms handled by the administration through IT tools: e.g. in France and
Spain 63% of insurance claims are resolved without any physical contact. Therefore, tasks
can be realised by automised systems, within huge shared services centres, or in foreign
outsourced call centres or administrative centres. The main drivers are productivity and cost
effective work.
There can be contact between the client and the company’s employee concerning a claim or
dossier, the schedule for reimbursement, or the search for new services. Due to these multi-
farious tasks, the job requires more finance and business knowledge and more relational
competences than previously known. In the insurance sector, Mr. Ferec, HR Manager for
Generali, insists that the traditional back office administrative are now expected to provide
personalised and quality service to each individual client.
• The" wholesale bank" (business and investment banking) requires a new type of back office
which appeared from managing securities that can work not only for its parent company but
for any kind of financial of company. It requires specialised IT personnel.
• Administrative and support services such as archives, reprography and editing are no longer
at the heart of businesses and have therefore been externalised.
The so-called "sheltered jobs" have become an anomaly in almost every European country. In the
study "Structural change in the financial services sector and consequences on employment and
training" (Bernard Brunhes Consultants, 1998), we noted that the volume of back office jobs was
formidable in countries such as Greece, Austria, Spain, France, Ireland and Italy. Yet these occu-
pations were done away with in the New Member States, in Great Britain and in Scandinavia.
However, the decline in the "clerks" group has alleviated. As for the NM10, the Tables show that
they have directly adopted a customer-oriented work organisation based on young educated
professionals.
Some of the occupational profiles within this function are:
• Administrative agents
• Administrative and banking technicians
• Credit technicians
• Claims technicians
• Accountants
Competences for the back office function :
• Insurance intermediaries, clerks and technicians who are in contact with the client (via differ-
ent channels) must have new soft competences such as communication skills, reactivity and
the ability to propose new services
• Extensive knowledge of the various and changing products
• Knowledge of the process
• IT literate
Examples of relocation
British companies were the first in Europe to undertake a wide relocation policy. In 2004, the
British insurance group AVIVA (operating in UK under the name of Norwich Union) decided to
outsource 2,500 jobs to India: 500 in call-centres and 2,000 for administrative back office and the
computer science department.
The French group AXA recently decided to create 1,500 jobs in Morocco in order to manage a
new contract with an automotive group. The CEO insists that news jobs will be created in France
(Le Monde, 13.03.07) needing the same skills. His reason for creating jobs rather than outsourc-
ing is to avoid losing essential skilled French employees.
In 2003 the HSBC banking group relocated 4,000 jobs (it employed 55,000 people in GB) to
India, Malaysia and China. British Unions still exhibit signs that this debate is far from waning.
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3.2. Competences for the new middle office for control and financial
operations
Traditionally in this sector, a stark contrast was made between back office operations and front
office operations. Today, however, many employment experts note that a new function has ap-
peared. With the inception of this function, experts and specialists with a high level of education
are needed. The new European regulations and the recent financial crisis have led to a rein-
forcement of this function. By combing the functions of both back and front offices, though skilled
employees are needed, their number is limited.
Beyond this fusion of back and front office functions, many specialised employees are sought
after. These include market analysts, risk analysts and risk managers, property managers, assets
managers, experts for local finances and actuaries in insurance businesses. Therefore, one can
conclude that there is a development in heavy specialisation.
Property management and enterprise relations are carried out by staff with high level of education
(higher education university degree or five years of university or vocational training) dependent
upon the criteria of the country.
Among the jobs encompassed in this new function are:
• market specialists
• risk analysts
• risk managers
• actuaries
• project managers
One can note that they are all highly skilled and specialised and they are all in development.
Among the competences required by the middle office function are:
• Deep finance process knowledge
• Specialised accounting and reporting knowledge
• Knowledge of the products and their risks
• Knowledge of the law (national, European, international)
• Foreign language knowledge (English) for the international regulation framework
• IT literate
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3.3. Competences for front office, marketing and sales related
occupations
All of these tasks represent an increasingly important function in companies. We can divide the
sales function in three parts :
• Marketing
• Direct sales (in call centres or on the internet)
• Clients counsellors in branches, local insurance offices or local intermediaries offices
The marketing function is equated to the design of new products, communication campaigns and
the sales functions. It is the preparation for sales: the product, marketing and publishing opera-
tions are based on clients differentiation using statistical research, defining targets and communi-
cation channels.
The industrialisation of data and information management has been developed in tandem with
customer relations. It is based on industrialised CRM (Customer Relation Management) on one
hand and on personal contact on the other hand.
Call centres do not enjoy an irreproachable reputation, especially in the United Kingdom. This is
due to many factors, among them the employment of youth for short term contracts and poor
working conditions. In most countries call centres do "hard selling" and employ an army of tempo-
rary staff in order to sell as much as possible in a short amount of time.
Counsellors: In this sector every job in each different branch and local office is defined as "sales
related". In the insurance and banking industries these jobs require a wide range of knowledge
about a wide range of products. Employees are not only expected to be competent but also to
possess a sense of inventiveness about the daily use of Internet and Communication Technolo-
gies, therefore being able to provide clients with the necessary solutions.
Often "sales related jobs" are the first jobs proposed to young graduates. As long carriers are
proposed in the financial services sector (internal labour market is the rule in large companies),
these young people can work their way up to marketing (design of new products and new ways to
deliver them) or to middle management.
A major part of Human Resource Managers in the sector acknowledge that with the demographic
shock and competition for employees, it becomes all the more difficult to attract young graduates
to sales. Competences such as personal sociability and affability are much appreciated and these
jobs cannot be held by older employees who have been in the company for a long period of time.
The scenarios need to explore different ways for the design of this "sales related function". Is it
preferable to have a qualitative approach which is advice-oriented or an industrial approach which
is intensively selling-oriented? The consequences for needed skills are extremely important.
When companies look at hiring people in mass distribution, it is a choice in regards to the alterna-
tive. For many industrial sectors, the challenge is now for financial services to be both a mass
marketing sector and a sector with a high level of customer relations and services.
Some of the job profiles within this function are:
• Tellers
• Cashiers
• Sales personnel
• Insurance technicians
• Insurance agents
• Brokers
• Loan client counsellors
• Securities, commodities sales people
• Marketing and sales managers
The emerging competences for the front office function are:
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• Ability to work in a multi-channel environment
• Reactivity
• Resistance to stress
• Knowledge of the products
• Communication skills
• Sense of responsibility
3.4. Research and development function – competences for innovation
Research and development
This represents a new function for the financial services sector, built on the pattern of research
and development departments in industrial companies. It encompasses economists (in general
the department is directed by a high level, well known economist, with a "chief economist" having
worked in international institutions for example), mathematicians, actuaries, market and finance
experts sometimes from the audit and consulting sector and computer sciences profilers (be-
cause new developments are closely linked to ICT models).
In every major company there is now a R&D director. However, one of the challenges for the
sectors is the lack of specific protection for innovation and new products (such as "patents").
Innovation and clusters in financial services
Innovation in the global financial market has taken on an important role yet it is not measured by
experts studies as "knowledge intensity" but can be in found in industrial sectors. Innovation in
the financial service sector is strongly linked to the concentration of financial activities and the
dynamism of the local markets. Examples of innovations can be recognised by new financial
products for the global market and wholesale banking, such as:
• creation of mathematical tools for risk models and management (SWAPS, financial futures,
options etc.) with the so-called “quants” or quantitative engineers
• derivative products
• dematerialisating with IT process.
Products and service innovations are also at the forefront of customer retail banking and insur-
ance, in step with marketing activities: "through innovative concepts, successful firms will find and
exploit new growth opportunities that arise at the intersections of traditional sector boundaries".
They work in unison with IT developments: the share of IT investment can be used as an indica-
tor for knowledge intensity. For example in the UK industry, the IT investment per hour worked
doubles every five years ("A view from Europe: productivity and change in the UK financial ser-
vices", Oxford Research and Eurofound, December 2007).
It can be ascertained that the most innovative clusters are logically located in the most important
financial centres. The primary position is held by London City, but also can be found in Luxem-
burg, Frankfurt, Zurich, Geneva and Paris.
A cluster in the financial services sector cannot be defined in the manufacturing industry. The
FSSC, however, establishes that a cluster can be defined:
• as a specialised local labour marker
• as an extensive business
• by the presence of recruitment services, computer services, postal services and telecommu-
nication services.
In London, independent brokers, the self-employed, and the European Monetary System are
considered as resources for innovations.
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Example of "cluster" supported by the Government: the French "Pôle de compétivité" or business
cluster: "Finance Innovation"
This cluster was created in 2005 with the aim of increasing the French percentage of the Euro-
pean market from 11% to 20% within 10 years and to increase employment in the R & D area.
The hub is located in the capital region (Ile de France Region); here one finds Paris Europlace
which has developed Creditnext, an independent platform for "derivative products". Researchers
concentrate on risk management with new tools for financial forecasts, financial mathematics and
regulations.
40 programmes are conducted with a financial volume of 40 million Euros. The cluster aims to
develop market management skills in the highly qualified jobs segment; it aspires, by developing
the French mathematical tradition, to challenge London’s financial hegemony.
One research programme concerns the "carbon finance" for managing the CO2 emissions, an-
other concerns climate indicators. By engaging in a partnership with Meteo-France, they are
developing environmental risk management and new insurance policies.
The cluster is not exclusively linked to universities and business schools in Paris but also to R&D
departments within main financial service groups. In France, about 700,000 persons are em-
ployed in the financial services.
3.5. Computer science and ICT competences
This function is at the core of business. New products are inextricably linked to ICT not only in
their delivery but also by guaranteeing the financial product’s place in the global world market.
ICT represents the basis for financial operations: buying and selling on the stock exchange, on
the exchange rate markets and on the primary materials markets.
The employment share of this function is larger than in other sectors of the economy. One can
see this in the EU15 as well as in the NM10: 4.3% of financial services compared to 1.9% of the
total economy in the EU15 and 4.1% of financial services compared to 1.2% of the total economy
in the NM10.
It encompasses different occupations:
• Studies
• Design and management of data systems (like information system architect)
• Daily operations (exploitation), software packages management
• Network architectures
• Project engineers
• ICT safety
• CRM: customer relation management
• Management of customer data
Two main trends can be observed regarding the development of this function and the jobs within
it:
• Developing skills within companies (for more safety and discretion regarding the different
processes and products)
• Externalising functions to major ICT suppliers (Cap Gemini, Ernst and Young, Pick Marwick).
It is not only a question of cost but also a question of skills and careers. A computer scientist
must be informed about the latest technological developments. This may be more difficult in a
bank or insurance company than in an ICT company.
The number of jobs in this function, both within and outside the financial services companies,
would increase if the financial crisis does not lead to externalisation of mass processing for
budget economies. These jobs are becoming highly qualified and competitive. Due to these fac-
tors, a shortage of qualified personnel could threaten the industry in some countries.
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Competences for the ICT function :
• A good level of academic scientific education
• A high level of specialisation according to the different activities
• A multi-dimensional competence: finance process, product knowledge and IT tools.
3.6. Competences for the management function
This function is present in top management, in support services, in branches and in local offices
management. It represents a larger share of total employment in the sector than in the total
economy.
Managers at different levels are generally financial services specialists. They are hired primarily
for specific jobs such as actuaries or credit specialists. There are not a lot of top managers from
other sectors, they are hired generally for their specific purpose and are not usually promoted.
The internal labour market works in this sector.
One of the main challenges at this moment in time is for companies to bring about an internation-
alisation of their management.
Competences for the management function:
• Knowledge of financial products and processes
• CRM (local managers are commercials)
• HR management (communication, motivation, coaching and mentoring...)
• Change management and ability to conduct restructuring process
• Foreign languages skills
• Intercultural management skills
The outcome points towards new requirements for training. Formal education, professional edu-
cation, internships and continued education will be described in Chapter 7, together with exam-
ples of company policies and training institutions.
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Table 24 Trend changes in the volume of employment (1996-2007)
FUNCTION EMPLOYMENT VOLUME
Administrative back office Declining
Sales back office Decreasing
Insurance back office: contracts , claims
and new services management
Stable with no differences between front office and back office
Wholesale bank back office It represents a small share of banking employment
The past trend was to a higher level of employment (before the 2008 crisis) but
now it is expected to be reduced
Middle office:
• control
• securities factories
Slow increase but a reinforcement of the function is expected
Front office and sales related jobs:
• direct sales and hard selling (call
centres)
Strong increase but with changes: development of definite contracts and
possible relocations
Front office and sales related jobs:
• client counsellors in branches and
local offices
Increase in NM10 (new branches and new offices)
Stability in EU15
Front office and sales related jobs:
• marketing
Stable
R & D Increase (but it is a very small share of total employment)
IT function Stable but needs for replacement
Risks due to concentration and externalisation
Management:
• of local teams
• strategic management
• international management
Increase in NM10
Stable in EU15
Possible decrease in companies looking for budget economies
Source: DKRC/Economix
Table 25 New competences for occupational functions
FUNCTION COMPETENCES
Administrative back office • IT skills
• Knowledge of administrative rules
• Knowledge of financial techniques
Sales back office • IT skills
• Perfect knowledge of the products
• Sales competences and capacities to get information about the clients’
needs
• Sense of responsibility
Insurance back office: contracts, claims
and new services management
• Communication with the client
• Requirement for more social competences for the employees answering
claims: interpersonal relations, communication skills
• More autonomy and ability to propose new services and to organise them
(reactivity)
• More poly-competences
• Ability to manage partnerships with other activities outside the company on
a local basis
• Perfect knowledge of the products
• IT skills
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Table 25 continued
FUNCTION COMPETENCES
Wholesale back office • Financial process knowledge
• Financial products knowledge
• IT skills
Middle office:
• Control
• accounting
• securities factories
• risks management
• Double competence: specialised knowledge of finance processes and IT
tools
• Knowledge of the law
• English language knowledge
• Updated knowledge on the international and national regulatory framework
• IT skills
Front office and sales related jobs:
• direct sales and hard selling (call
centres)
• Ability to work in a multi-channel environment
• Reactivity
• Soft competences such as interpersonal communication and social compe-
tences
• Rapidity and reacts well under stress
Front office and sales related jobs:
• clientele counsellors in branches and
local offices
• insurance agents
• brokers
• Poly-valence and various knowledge about the products
• Poly-competence and stress resistance
• Communication with the client
• Interpersonal relations
• Autonomy
Front office and sales related jobs:
• marketing
• Statistical competences for screening customer habits
• Sociology to understand client behaviours
• IT skills
R and D • Actuaries
• Mathematicians
• Statisticians
• Economists
• IT innovations
• Globally prospective competences for forecasting economic and business
trends
Management:
• local teams
• strategic
• international
• Knowledge of financial products and processes
• HR management
• New management techniques
• Customer relation management
• Languages skills
• Inter-cultural management sensibility
Source: DKRC/Economix
4. The financial crisis and its consequences
For the first time in decades, the threat of a systemic crisis – a big financial crash – became a
worldwide reality. Due to the interconnection of all the different financial markets, all types of
financial activities are concerned. Activities are already declining in many countries and are ex-
pected to weaken further in the short-term. The OECD Economic Outlook (N°84, December
2008) expects a severe breakdown for all the OECD economies: “A recovery to the trend, at
least, is not expected before the second half of 2010, leading to a sharp rise of unemployment.”
The European Commission also reversed its economic forecasts considerably, expecting a 1.8%
decline of GDP in 2009 and hoping for a minor increase in 2010. The uncertainty of projections,
however, is extremely high: alternative GDP growth rates range between ± 0 and ? 4% for 2009
(European Commission (2009): Interim Forecast, 19 January 2009).
The financial system almost collapsed in autumn 2008. “Money, interbank and credit markets
were in disarray amid a rarely seen uncertainty about the strength of banks’ balance sheets and a
complete collapse of confidence among market participants and intermediaries” (EU Commission
2009, page 4). Banks tumbled into a severe liquidity crisis which was followed by a solvency
crisis. Without massive support from central banks and rescue programmes provided by national
authorities, a financial meltdown would have happened with unpredictable economic effects.
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Nevertheless, the crisis remains with substantial risks, uncovered by a series of press releases
about bank losses and alarms about bankruptcies.
Considering the transition of the financial sector
over the past decades, the financial crisis can be
seen as the consequence of market liberalisation.
Three major factors contributed to the emergence
of the crisis:
• The opening of capital markets: hedge funds
and other investors have been allowed to en-
ter the markets, borders between financial
business and retail activities have been re-
moved, insurance and banking businesses
have merged, and traditional banking has
been restructured towards investment bank-
ing. Lucrative markets emerged and ex-
panded the financial bubble which then ex-
ploded in September 2008.
• The failure of risk management, which al-
lowed capital investors to reorient their activi-
ties towards short–term profits without assessing long–term risks. This was certainly pro-
pelled by the exceptionally strong upswing of the world economy, opening excellent oppor-
tunities for short–term speculation but blurring the sense of risks.
• The failure of public supervision over financial markets. Neither the International Monetary
Fund (IMF) nor national and other international authorities were able to identify the accumu-
lating risks of a short–sighted financial business, not to speak of avoiding these risks. Rating
agencies failed in adequately assessing securities.
Even if some experts warned against the unhealthy developments of capital markets, the majority
of actors felt confident about the new business models and thus could not see the deterioration of
fundamental facts. Markets were unable to correct themselves – except through a severe crisis:
and this is the point we are at now.
The magnitude of financial risks still is unknown as is the length and depth of the economic down-
turn. However, we have learned a lot about the crisis’ facts and figures:
• The enormous expansion of financial markets which happened during this decade: the vol-
ume of financial derivatives has multiplied by four since 2002 and doubled within one year
after mid 2007. Large parts of GDP growth in the USA, the UK and other countries came
from financial products.
• The accumulation of risks: the latest Global Financial Stability Report by the IMF estimates
write-downs of financial assets in the world economy to around $ 4 trillion. For clarification,
these amount to 7 % of the current world output.
• The spread of the financial crisis: pension funds, life insurance, companies and private asset
owners have been hit hard by the crisis. Substantial parts of their assets have been devalu-
ated. Stock exchange values have declined by almost 50 % since the beginning of 2008.
• Strong effects on the real economy: output has been declining at extraordinary rates. In
February 2009, industrial production in Europe was 17.5% below the previous year, and
there was no country with output growth. Unemployment started to rise considerably in the
Baltic States, Spain and Ireland. The Scandinavian countries were also affected. Most of the
other member states are presently entering recession in labour markets.
• Signs of disintegration in the world economy: on capital markets, the retrenchment from
foreign markets is meanwhile outpacing the overall deleveraging process with a sharp de-
cline of cross-border funding (IMF: Global Financial Stability Report, 2009). Governments
tend to favour domestic suppliers and consumers buy locally. Emerging countries are par-
ticularly affected by these trends, in parallel to the New Member States of the European Un-
ion.
Expert panel views
Some of the participants at the expert panel under-
lined that it appears particularly difficult to capture the
scope of the financial crisis at present. The tremen-
dous losses which have accumulated to date, how-
ever, will call for substantial reforms in the sector.
It was also stressed that the different sub-sectors are
affected very differently in the member states. Bank-
ing and insurance were seen as separated sectors,
and the segments within the banking business were
also perceived as being largely independent. In
particular, co-operative groups may be less affected.
Moreover, participants had the opinion that long-term
skill requirements will not be changed fundamentally.
The effects of the crisis will be limited to wholesale
baking which was at the origin. Large parts of retail
banking and insurers will continue with their business
model, meaning that the skills requirements will
hardly be affected.
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These few observations underline the dimension of
the crisis. Comparisons between the current and
previous US recessions reveal that various statisti-
cal indicators are meanwhile far beyond former
experience. Residential investments and private
consumption have declined with exceptionally
strong rates, output and employment have shrunk
considerably and unemployment is increasing
rapidly (IMF: World Economic Outlook, 2009).
Other countries in the world – the European coun-
tries in particular – are following the US and are
significantly worse off compared to former reces-
sions.
Expectations are divided between hope and de-
spair. The latest interim forecast of the European
Commission (January 2009) indicates a strong
decline of economic activity in 2009 and a gradual
recovery in 2010. However, the analysis of past
financial and economic crises tells another story.
The observation of the Swedish and Japanese
banking crisis at the beginning of the 1990s is that economic growth was well below former trends
several years after the start of the crisis. The IMF concludes from this past analysis that reces-
sions associated with financial crises have typically been severe and protracted. Recoveries from
these recessions are often held back by weak private demand and credit. Moreover, globally
synchronised recessions are longer and deeper than others. The IMF summarises: “Past epi-
sodes of financial crises have shown that restoring the banking system to normal operation takes
several years, and that recessions tend to be deeper and longer lasting when associated with
financial crisis.” (IMF: World Economic Outlook, 2009, p. xii).
4.1. In the short run
Consequence n°1: the risk of failure for financial institutions
The subprime crisis led to failures or quasi-failures of a series of banks: Northern Rock (UK) in
September 2007, Bear Sterns (USA) in May 2008, Lehmann Brothers (USA) in September 2008,
Hypo Real Estate in Germany, Fortis Group and DEXIA in Belgium were among the first to de-
mand financial support from national authorities. Most of them – except Lehmann Brothers – were
stabilised by a government bailout, illustrating the motto “too big to fail”. However, the bankruptcy
of Lehmann Brothers triggered a wave of severe losses, revealing the face of the crisis without
any public rescue.
Initially, it was mainly a banking crisis. Insurance companies were partly saved from the tempest,
except when they were engaged in CDS activities (Credit Default Swaps) such as AIG in the US
or KBC and AEGON in the Netherlands. Insurance groups, however, have been affected in other
ways:
• Companies have lost parts of their assets due to the devaluation of stocks and residential
property.
• The companies’ clients have experienced similar property losses and are becoming less
inclined to sign new contracts.
• Competition with bancassurance companies is becoming keener due to the governments’
support of the banking sector. Probably some representatives will claim for more fair compe-
tition.
• For the time being they are not protected from the “fair value rule” and the European discus-
sion for the Solvency 2 rules will be hard.
Facing the risk of failures within the financial system, public authorities reacted quickly. To protect
the financial system, the States had to increase guarantees in order to avoid the withdrawal of
deposits by bank clients. It can be noted that this phenomenon took place only in the British bank
Expert panel views
An intensive debate arose on the role of co-operative
and semi-public banks. In particular the National
Association of German Co-operative Banks under-
scored that their business model is certainly sustain-
able and follows a long-term orientation since many
years. Moreover these banks have put the recom-
mended actions and policies already in place.
These arguments however have to be contrasted
with the fact that German co-operative banks were
reported to have been hit by losses of 2 bn euros
from their investments in dubious financial papers
(Handelsblatt, April 2009). The heading organisations
of the German Sparkassen – the Landesbanken –
have been unable to survive the financial crisis
without massive public support. Moreover, for both
German organisations, co-operative banks and
Sparkassen, substantial restructuring needs have
been identified before the crisis.
Even if this report has identified various merits of
these decentralised banking systems, the analysis
gives little support for the argument to apply such
business models without substantial changes.
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Northern Rock, which was immediately nationalised by the UK government. Looking at other
cases, in spite of various deposit transfers, their volume did not achieve dangerous levels.
The OECD Outlook provides a list of governments which explicitly gave blanket deposits: Austria,
Denmark, Germany, Greece, Ireland, Portugal, Slovakia and Slovenia. Some others raised their
ceilings to 50 000 or 100 000 euro, as in the case of Belgium and the Netherlands. As a second
step, governments of the EU member states took equity stakes in several financial institutions,
often by the way of non-voting preference shares. By the end of 2008, rescue programmes for
Germany, France and the UK amounted to between 20% and 30% of annual GDP. In small coun-
tries like Ireland the volume was expanded to 210%. Additionally, the European Central Bank
expanded money supplies considerably and lowered interest rates to historically low levels.
Consequence n°2: confidence crisis and credit crunch
The lack of liquid assets immediately led to the breakdown of interbank credits. The state-owned
and central banks helped banks during this first liquidity crisis with guarantees for interbank cred-
its. However, the question of confidence is most probably a central one. The breakdown of trust is
huge and is more extreme than the interbank credit issue. It will take time to restore trust and
there will be consequences for customer relations.
The major consequence from the liquidity crisis is that lending possibilities are decreasing: less
credit for individual demands (for housing and consumption) and less credit for businesses, par-
ticularly for SMEs. Banks became reluctant to extend credit and sharply tightened their criteria for
lending to businesses and consumers. What has generally been deemed as the “credit crunch”
has had a direct impact on companies’ investments and economic growth. Enterprises have
stopped their expenditures on communication, advertising, human resources, R&D, and a lot of
new investments have not been realised. The consequences on employment are direct: a lot of
companies are starting to announce job cutting plans in different countries. The credit crunch has
also had an immediate effect on the real estate sector: building sites and condominium programs
have been stopped and all the business of this sector are affected.
Only very few banks have not been directly affected by the liquidity problem and the credit
crunch: the co-operative banks have been less engaged in new financial products. However, they
are also faced with the various indirect effects of the financial crisis and the economic downturn.
In order to make credits cheaper all the central banks lowered interest rates, even if it was not
their policy in the past. For a long time this was the philosophy of the American FED. Now the
Japanese Central Bank, the English Central Bank, and last but not least the ECB have changed
their monetary policy and have promoted lower interest rates.
Consequence n°3: stock exchange crisis
The financial tempest has captured banks, but also money-market mutual funds, hedge funds,
retirement funds and companies’ capital in all sectors. So far the uncertainties are large and “a
negative feedback loop” (OECD 2008) is possible. Since the beginning of 2008, stock markets in
Europe have lost almost half of their value (-45%).
Initially, some experts thought that there will be a decoupling trend in the world with emerging
countries partly being saved from the crisis. But now it appears that all countries are concerned,
even if growth perspectives remain better in emerging rather than in developed countries. The
financial crisis is nevertheless global as many emerging countries were involved in speculation
with derivatives or other “toxic products”. With the expanding economic crisis growth, exports to
developed countries are affected negatively. When writing this report (during December 2008 and
the beginning of 2009), it could be said that the worst of the financial crisis may have already
passed (even if new developments cannot be excluded) yet the worst of the economic crisis is
still to come.
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4.2. Structural consequences for the financial services sector
Consequence n°4: needs for recapitalisation
“International experience shows that a rapid recapitalisation of the banking sector is an important
ingredient of a successful and fast resolution of a financial crisis.” (IMF, Global Economic Report,
November 2008). Companies therefore need capital (some of them immediately) because they
have – in the first instance –a liquidity and now increasingly a solvency problem. The financial
services sector needs capital to rebuild its debt and leverage ratio.
The first way to recapitalise banks is public capital injection. This is the reason why the British
government went so quickly into nationalising banks: the British government adopted a rescue
programme (for Northern Rock in 2007 and for Royal Bank of Scotland, Lloyds-TBS, Bingley etc
in 2008) based on public stakes in the companies. The effect was a rise in the banks’ dept ratio to
around 12%, the highest rate in Europe. As this ratio cannot be reached by the banks in the oth-
ers European countries, Great Britain retains its leadership in the financial business.
Public ownership is spreading:
• in the Netherlands for the FORTIS group (a public-private solution built with the Dutch gov-
ernment and the French group BNP-Paribas) and the insurance group Aegon
• in Germany, even if this country is more reluctant to this solution (HRE was nationalised in
March 2009)
• in Austria for Erste Bank
• in France for DEXIA
One can note that these new types of public ownership – named by the OECD as a “non-
orthodox” policy – usually took the form of non-voting preference shares and will probably be very
different from previous nationalisation in countries such as France.
The question remains: are the interests of tax-payers really preserved? In some cases there is a
clear deal between the governments and the banks, such as the dividend policy in the Nether-
lands, regarding their lending strategy and lower compensation for top management. So far,
however, the results of such deals have not been proved.
Finding money on the stock markets is the second solution: examples of Société Générale,
Unicredit, Santander, Barclays can be given. Are new competitors, such as Asian countries,
Sovereign Wealth Funds going to take advantage of this situation to become stake-holders in a
wide range of western companies? For example, Qatar and Abu Dhabi own a 38% share in Bar-
clays’ capital. some Chinese firms in American or European companies at the beginning of 2008.
Consequence n°5: crisis leads to consolidation
The lessons of past crises, particularly the Japanese banking crisis (1992) and the Swedish crisis
(1993), show that each crisis brought a new step of consolidation through mergers and acquisi-
tions. The trend has already started: Barclays buying parts of Lehmann Brothers, BNP-Paribas
buying the major part of FORTIS, the Japanese insurance company Nomura invested into Leh-
mann Brothers, the German Dresdner Bank is merging with Commerzbank. Some of these merg-
ers may be encouraged by governments in Spain, for example, for CAIXA and local savings
banks.
This need for consolidation is due to the weak position of some companies and the need for
capital, and also because European regulation leads to consolidation in the mutual and regional
banking sector: see examples for Germany and Spain.
The consequences of mergers on employment are important: for example the merger between
Dresdner Bank and Commerzbank is expected to cost 9000 jobs. Moreover, consolidation will
also happen internally with the reduction of activities in investment banking and other sections.
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Consequence n°6: the end of the business banking model?
Some of the large banking companies which were involved in derivatives are (or were) pure busi-
ness banks. Companies such as Lehmann Brothers, Goldman Sachs and Morgan Stanley are
only based on wholesale activities, making the greatest part of their business with the huge debt
market. This means that no deposits are guaranteeing their activities. For some experts (such as
Michel Aglietta, 2008), the present crisis means the failure of this model. To illustrate this idea,
one can note that Morgan Stanley and Goldman Sachs have just asked for a licence to become
deposit banks. From this point of view, European banks which are generally universal banks can
be seen as being stronger as long as they have enough equity capital.
Business banks, brokers, private equity companies, and financial consulting companies are di-
rectly affected by the crisis: in London City for example, they represent 17% of the total financial
employment. The city lost around 40,000 jobs immediately after the start of the crisis. In France, it
is said that business banking activities employ 10% of the banking workforce.
Consequence n°7: a new regulatory framework?
Even though national governments rescued their banks, it was clear from the beginning of the
crisis that the regulatory framework for the financial markets needs to be improved. “International
cooperation is desirable to avoid measures that distort competition” stated the OECD, pointing
out the two problems associated with the regulation of capital markets: it is an international prob-
lem and a problem of balanced competition. This reveals that it might be a complicated issue.
However, there is less time to draw a conclusion compared to how long governments took to
negotiate the Kyoto protocol or the WTO agreements.
Several issues can be added to the check list for the international regulatory conferences:
• Encourage a better assessment and risk management: limiting or forbidding the off-balance
sheet exposures, redefining the incentives which lead to risk taking behaviours. The Euro-
pean Commission will finish a public report on CDS in April 2009.
• Regulate compensation models and align them with long-term results
• Promote transparency in order to manage risks and rebuild trust
• Regulate solvency criteria and solve the discussion about “ fair value” rules
• Change the rules for rating agencies
• Regulate hedge funds, private equity firms and all the “black areas” of non-regulated finan-
cial business
• Regulate tax havens
In Europe, the framework for managing the financial crisis needs to be improved due to the fact
that a large part of European companies are global players. This makes international agreements
indispensable.
5. Scenarios for the European financial services sector
Taking the current world financial crisis into consideration, the endeavour to formulate skills sce-
narios for the European financial services sector appears to be courageous, if not pretentious.
Little is known about the real extent of property risks and their effects on the ongoing downturn of
the world economy. However, thinking about the future of a sector is needed more than ever in
such a period of great trouble. The future appears to be widely open and widespread options for
alternative developments are being discussed. Reflecting on the future therefore is crucially im-
portant.
The scenarios, however, cannot escape the uncertainties. This Chapter therefore tries to capture
the main alternatives for future developments rather than pretending to make forecasts. It is de-
signed as input to the discussion about the future of this sector, thinking also about policy options
in these times of great change.
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Financial services will not remain the same after this crisis. It is therefore particularly important to
develop a clear understanding of the numerous change mechanisms. For this purpose, the Chap-
ter starts with the analysis of possible future impacts of the drivers identified in Chapter 2. It then
identifies the links between the drivers and finally develops three scenarios for the European
financial services sector up to 2020.
5.1. Main drivers of the scenarios
In Chapter 2 we identified five drivers of change for the past ten years: new market develop-
ments, globalisation, consolidation of the sector, regulation, ICT knowledge and the development
of distribution channels. These can now be used to describe alternative future trends under the
radically new conditions of the world financial and economic crisis. This can be expected to affect
the sector not only in the short-run but may have a strong long-term effect on the operational
scope of the business.
5.1.1. Principal methodology
As the scenarios will have to cover both the trends tied to the past and the changes triggered by
the financial and economic crisis, the identification of drivers starts with a detailed collection of
descriptors which are able to describe all the important factors. These descriptors refer to a wide
range of economic, political and social phenomena. They do not need to be directly related to the
target variables of FS output, employment and skills. Indirect links are similarly important.
The descriptors are linked through an interdependence matrix which shows the linkages between
all the descriptors in four categories. The following categories are used:
Value Meaning
3 Direct dependency
2 Strong indirect dependency
1 Weak indirect dependency
0 No dependency
These categories are applied to all combinations of descriptors in a two-sided approach: each
descriptor has a value for its active impact on each of the other descriptors, and each descriptor
has a value for its passive dependency on all other descriptors. Usually, lines contain the active
values and columns contain the passive values. Line sums therefore give the active sums, show-
ing how strongly the descriptor affects all other descriptors. The column sums make the passive
sum, which measures the degree of dependency of the descriptor on all other descriptors. Finally,
active and passive sums can be combined in a scatter plot which reveals those descriptors with
strong active impacts and weak passive dependencies (Chart 5). These can be included in the
set of drivers.
Regarding the variety of EU countries, financial services do not appear to be strongly segmented.
In particular in the New Member States, financial companies from Western countries built the
banking and insurance systems according to their principles and strategies, and applying their
approved business models. Former socialist banks were bought by western companies. Thus the
financial services market is European now and there is no stringent need to separate scenarios
by regions.
5.1.2. Set of descriptors
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Based on research literature, interviews with branch experts and workshops, a list of 25 descrip-
tors was produced (Table 26). These can be sorted into five major groups, which are called
groups of drivers:
• Knowledge base, including the skills and competences of the existing work force, the training
system, and labour shortages in different occupations. This refers to ICT knowledge in particu-
lar which was one of the major drivers of past developments.
• Markets, comprising the determinants of market development in financial services, i.e. income
and wealth distribution, consumer preferences and in particular consumer confidence in the fi-
nancial system, demography but also general economic development. The globalisation of
capital markets which was so important in the past will continue to play an important role at
European and international levels.
• Control systems, which are now under reconstruction both externally and internally in order
to have stronger public control and to rebuild consumer trust.
• Sector organisation, including mergers and acquisitions, internet banking, different types of
retail channels, and relocation of back office functions.
• Production and employment, which belong to the target variables of the scenarios.
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Table 26 List of Descriptors
Descriptor Meaning Categories
Knowledge base
FS skills structure Will companies with highly trained staff have comparative
advantages against companies with intermediary and low-
skilled employees?
• High share of profes-
sionals
• High share of clerks
R&D knowledge The R&D experience and knowledge of financial products and
processes. This means the ability to create new financial
products, apply new technologies and optimise processes,
operating internationally etc.
• Strong
• Weak
Product innovation Will product innovation come to a halt due to the risk awareness
of consumers and investors, or will the creation of new financial
products be accepted again as long as they allow improved
transparency and risk assessments?
• Strong
• Weak
Process innovation,
ICT application
Will companies use the cost-saving potential of ICT in large
scale organisations or will they apply ICT at a minimum level in
small scale units?
• Large scale
• Small scale
Training system The descriptor comprehends general education, intermediary
vocational training, and university training, evaluated from the
perspective of potential financial services employers. The well
developed training system therefore provides the competences
which are important for jobs.
• Well developed
• Poorly developed
Labour shortage of professionals Professionals include managers, professionals and specialists.
Labour shortage means a lack of sufficient supply of labour in
these occupational groups.
• Lack of labour
• Sufficient supply
Labour shortage of clerks Administrators and clerks include skilled clerical workers at the
intermediary level, sales staffs and secretaries.
Labour shortage means a lack of sufficient supply of labour in
these occupational groups.
• Lack of labour
• Sufficient supply
Markets
Consumer confidence Banking and insurance clients lost at least part of their former
confidence regarding the security of deposits, life insurance
products and the quality of consulting services.
Consumer confidence will have to be re-established. However,
consumers might adhere to their scepticism.
• Re-building
• Lost for many years
Income and wealth distribution The distribution of income and wealth widened in the past and
contributed to the segmentation of financial markets. Economic
recession devaluated substantial parts of property and might
limit the markets for property management. A rapid recovery
might lead back to former trends.
• Wide
• Narrow
Demography Age structure of the population. This is related to consumer
preferences regarding risks and the quality of services. More-
over, it affects recruitment policies.
• Aged
• Young
Economic growth Will the European economy rapidly recover from the present
recession or will it take years to overcome the financial and
economic crisis?
• Rapid
• Slow
Emerging countries Will emerging countries use the crisis to expand their shares in
the European financial services or will they concentrate on
home markets?
• Rising importance
• No increase
Global capital markets Will there be a break in the development of international capital
markets leading to a re-nationalisation of capital allocation, or
will international business grow again when the crisis is over-
come?
• Nationalisation
• Internationalisation
Table 26 continued
Descriptor Meaning Categories
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Control systems
Self-control Will companies be able to establish controlling mechanisms
(middle office function) which allow a better balance of risks, or
will they continue to follow a short-term profit maximising
strategy?
• Strong
• Weak
Rebuilding trust Will companies be able to rebuild the confidence lost among
consumers and investors? Will they invest into reliability with
better information, competent consultants and stronger product
control, or will they limit their activities to marketing campaigns?
• Determined
• Vague
Public rescue programmes Will governments be obliged to take the risks of financial
investments through shareholding and guarantees in the long-
run, or will they be able to retreat from the business soon?
• Short-term
• Long-term
Public supervision Will governments be able to control international capital markets
and avoid future imbalances or will they only cosmetically adjust
current supervisory concepts?
• Efficient control
• Weak control
Risk management control Will governments force financial institutions to introduce an
effective system of risk management for all types of invest-
ments? Will this system be able to improve risk management
and lead to the early identification of changes?
• Efficient risk man-
agement
• Weak risk manage-
ment
Sector organisation
Back office relocation Will companies follow cost pressures and relocate back office
work to low-cost countries? Will those who use this opportunity
get substantial advantages?
• Outward investment
• Balanced
• Inward investment
Mergers & acquisitions Will economies of scale through the standardisation of products
and market power further increase the rate of concentration or
will smaller companies be able to survive on a regional basis
through better services and more trust?
• Increasing
• Decreasing
Outsourcing of technical and
administrative services
Will independent “technical and administrative service organisa-
tions” emerge, which provide the whole range of services
needed for banking and insurance or will these services remain
in-house for control and data protection reasons.
• External
• Internal
Retail channels Will retail banking and insurance use sales points and branches
with sales specialists rather than financial professionals? Or will
market success depend much more on financial competences
of consultants, broad market knowledge and personal relations
available in competence centres?
• Sales points
• Competence centres
Internet banking Will internet banking and direct insurance be broadly accepted
as the usual instrument of financial activities or will customers
remain sceptical and prefer personal contact to bank represen-
tatives?
• Normal standard
• Exception
Production and employment
Financial services employment Total employment in the sector • Rising
• Stagnating
• Falling
Financial services output Total value added in the sector • Rising
• Stagnating
• Falling
Source: DKRC/Economix
5.1.3. Interdependence matrix
The interdependence matrix shows the links between these descriptors using the classification
mentioned above. All descriptors are classified and ordered by their active and passive sums in
Table 27. The classification is based on the evidence from mapping the sector, information
gained through literature analysis, expert interviews, and the debates conducted during the sce-
nario workshops. The principles of economic theory are also included.
3
3
The matrix nevertheless reflects the theoretical understanding of sector which the authors of the scenario devel-
oped. In order to reveal this understanding and open the discussion, the matrix is published in detail.
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The red cells of the matrix indicate the direct links between the descriptors and the orange cells
indicate the strong indirect links. The weak indirect links are light blue and dark blue signals no
interdependency. Due to the ordered presentation of the descriptors, most of the direct and
strong indirect links can be found in the upper right hand corner, while weak indirect and non-links
are in the lower left hand corner.
This description of interdependencies is based on the present status. It does not include forecasts
of how the role of the descriptors will change during the scenario period. Therefore, the scenarios
will also consider how the impact of the descriptors (and drivers) will change in the future and
which implications will arise from these changes.
The picture, however, is rather scattered and does not reveal a clear dominance of one of the
descriptors or a group of them. A series of descriptors appears to be both strongly active and
strongly passive. This could be understood as a contradiction, but it is the indication of strong
interdependencies among the descriptors.
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Table 27 Interdependence matrix
Classification categories: 3 = direct dependency; 2 = strong indirect dependency; 1 = weak indirect dependency; 0 = no dependency;
Source: DKRC/Economix
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5.2. The drivers
The comparison of active and passive sums of the interdependency matrix reveals the impor-
tance of the descriptors (Chart 5). In brief, the financial services sector is strongly driven by:
• knowledge of the sector
• control systems which will be established and reorganised in the near future
• organisation of the sector
• market developments
The result is in the two output categories of value added and employment.
Demography appears to be the least active but also the most independent factor in this set of
descriptors.
Chart 5 Drivers
Active and passive sums of descriptors
Wealth distribution
Training system
Skills structure
Self-control
Risk management control
Retail channels
Rescue programs
Rebuilding trust
R&D knowledge
Public supervision
Product innovation
Process innovation
Outsourcing of services
Mergers & Acquisitions
LS professionals
LS administrators
Internet banking
Global capital markets
FS Value added
FS Employment
Emerging countries
Economic growth
Demography
Consumer confidence
Back office relocation
0
5
10
15
20
25
30
35
40
45
50
0 5 10 15 20 25 30 35 40 45 50
Passive Sum
A
c
t
i
v
e
S
u
m
Knowledge base
Control system
Sector organisation
Output
Markets
Source: DKRC/Economix
The high interdependency of the descriptors requires a more detailed look at the linkages be-
tween the drivers. This can be seen in Chart 6, below, which shows the active and passive sums
for drivers, including the internal links among the descriptors of a driver. The active sums are
arrayed in a North-West direction while passive sums follow a North-East direction.
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Chart 6 Links among drivers
Active and passive sums of drivers
Sector organisation
Control system
Knowledge base
Market
Output
Sector organisation
Control system
Knowledge base
Market
Output
0
10
20
30
40
50
60
70
80
90
100
Active sums Passive sums
Source: DKRC/Economix
According to Chart 6, the driver “Sector Organisation”, in the bottom right, strongly affects the
driver “Knowledge Base”, ordered as the third driver in the North-West direction. It also has im-
portant internal links, visible as the bar with the brick pattern. This means that sector organisation
depends not only on one of the descriptors but on a variety of them which are closely interlinked.
Similarly, the creation of “Control Systems” has strong internal links, in addition to important ef-
fects on markets and the knowledge base.
The “Knowledge Base” affects markets and sector organisation, but – most importantly – shows
the strongest internal link among all the drivers. This means that the “Knowledge Base” is a driver
which reinforces itself. While it depends on the type of sector organisation, the structure of the
control system and market developments (North-East dimension of “Knowledge Base”) the deci-
sion to invest into the human competences appears as a (partly) independent option in the sce-
narios. More so than the internal links of other drivers, this option can be expected to have self-
enforcing effects.
5.3. Three scenarios up to 2020
5.3.1. Overview
The scenarios start from both the fundamental drivers identified in the previous sections and the
present knowledge about the financial crisis. It appears obvious that the European banking and
insurance sector will be affected by the crisis more than the other sectors. In particular, the failure
of liberalised capital markets and the inability to supervise these markets will have a strong im-
pact on future developments. The scenarios therefore put the organisational answers to the crisis
into the focus of considerations:
• How will the European financial services sector reorganise its activities and markets? Will it
develop a new and sustainable business model which avoids the errors of the past or will it
continue with the free-market approach of the last decade?
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• How will governments develop their supervisory instruments? Will they be able to achieve
the necessary international agreements or will they act nationally? Will the financial and
economic crisis force governments to take large parts of the banking industry into state-
ownership or will a rapid recovery allow for a more relaxed system?
• How will banking clients and financial investors react? Will financial institutions be able to
rebuild consumer trust or will the crisis raise uncertainties in the long-run?
Chart 7 Drivers and scenarios
Source: DKRC/Economix
When these considerations are combined, three alternatives appear to be crucial for the future of
the European financial services sector (Chart 7):
• Scenario 1: “Sustainable finance” describes the self-healing of financial markets. It is a
combination of strong self-governed restructuring of the sector, restrictive control, and the ap-
plication of an innovative, market-oriented approach which targets rebuilding market confi-
dence. The focus is on the development of self-enforced and self-regulating control systems,
which will overcome the short-term orientation of the financial business. A new business
model will be developed which considers risk analysis and consumer trust as its core ele-
ments. Strong investments into new financial products with superior characteristics will be
necessary, based on a long-term development strategy for the knowledge base of the sector.
• Scenario 2: “Laissez-faire” sees the main actors of the financial business avoiding significant
restructuring of the sector. They will try to blur the consequences of the financial crisis and
continue with the present business model as far as possible. Public control will remain liberal
or ineffective, particularly in global capital markets. New products will continuously be devel-
oped for investment rather than consumer markets. Financial services and products will be-
come increasingly standardised. Mergers & acquisitions will be undertaken on a large scale. It
is the scenario which successfully returns to development trends from before the crisis.
strong
restrictive
liberal
Market
confidence
Control
systems
weak
Weak
strong
1
Sustainable
finance
2
Laissez-faire
3
State ownership
Sector restructuring
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• Scenario 3: “State ownership” assumes that
the crisis will run out of control and public au-
thorities will be forced to maintain the basic
functions of banking and insurance. It is the
“Great Depression” scenario. As a last resort,
public control over the financial system will be
enforced. The banking sector will return to the
“administrative” approach without providing
many sophisticated services. Following public
regulation will become more important than
serving clients. The sector will concentrate on
process innovation rather than developing new
business models. Consumer confidence will
remain weak.
The scenarios are not developed for the driver
“economic growth” as this will happen in all three
scenarios, for better or worse. Nevertheless, they
differ in the economic performance of financial
services as well as in the overall economy.
Table 28 Scenarios for the European financial sector up until 2020
Driver Scenario 1
Sustainable finance
Scenario 2
Laissez-faire
Scenario 3
State ownership
Business model
Trust- and
consumer-oriented
Profit-oriented Control-oriented
Self-control by the
sector
Strong Weak Strong
Public control Restrictive Liberal Very restrictive
Mergers & acquisitions Weak Strong Strong
Market growth Restrained Unstable Weak
Product innovation Strong Strong Weak
Product
standardisation
Low High High
Process innovation Medium Strong Strong
Globalisation Controlled Uncontrolled Restricted
Outsourcing/relocation Medium High Low
Training activities Strong Strong Weak
Employment Recovery after recession
Short-term fluctuations after
recession
Long-term reduction with late
recovery
Source: DKRC/Economix
They are also not separated by technical or work organisation alternatives. While these drivers
are seen to be important, they very much depend on other drivers. The key to future development
seems to be the prevailing business model which may be a completely new approach in the case
of Scenario 1, the return to the past business model after the crisis in Scenario 2, or the end of an
economically independent financial sector in Scenario 3.
Expert panel views
To the great surprise of the authors, there was a
principal consensus among the expert panel partici-
pants about the relevance of the scenarios and their
realistic opinions. None of the scenarios were ex-
cluded or located to the “world of fantasy”. There was
also consensus that the financial crisis is going to
reduce employment in the sector considerably.
The broad discussion about the scenarios revealed
that scenario 1 attracted many participants as the
“desirable” future which will, nevertheless, face many
obstacles and strongly depend on the regulatory
framework of capital markets. Scenario 2 was as-
sessed as the least probable. As one of the partici-
pants expressed: “there will be no free market any
more!” Scenario 3 was characterised as the hell we
might have to cross. Nevertheless, it was seen as a
transition phase which may lead to a gradual recov-
ery of private banking.
Of course, the scenarios were criticised as being too
general and not directly applicable to specific coun-
tries or parts of the sector. The authors apologise for
not focussing on every detail.
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Table 28 contains assumptions and outcomes of the scenarios in a synoptic way. The rationale of
the scenarios is described in the following sections. The scenarios cover all 27 EU member
states.
5.3.2. Scenario 1: Sustainable finance
Facing sensitive customer reactions regarding all news about bank losses and experiencing a
high level of mistrust in interbank business, the banking sector will recognise the need to develop
an alternative business model – a business model which intends to rebuild trust into the long-
term stability of the sector and the security of deposits. The heavy government intervention in the
banking business, which will continue for some years, will be realised as the failure of liberalised
capital markets. It will become evident that short-term profit maximising strategies were one of the
major reasons for the crisis, as they systematically underestimated long-term risks. It will also be
realised that businesses turned a blind eye to long-term risk assessment for a long time.
This analysis being broadly accepted, the banking business will start a process of principal re-
structuring which targets regaining consumers’ and investors’ trust by reducing long-term risks.
Internal restructuring rather than external intervention will drive this process. The business will
accept demand from its clients and the public to avoid the recurrence of a financial crisis, and will
see the need to offer a convincing approach. This will result in a completely new business model.
At first, the banking sector will establish stringent risk assessment models. These will consider
long-term investments as the standard and thus include a wider scope of economic risks. Banking
management will be forced to assess risks in a transparent and obliging way. This will be en-
forced by government regulations, which strengthen the position of bank customers by making
banks liable for investment recommendations. Customers will prefer investments with clear risk
analysis and bank liabilities. The reforms will mainly address the banking sector but will have
side-effects on insurance. Life insurance in particular will have to adjust to the new liability stan-
dards and provide evidence of security and returns on investment.
Secondly, this will reduce large parts of the investment banking business, not only through its
actual breakdown during the financial crisis, but also in the long run as it will appear being too
risky. New forms of investments, like speculative derivatives and insurance CDS, will be scruti-
nised with respect to their profit/risk ratio and investments will be avoided if only short-term ad-
vantages appear.
Restructuring will be in favour of traditional investments where long-term profitability can be ex-
pected. Life insurance will particularly profit from this development. This will be at the expense of
profit rates in the banking sector – a rate which was exaggerated in an unsustainable way before
the 2008 financial crisis. The sector will learn that profit rates are worthless to convince custom-
ers. It will realise again that banking is a very peculiar business with a high degree of public ac-
countability. Markets will accept only those companies which will be able to demonstrate such a
responsibility. In favour of a sustainable financial business the sector will therefore abandon great
parts of its derivatives markets.
The transition process will give advantages to banks with less stringent profit orientation. This will
be the co-operative banking sector and savings banks rather than strictly private banks. At least
during the first years of the crisis, clients will put more trust into banks with a strong link to public
budgets. Private banks will nevertheless undertake great efforts to re-establish their reputation
through rigorous adjustments of their portfolios. The combat on banking markets will thus be on
private equity and consumer banking rather than investment banking or mergers and acquisitions.
The development will also be against standardisation – another main trend in actual business.
Computerised risk assessment will lose much of its importance in favour of individual risk evalua-
tion and investment consulting. Banks and insurance companies will considerably expand their
efforts to collect information on their clients. Their demands will go into the details of the clients’
businesses and try to get access to the most updated information. Supervisory systems will be
established which will lead to an early identification of risks. Continuous reporting on business
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changes will be obligatory for company clients. Sales related employees will be responsible when
selling products to customers, through ethic rules and through certifications.
Banks will also improve their consulting services with better risk assessments for different in-
vestments. Rating agencies will undergo a principal reform. By law they will have to be independ-
ent from financial institutions. Investors rather than suppliers of financial products will refund the
agencies. They will clearly indicate the degree of uncertainties included in their ratings. Moreover,
they will be reliable for severe cases of misjudgements.
Remuneration systems will be changed with a stronger financial commitment from top manage-
ment. Bonus systems will include malus components for financial losses. The independence of
supervisory boards will be strengthened in line with their liabilities. Brokers and investment bank-
ers will also see a stronger impact of financial risks on their remuneration.
The switch to the “sustainable finance” strategy will solve the financial crisis through a “cultural
shock” which will not only reverse most of the present business principals, but will demand for a
new category of bankers and insurers. The present group of leaders and professionals will be-
come increasingly obsolete and a new type of management will take the responsibility with a
long-term vision and strong customer commitments. Public accountability of the financial system
will be a major business value rather than private profitability. Top management in most of the
companies will be changed in order to achieve the “cultural” change. Former managers and su-
pervisors will be incriminated for the extent to which they were responsible for losses during the
financial crisis.
5.3.3. Scenario 2: Laissez-faire
The European financial sector will come to the conclusion that the financial crisis was an accumu-
lation of unfavourable events that disrupted the formation of a new and promising type of global
finance. The unhealthy expansion of the US mortgages markets and the cyclical downturn of the
world economy will be identified as the main reasons for the crisis. The short-term orientation of
the banking business and – in particular – the expansion into highly speculative types of financial
products however will not be questioned.
The plans for strict public supervision of the banking business will fail due to severe differences
among the G20 governments about the optimal structure of global capital markets. Most of the
European governments will try to establish stringent supervisory systems, however, the US and
parts of Europe will continue to appraise liberal capital markets as the superior solution – after
having saved the financial systems with public support. Short-term capital flows will be seen as
indispensable for the flexibility of the world economy, and investment banking as a necessary
market innovation. Only minor regulative restrictions will therefore be implemented.
Governments have nevertheless pumped large amounts of money into the tumbling banking
sector in order to avoid the catastrophe of a severe world economic crisis. This will appear to be
rather efficient in that the crisis will not be extremely serious and the existing banking system will
survive.
The side effect of these rescue programmes however, will be low pressure on sector restructur-
ing. As nothing will appear to be as serious as it was expected, neither banking management nor
banking clients will see strong reasons for changing their behaviour. The banking business can
undertake a relieved restart after having transmitted the “toxic” parts of its portfolios to public
authorities. Banking clients on the other side will see most of their deposits guaranteed by public
budgets, and thus will continue to maximise short-term revenues without adequate risk assess-
ment. Switching to an alternative business model will fail.
Negative effects on the banking business will emerge only gradually through rising taxes in order
to serve the tremendous debt accumulated during the crisis. Moreover, central banks will follow a
restrictive monetary policy in order to curb the inflationary effects of money supply expansion
during the crisis. Slow economic growth will therefore be the price of this strategy.
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Private banks will be the main profit takers from these developments, as they will be able to con-
tinue their business model without substantial adjustment. Public and semi-public banks will stay
in their sub-optimal position, where they already were in the past. Moreover, they will be restricted
in their operational activities because of stronger public regulation. Public owners will demand for
compensation of previous financial help and thus will take great parts of their profits.
Investment banking will recover after the sharp decline during the financial crisis. New markets
will be developed with continuous innovation of new products for investment banking and insur-
ance. Private equity will expand. The short-term orientation of global capital markets will be re-
vived.
Consumer banking will experience further standardisation with automated risk assessment. Inter-
net banking will strongly expand, including real-time stock trading and online consumer credits.
With the economic recovery, private clients will increase their participation in speculative trading
again. Banks will distribute more and more insurance products to make their networks more prof-
itable.
However, these conditions will not be able to avoid future imbalances. The next economic up-
swing will therefore create another financial bubble, as market dynamics will create similar expec-
tations among participants and drive their investment decisions into uniform directions. With the
repeated expansion of speculative market segments, the financial sector will remain vulnerable to
changes of short-term expectations and economic trends. Instability will therefore be another
major price of the strategy.
5.3.4. Scenario 3: State ownership
Triggered off by the US mortgages bubble, the world economic crisis will accumulate to a wave of
destructive power. Even financial investors with no engagements in highly speculative markets
will be strongly hit by the depreciation of stocks and credit failures. The sharp economic recession
will cause a series of bankruptcies in the non-financial sector which the majority of banks will be
unable to evade. Economies will be on a strong downturn worldwide, whilst also dragging the
healthy parts of the economies into the crisis.
Governments will fight against the breakdown of the financial systems throughout the world, but
will be unable to keep their economies at a normal level. They will have to accept shrinkages of
between 10% and 20% below potential capacities. The crisis will escalate to a worldwide depres-
sion with a long duration.
Facing this situation, governments will be forced to take the majority of banks under state control
in order to guarantee the minimum functions of capital markets at low risks. This will appear as
unavoidable because state guarantees and funds alone will not be able to impede bankruptcies in
the private financial sector. The banking sector will come under state ownership. Some of the
insurance companies involved in CDS and other “toxic” products” will follow them.
State ownership will mean that only the basic functions of the banking system will continue at low
interest rates, with minimum standards for client services, and the focus will be on operational
functions rather than new markets. It will be lean banking in its depressive meaning; targeting at
survival, not at being efficient.
Recession and state control will dry up the new markets almost completely. Investment banking
will not see a future for at least a decade. Private equities markets will have shrunk considerably
due to the devaluation of properties and poor economic prospects. Consumer banking will be run
at a low level providing only the basic functionalities.
Insurance business will also be hit by the depreciation of stocks and other property. In particular,
those companies which are strongly linked to capital markets will be in danger,. Economic pres-
sure on mass insurance will nevertheless be heavy due to the economic recession which will
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reduce premium incomes considerably. Insurance companies therefore follow a clear separation
from banking and a specialisation on insurance markets. A large part of the sub-sector will, how-
ever, be able to avoid state ownership.
Intermediaries will see strongly declining markets. State control will be expanded to niche mar-
kets and companies will (officially) only be able to offer products supplied by state banks. Parts of
the intermediaries’ business will therefore shift to black capital markets.
Innovation activities in the banking system will concentrate on process innovation with a special
focus on the improvement of controlling instruments. New financial products will only be devel-
oped within the narrow range of public capital market regulations, which demand low risks and
standardised products. In order to keep control over banking operations, the number of products
will be significantly reduced and products will be simplified. Control efforts will be undertaken to
check compliance with administrative regulations rather than efficiency or profitability.
Due to the severity of the crisis and the suspension of markets, an effective recovery from de-
pression will only be seen by the end of the scenario horizon. Similar to the financial crisis which
happened in Japan during the 1990s, the economies will suffer from the losses of property and
markets for a long time. This will be due to the fact that the breakdown of the economies will
largely exceed the initial effects of the financial crisis, and governments will be overburdened with
stopping the avalanche. While this will lose its power after some years, the destruction of markets
will be serious. Trust and economic optimisms will be difficult to re-establish.
At the end of the scenario horizon between 2015 and 2020, private banking and insurance will
slowly recover. Governments will start to release state-control and extend the accreditation for
financial services. This will herald the reconstruction of a strongly controlled private business.
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5.4. Employment effects
Estimating the employment effects of the scenarios is an even greater endeavour than writing the
scenarios. As there is no econometric model available to reflect the changes described by the
scenarios, quantitative results must be based on differentiated employment figures for the sub-
sectors in 2006 and assumptions on growth perspectives associated to the scenarios. The em-
ployment figures estimated for the different scenarios are therefore given for demonstration pur-
poses only.
5.4.1. Scenario 1: Sustainable finance
European financial services will have to go through the crisis with substantial job losses. The
sector can be expected to lose 15 % of its employment by 2012 but will increase the number of
jobs afterwards (Chart 8)
4
. Even under positive assumptions however, the employment level of
2007 will not be achieved until 2020. This will be due to the cut in the volume of investment bank-
ing and also to the effects of the economic downturn worldwide. The recovery after 2012 will be
accomplished with the restructuring process during the crisis. Forceful consumer orientation and
visible improvements in the quality of investment consulting will contribute substantially to rebuild-
ing trust. Nevertheless, it will take years until the markets are convinced of the sustainability of
the new business model.
Chart 8 Employment trends in the “Sustainable finance” scenario
Number of persons employed (EU 27, millions)
3
3,5
4
4,5
5
5,5
6
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
m
i
l
l
i
o
n
j
o
b
s
Source: DKRC/Economix
Insurance markets will able to profit from the crisis as their products have never been under seri-
ous liability suspicion. Insurance companies will take advantage of favourable consumer assess-
ments and expand their product portfolio with respect to long-term risk minimisation. Life insur-
ance will experience a new revival due to the security orientation of the population.
4
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Intermediaries will also be less affected by the financial crisis, but will nevertheless experience
shrinking markets during the first years. They will be able to recover from this sooner than the
banking sector and will try to play their consulting and advice role. Improvement of the banks’
consulting services, however, will be a continuous threat to the expansion of intermediaries’ busi-
ness, which will grow with the overall trend in financial services.
By 2020, the financial services sector can be expected to employ fewer workers than in 2006.
Following the assumptions of this scenario the volume of job losses up until 2020 might range
between 50,000 and 600,000, depending on the strength of the recovery after 2012.
5.4.2. Scenario 2: Laissez-faire
In the “Laissez-faire” scenario, the European financial services will enter a phase of unstable
employment with short-term recoveries only. The number of jobs will continue to decrease up
until 2012 due to the effects of the current crises. Fundamental conditions of the world economy
will not allow an earlier recovery. The sector will however profit again from the succeeding up-
swing and expand its labour force in investment banking, mergers and acquisitions, and private
equities. However, this cannot be expected to be sustainable. The banking business will therefore
enter the group of sectors which are highly sensitive to cyclical fluctuations.
Chart 9 Employment trends in the “Laissez-faire” scenario
Number of persons employed (EU 27, millions)
3
3,5
4
4,5
5
5,5
6
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
m
i
l
l
i
o
n
j
o
b
s
Source: DKRC/Economix
In the long run, the recurrence of high financial risks will undermine the trust in the banking busi-
ness. It will not be perceived as a business that fully complies with its peculiar public accountabil-
ity. This will limit the expansion of the private banking sector in favour of public or semi-public
banks and the insurance industry. Being less affected by the ups and downs of global capital
markets and having applied long-term investment strategies professionally for a long period of
time, the products from insurance companies – life insurance in particular – will become more
attractive to private investors. Moreover, independent intermediaries will profit from the uncer-
tainty in capital markets, as high quality consulting is strongly appreciated by investors.
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By 2013 the sector can be expected to have lost around one sixth of its 2007 labour force and will
escape from the negative trend only for a short period. The major burden of this decline will have
to be taken on by the banking sector, while insurance and intermediaries will be able to expand,
at least in relative terms.
5.4.3. Scenario 3: State-ownership
The number of jobs within the European financial services will remain at a low level, even after
the immediate effects of the financial crisis which is expected to be more severe and to take
longer than in the previous scenarios. By 2020, the European financial sector will have lost al-
most 25 % of its 2007 level. Job losses will continue until 2015 and then turn into a slight increase
afterwards. Nevertheless, employment growth will remain limited due to slow market expansion.
Chart 10 Employment trends in the “State Ownership” scenario
Number of persons employed (EU 27, millions)
3
3,5
4
4,5
5
5,5
6
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
m
i
l
l
i
o
n
j
o
b
s
Source: DKRC/Economix
The major burden of this decline will have to be taken on by the banking industries, but insurance
and intermediaries will also lose jobs. Insurance will perform relatively better. Intermediaries,
however, will lose substantial parts of their workforce.
Employment losses will concentrate on formerly private banks, particularly in the area of invest-
ment banking and private equity. Public and semi-public banks, co-operative banks and savings
banks, however, will mainly be affected by the overall economic downturn. While this will happen
during the first phase of the scenarios up until 2015, later employment growth will result from high
cost pressure and labour saving technologies.
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5.5. Impact on skills
5.5.1. Scenario 1: Sustainable finance
As indicated above, the restructuring process will imply considerable changes of both the type of
competences needed by the banking sector and the occupational structure of employment.
Table 29 Change of occupational structures in the “sustainable finance” scenario
Tendency of % change; EU27; 2006-2020*
Occupation Banks Insurance Intermediaries
Total financial
services
Managers = = = =
Computing professionals = = = =
Business and finance professionals (sales and
marketing)
++ + ++ ++
Business and finance professionals (new
products)
+ + = +
Business and finance professionals (organisa-
tion, controlling)
++ + = ++
Clerks ? ? ? ?
Service and sales workers + + + +
Craft and related trades workers ? ? ? ?
Elementary occupations = = = =
* Change of % shares of area total:
++ strong increase; + increase
= no change
? ? strong decrease; ? decrease
Source: DKRC/Economix
The upcoming competence profiles will demand:
• Strong consumer orientation of the whole business. This will be the major battlefield of com-
petition among financial services providers. It will be governed by the ambition to provide the
best consulting services possible. Reliability and trust will be the goals to be achieved from all
marketing activities. Individual consulting will be provided and long-term consumer and busi-
ness relations will be established.
• Strong risk awareness instead of short-term profit maximisation. Consultants will have to be
trained in assessing investments risks from a long-term perspective. They will return to “con-
servative” investment strategies in favour of better security.
• Investment banking and parts of short-term capital management will be abandoned. This will
not be required in capital markets following a sustainable strategy.
• R&D specialists will be needed in order to improve risk analysis and customer consulting
rather than the development of new financial products. This will raise the demand for risk ana-
lysts, market analysis specialists, mathematicians and statisticians.
• Internet banking will experience a certain upper ceiling, as consumers prefer individual ser-
vices. Nevertheless, it will be used for daily banking operations. Back office operations will be
reorganised further. Thus ICT specialists will see a continuous expansion of labour demand.
5.5.2. Scenario 2: Laissez-faire
Skills trends remain rather unclear in this scenario, as cyclical fluctuations will have a strong
impact. In particular, investment bankers and brokers will find themselves in a similar position to
engineers in the manufacturing sector. Strong fluctuations in labour demand will create cobb-web
cycles in these labour markets. These will be driven by rising labour demand, initiating increasing
training efforts, which will arrive in labour markets at a time when demand will be in decline again.
Unemployment risks will therefore increase for these types of professionals.
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Competence profiles in the upper segment of the business will nevertheless reveal some stable
trends:
• R&D specialists will be required for product innovation and risk assessment
• Specialists for business organisation and ICT will restructure back office administration and
develop the instruments for expanded internet banking
• Marketing specialists will be used to regain market shares for private banking
• Controlling specialists will be needed to keep control of a standardised and automated con-
sumer business
Table 30 Change of occupational structures in the “laissez-faire” scenario
Tendency of % change; EU27; 2006-2020*
Occupation Banks Insurance Intermediaries
Total financial
services
Managers = = + =
Computing professionals ++ ++ = ++
Business and finance professionals (sales and
marketing)
+ + ++ +
Business and finance professionals (new
products)
++ + ++ ++
Business and finance professionals (organisa-
tion, controlling)
+ = = +
Clerks ? ? ? ? ? ? ?
Service and sales workers = + + +
Craft and related trades workers ? ? = ?
Elementary occupations ? ? = ?
* Change of % shares of area total:
++ strong increase; + increase
= no change
? ? strong decrease; ? decrease
Source: DKRC/Economix
The scenario will strengthen the trend towards a dual labour market, split into a high-skilled seg-
ment for investment brokers, R&D specialists, organisational and marketing specialists, and a
low-skilled segment for sales and call centre agents, clerks and other support staff. This will be
due to the segmentation of financial markets into a sophisticated area of investment banking and
asset management, and standardised consumer markets which will increasingly operate with
internet tools. Big service providers will be established which will take a major part of day-to-day
operations in accounting, mailing, and internet operations. This part of labour demand will be-
come effective in other sectors than financial services.
5.5.3. Scenario 3: State-ownership
Skills structures will change in opposite directions compared to the pre-crisis period:
• A greater need for back office professionals will emerge, due to a stronger emphasis on con-
trolling and general administration. This will also increase the need for computer specialists.
• The middle office jobs will grow.
• Front office professionals in the fields of sales and marketing but also in R&D for new prod-
ucts will see declining demand.
• Lean management will be introduced at the expense of the broad middle management
groups in particular.
• Clerks will keep a relatively good position due to the fact that administration will become
more regulated.
• Service and sales workers will see declining demand.
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The new type of bankers demanded by the state-owned banks will need the competences of civil
servants rather than the strategic and market oriented competences of a private banking system.
They will need to have a sound education in law, a clear perception of tasks and legal compe-
tences, and an orientation towards public targets rather than company profits.
Table 31 Change of occupational structures in the “state ownership” scenario
Tendency of % change; EU27; 2006-2020*
Occupation Banks Insurance Intermediaries
Total financial
services
Managers ? = ? ?
Computing professionals + + + +
Business and finance professionals (sales and
marketing)
? ? = ? ? ? ?
Business and finance professionals (new
products)
? ? ? ? ? ? ?
Business and finance professionals (organisa-
tion, controlling)
++ + ++ ++
Clerks + ? + +
Service and sales workers ? + ? ?
Craft and related trades workers = ? = =
Elementary occupations = ? = =
* Change of % shares of area total:
++ strong increase; + increase
= no change
? ? strong decrease; ? decrease
Source: DKRC/Economix
The new strategic orientation will bring a radical change to bank management in particular. Top
management will be largely exchanged and the middle management will have to follow the new
rules rapidly. Moreover, remuneration will be significantly reduced. Bonus systems will expire,
and overall wage levels of the banking system will decline in relation to other sectors.
Investment bankers and brokers will have to look for jobs in other areas as financial specialists in
the non-financial sector or as consultants. The rising need for administrative professionals and
controlling specialists will be covered by other occupations.
6. Strategic impacts from the scenarios
6.1. Human resource policies in a declining industry
In most of the EU countries, the financial sector expanded for many years. This is changing radi-
cally due to the current financial crisis and will lead to a substantial loss of employment, whatever
is assumed for the long-term future of the sector. With the downturn of employment, human re-
source policies will face new conditions in internal and external labour markets which will be
similar to other declining industries. This Section shortly reviews the particularities of these
branches.
The reduction of employment will affect both labour supply and labour demand in a significant
way. It will result in:
• high unemployment risks for the staff employed – certainly a new and alarming experience
for much of the workforce
• a small number of job openings for those entering the sector – a surprise for many of the
students and trainees in professional schools and colleges, and also for those who are in the
process of deciding about their educational career
• a lower wage increase due lower profits and rising unemployment
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• a generally poorer attractiveness of the sector compared to other sectors – a new condition
for the human resource departments
This will not make human resource policies easier: while labour supply will be more than sufficient
due to the rising number of lay-offs, it will become difficult to recruit specialists from the non-
banking sector (ICT specialists, marketing specialists, mathematicians, statisticians etc.). These
groups will recognise higher unemployment risks in a sector which, until recently, was perceived
as providing secure jobs. Even financial specialists will look for job opportunities outside the fi-
nancial sector. Selecting those who are the best qualified will become more difficult.
Company restructuring appears to be difficult in such a situation. While markets demand a rapid
restructuring in all areas – products, technologies, organisation – the human resource policy in
companies is determined by low labour turnover, the great importance of internal labour markets,
and an ageing work force. Particular skills shortages appear among emerging skills, which are
scarce due to competition among employers.
6.2. Adjustment strategies at company level
In the short-run, many financial institutions will be forced to consolidate and to adjust activity
levels to declining financial markets. In the long-run however, companies will follow different types
of strategies which appear clearly separated in the three scenarios (Table 32).
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Table 32 Main adjustment strategies
Adjustment strategy Scenario 1
Sustainable finance
Scenario 2
Laissez-faire
Scenario 3
State ownership
Diversification strategy
•
Trust and security oriented strategy
•
•
Globalisation strategy
•
Specialisation strategy
•
Standardisation strategy
•
•
Source: DKRC/Economix
Five principal strategic orientations might determine the prevailing business models:
• Diversification strategy: banks in particular recognised the importance of consumer deposits
and credits for the stability and security of the business. The wide distribution of risks ap-
pears to be fundamental, as well as participation in a wider scope of markets. Universal
banks are the ideal business model of this strategy. Mergers between banks and insurance
companies appear to be attractive.
• Trust and security oriented strategy: the financial crisis also revealed the importance of
consumer trust for the long-term sustainability of the sector, and it made clear that profit ori-
entation disagrees with this principle. The strategy requires long-term orientation rather than
short-term profitability, and results in a fundamental change in product development, invest-
ment consulting, and investment decisions.
• Globalisation strategy: big is not only beautiful but efficient. The economies of scale in finan-
cial markets are strong and make cross-border mergers attractive. This creates big institu-
tions in interbank markets and re-insurance, but also in private equity, asset management,
and back-office services.
• Specialisation strategy: this is not only the separation of banks and insurers, but the institu-
tional specialisation on mortgages, business credits, different types of asset management,
investment banking and other market segments. The economies of this strategy are based
on specialisation rather than size. A high degree of professionalism is required for market
success.
• Standardisation strategy: products for mass consumer markets are standardised in a limited
number of alternatives and automatic risk assessment. The internet plays a dominant role for
the business. Big back office service providers execute the administrative tasks. Individual
services are an exemption.
The scenarios contain different combinations of these strategies:
• Scenario 1 mainly refers to the trust and security oriented strategy in order to rebuild con-
sumer confidence. Also, for security reasons, a diversification strategy is followed.
• Scenario 2, in contrast, applies a strongly economic approach searching for favourable mar-
ket positions in global capital markets. This can also be achieved through specialisation in
niche markets and standardisation of consumer markets.
• Scenario 3 applies a trust and security oriented strategy by the means of a public banking
system. In order to be efficient, a high degree of standardisation must be achieved. The het-
erogeneity of consumer preferences is not directly relevant.
The different strategic options of the scenarios also imply different adjustment measures regard-
ing human resource policies. The importance of these measures is indicated in Table 33:
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Table 33 Adjustment measures of companies
Scenario 1
Sustainable finance
Scenario 2
Laissez-faire
Scenario 3
State ownership
Changing work organisation +++ ++ 0
Retraining of labour force +++ ++ +
Recruiting unemployed 0 0 +
Recruiting young ++ +++ 0
Recruiting from abroad 0 ++ 0
Improving working conditions +++ 0 +
Outsourcing / relocation 0 +++ +
Networking ++ + 0
Improving career structures +++ + +
Knowledge transfer ++ + +
Raising wages + 0 0
Improving image +++ ++ +
+++ very important; ++ important; + relevant; 0 not relevant;
Source: DKRC/Economix
Scenario 1 “Sustainable finance” will lead the companies towards a customer oriented organisa-
tion, putting a strong weight on “face-to-face” work situations. This organisation is based on a
high level of competences for the counsellors, loan officers, insurance agents, and intermediaries.
They need a high level of education to analyse the clients’ needs, the knowledge of a large range
of financial products, and a good assessment of potential economic and financial risks. They
have to maintain this level throughout their career by taking part in frequent training programmes.
Their motivation needs to be strengthened by serious career management, by knowledge transfer
measures and the experience of internal and external networking.
Scenario 2 “Laissez-faire” is based on an industrialised organisation and on lean production
models with large service centres and big call centres for product sales. Turnover will be encour-
aged by profit-based remuneration. Young people will be hired on low wages to work on sales
platforms and in call centres, but also for highly professional jobs in investment banking. New
products will be continuously developed by special R&D staff. Training courses will be used to
continuously update employees’ knowledge on innovative products. Particular attention will be
paid to soft competences and communication.
Scenario 3 “State ownership” will lead to an administrative sector demanding reinforced control-
ling skills, and people with a strong knowledge of regulations and general law in order to apply
national and international rules. The middle office will be the most developed function. Employees
must participate in training courses to develop their regulation and law knowledge.
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6.3. Strategic choices for sector organisations, training institutions and
governments
The scenarios also require different strategies to be followed by sector organisations, training
institutions and governments (Table 34):
Table 34 Adjustment measures of sector organisations, training institutions and governments
Scenario 1
Sustainable finance
Scenario 2
Laissez-faire
Scenario 3
State ownership
Image of the sector Sustainable sector with a
high degree of public
accountability
Modern and dynamic sector Strongly security oriented
sector providing low-cost
products
Career guidance Strong client orientation,
risk oriented decisions
Flexible and innovative,
Profit oriented decisions
Strictly task oriented
Vocational training Communication skills,
risk assessment and
controlling
Specialists for financial
products,
global financial markets,
business organisation
Business administration,
controlling
Cooperation between
education and industry
With a focus on the princi-
ples of trust and security
oriented financial business
Specialised continuing
training for professionals
Law and public administra-
tion
Labour markets Regional labour markets
very important
International recruitment Internal labour markets
important
Source: DKCR/Economix
• In Scenario 1, sector organisations will support the image of a sustainable sector with a high
degree of public accountability. A high degree of client orientation will be demanded from
persons in consulting and management positions, combined with strong risk awareness.
Communication skills and a sense of responsibility will be particularly promoted, together
with the principles of a trust oriented and security oriented financial business. Recruits will
mainly be from regional labour markets as direct communication with local clients is impor-
tant.
• Scenario 2 will present the sector as a modern and dynamic business which demands flexi-
ble, innovative and profit oriented professionals. Vocational training should train specialists
for various financial products, global financial markets, and business organisations. Life-long
learning will be particularly important to keep professionals updated with the rapid path of in-
novation. Specialists will be recruited from international rather than local labour markets.
• For Scenario 3 an image campaign is not really needed as the sector is reduced to basic
financial operations. Nevertheless, it appears as a security oriented business which targets
providing financial services at low costs. Career promotion will select strictly task oriented
employees. Vocational training is reoriented towards business administration and controlling.
Training centres will focus on law and public administration. The majority of recruits will be
from internal rather than external labour markets.
6.4. Policy choices
The specific policy mix applied in the three scenarios is as follows (Table 35):
• For Scenario 1 a broad policy approach is required to achieve the reorientation of the finan-
cial business towards the “sustainable finance” model. Training policy creates the basis for
this by means of a broad enhancement of competences at all skill levels. The workforce has
to be “re-educated” from the previous profit orientation towards risk awareness. This requires
strong investments in new tools for risk assessment and strategic controlling. Regulation pol-
icy will enforce these changes with strict control in risk management and rigorous liability
rules for financial consulting. Global capital markets will be controlled by international super-
vision and monitoring standards.
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• In Scenario 2 the training policy will concentrate on highly-skilled professionals who are
needed to develop new financial products and reorganise administrative processes. Low-
skilled workers will only be trained in short courses for restricted tasks. Financial institutions
will have a wide scope of action to reorganise markets and business processes. Controlling
will not significantly exceed the present level, particularly not in global capital markets.
• Scenario 3 does not develop an explicit training policy as it has to operate with the existing
labour force rather than a high volume of recruits. Innovation policy will concentrate on im-
proving controlling systems and operational rules will be adjusted to public administration.
Global capital markets will be restricted and international capital flows will be controlled na-
tionally.
Table 35 Policy measures
Scenario 1
Sustainable finance
Scenario 2
Laissez-faire
Scenario 3
State ownership
Training policy Broad competence en-
hancement at all skills
levels
Focus on highly-skilled
professional
Limited efforts
No explicit training policy
Innovation policy Risk assessment and
strategic controlling
New financial products
Standardisation
Back-office services
Controlling systems
Regulation policy Strict control of risk man-
agement
Rigorous liability rules
Control of risk management
at national level
Public administration rules
Globalisation policy International controlling and
risk management rules
Free international capital
markets
Nationally restricted capital
markets with state control
for international transfers
Source: DKCR/Economix
6.5. Critical competences
The scenarios require employees who developed strongly different sets of competences (Table
36):
• Scenario 1 relies on a new type of “banker” and insurance employees who forget most of the
principles which were developed over the past decade. This starts with general management
which acts on a long-term vision rather than short-term profit orientation. In order to change
of the business model, managers need to be experienced in change management. Market-
ing and sales staff are financial professionals who are strongly client oriented even at the
expense of lower short-term returns. They communicate their social responsibility and are
able to build trust and long-term relationships with clients. Administration is independent
from the sales departments and strongly committed to short-term monitoring of business
processes and strategic controlling. Strategic controlling means that the check list of control-
lers focus on the assessment of principal business targets rather than detailed operations.
Research & development provides the instruments needed by the controllers and process
re-engineering achieves a high degree of flexibility which allows serving a wide range of
consumer demands.
Table 36 Critical competences
Scenario 1
Sustainable finance
Scenario 2
Laissez-faire
Scenario 3
State ownership
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General management Risk oriented rather than
profit oriented
Long-term vision
Change management
Global orientation
Strong profit orientation
Short-term flexibility
Security oriented,
Low-cost oriented,
Change management
Front office / Marketing and
sales
Financial professionals
Strongly client oriented
Socially responsible
Market oriented sales
specialists
Product oriented
Limited marketing efforts
Back office / Administration Strict monitoring and
controlling
Rapid adaptation to product
changes
Strict controlling according
to administrative rules
Research & development Risk assessment
Controlling instruments
Customised products
New financial products
Internet-based sales
Standardisation of products
Standardisation of
products
Middle office / controlling ,
process engineering
High flexibility of processes
due to heterogeneous client
demands
Standardisation of
processes
Relocation of back office
services
Standardisation of
processes
Source: DKCR/Economix
• Scenario 2 continues with the short-term profit orientation which was followed by the finan-
cial business in the past. It reaffirms the principles developed by the present leaders rather
than demanding for a change of business models. The competences needed by this sce-
nario, therefore, are in line with existing trends: global orientation of managers and profes-
sionals, market orientation of sales specialists, and flexibility at all levels of the rapidly
changing business. This is mainly addressed to R&D staff who will have to develop the new
financial products. Markets are strongly separated into global financial products and con-
sumer markets. While product innovation will mainly happen in global markets, consumer
markets will be strongly standardised. Internet technologies will be developed to provide effi-
cient instruments for this market. This will considerably reduce the need for administrative
staff. Moreover, relocation of back office operations will reduce the demand for this type of
labour.
• Scenario 3 will be a similar “shock” to the financial business, just like scenario 1. It will make
large groups of innovative professionals in the banking business redundant, in particular in-
vestment brokers, asset managers, private equity consultants etc. The skill profile of this
scenario will be reduced to the needs of standard banking and insurance operations. A
strong focus will be on controlling. Employees will therefore return to the principles of public
administration. Market orientation will be exchanged for low-cost orientation. Marketing and
sales staff will be hardly needed. Civil servants will take the responsibility for company man-
agement and insure the application of public rules. Low-costs will be achieved by standardi-
sation of products and processes. R&D staff will therefore concentrate on controlling instru-
ments and lean service production.
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7. Human resource strategies to meet skill needs
This part is written from the human resources management point of view. We had specific inter-
views with HR managers in companies, with responsible training institutions and with experts,
and we analysed literature about qualifications, training and HR management in the financial
services sector.
7.1. Facing the demographic challenge
For the banking sector the analysis relies on the demographic development study conducted in
2006 by the social partners at the European level (UNI EUROPA Finance, EBF, ESBG and
CEAP): "The impact of demography on the human resource policies in the banking sector", No-
vember 2006. The basic results of this study (which covers 14 countries) correspond to the facts
analysed in this report.
This very interesting study shows for several Western European countries (with the exception of
the UK where the employees in the banking sector are relatively young) that the number of peo-
ple retiring will be quite high from 2010 onwards. Even if total employment decreases (that is the
outcome of all the three scenarios), there will be certain needs for newcomers.
After the presentation of the population pyramid in different countries, the study on demography
examines how the sector would face challenges whilst adapting itself to population changes:
• recruitment of new staff members
• retention of older staff
• utilization of "life cycle policies" as a tool to attract newcomers
• updating skills of older staff
The interviews conducted for our study and also the national studies from the European social
partners both show that the big financial groups can take advantage of these important retire-
ment figures to realise productivity gains, and to now face the systemic crisis and the decline of
employment.
• In the back offices in Western European countries, replacements are realised at the rate of
one appointment to two retirements. According to the scenarios, back office employment
(clerks, technicians) will decrease. This may be a function without recruitment.
• In the insurance sector, the number of employees working in the administrative services or
preparing contracts will be reduced. The use of new computer programmes renders the
knowledge of the ageing employees whereas obsolete and retired employees are not re-
placed.
• Similarly, in the banking sector new software and new computer systems accelerate the
preparation of credit offers which in turn are replacing retired employees.
• As to the management function, the replacements are realised at the rate of two appoint-
ments to three retirements. If the companies should go to a “low cost” scenario and want to
realise budget economies, this proportion would be changed and the volume of managers
would decrease.
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7.2. Hiring young people with university degrees
The most common answer to the massive need of new competencies and the need to renew the
workforce is the recruitment of young graduates with post secondary and tertiary education:
• Highly educated and highly specialised graduates for business and investment banking
activities, for the functions of risk management, actuaries consultants for companies, and to
a large extent for retail activities.
• Two to three years of study in post secondary and tertiary education for people working in
call centres and partly in retail activities.
Following this strategy there will hardly be recruitment in this sector for graduates with a level
inferior to university entrance qualification plus 2 years of studies or training. However, the possi-
bility to recruit young graduates will be linked to the attractiveness of the sector.
The financial sector is recruiting very few newcomers who are in the middle of their professional
career with some exceptions:
• Groups of salesmen in the companies are not always satisfied with the performance of
young university graduates and started poaching employees in the large consumer service
sectors such as in travel agencies or big retail companies.
• For the employees in the sub-sectors of agents and brokers, where the more entrepreneurial
status is attracting young employees with some years of professional experience in a classi-
cally large company are available.
• For the employees in marketing functions where the companies hire employees from sectors
where the marketing aspect is highly developed (mass consumption product sector).
• In the UK where the turnover in the companies of the sector is important; the companies
prefer recruiting employees with some years of professional experience.
In the old member states the companies’ view point just before the crisis was that they do not
have any problems in finding and attracting the young graduates they need. The financial ser-
vices sector is attractive to young graduates who are drawn in by the prospect of a high income,
good working conditions including good career possibilities and significant professional ad-
vancement prospects. The financial crisis can be expected to change this situation.
Example: In the capital cities, especially in London which represents the most advanced innova-
tion hot spot in Europe, young professionals find a large number of possibilities to change from
one company to another or to be internationally mobile and change from one country to another.
Additionally, in these business activities salaries paid in London are 20% to 30% superior to the
salaries paid in Germany, France or Italy. A survey conducted by Fed Finance and the Grant
Thornton group shows that 80% of the new employees in London are satisfied with the training
they get in Europe, regardless of the country. However, they are now in turmoil and a lot of jobs
are going to be cut in London.
However, the FSSC (Financial Services Skills Council) in the UK points out problems regarding
the recruitment of young graduates: “Recruiting and retaining young people in our industry is
becoming increasingly difficult." (2008). Le FSSC defines itself as "licensed by the UK Govern-
ment to work in partnership with employers to provide strategic and responsible leadership for
training and education".
The quoted demographic study shows examples in countries like Cyprus, Italy, Portugal "where
the banking sector keeps on being attractive thanks to the benefits that are given, the above
average wages, health plans etc. But in Denmark, representatives from the employers regard the
sector as very attractive whereas the employees representatives highlight that the banking sector
is often considered as a stressful environment and for this reason not very attractive". The Eng-
lish Union Amicus points out that the financial sector is very stressful and becomes less and less
attractive for employees.
However, in the New Member States, despite the fact that the financial sector is attractive, the
number of young graduates trained in financial areas of expertise is not sufficient to meet the
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recruitment needs of the companies. In addition to this, young graduates tend to leave to work
abroad (Ireland, United Kingdom, Sweden, the US) and presently the companies and the profes-
sional organisations are trying to bring them back to their home countries. For the bank SEB in
Lithuania: "The challenge now is to attract people coming back from abroad. 200,000 people are
working abroad, in all sorts of sectors, salaries are increasing in Lithuania, people are starting to
come back. Potentially attractive candidates are graduates from foreign universities."
7.3. A possible answer: retrain older staff
To a high degree the finance sector made use of early retirement systems. Today and prior to the
present financial crisis, a rethinking in the companies of the sector and a change of strategy can
be witnessed in all countries:
• On one hand at national level in every country general measures are implemented to post-
pone the statutory age of retirement.
• On the other hand at company level new policies are just starting to be implemented.
The study of the social partners in the banking sector gives some examples:
• In Denmark, part-time employment is now a legal right for employees who are over 58 years
old.
• In the Netherlands, employees older than 57 can reduce their working time.
• In Germany, many banks offer the possibility of part-time work for young parents (to reinforce
the attractiveness of the sector) as well as for older workers.
• In the UK, the non-discrimination policy was renewed.
• In Portugal, co-operative banks institute a discount on pensions in case of early retirement
etc.
If the finance sector is faced with difficulties in recruitment, this could lead to making better use of
the older workers, however, they will face job cutting plans, and early retirement could be a solu-
tion.
In France in July 2008, an agreement between the social partners was negotiated in order to rise
the effective retirement age in the sector (at present the average retirement age is 58.5 years
old). The companies have to offer every employee a so-called “mid career interview” when they
are 45 years old and a development report on this issue is published every year.
Training employees is a response to the need of new skills; it is even more necessary to retain
the older employees in the job. "Maintaining the employability of staff is not only a question of
updating competencies, it also requires that the working environment allows people to stay in
employment until they reach normal retirement age": that was the conclusion of Mr Olivier Ro-
ethig (Uni Europa Finance) during the conference dedicated to the demographic study mentioned
above.
In some countries the banking and insurance companies created special training programmes for
aged workers: in Belgium, in Austria based on different modules (in Sweden with the programme
SenKO for those older than 55 years old and in Portugal with the programme SABERES+).
7.4. Vocational training for employees
A tradition of companies engaged in training (EU15)
For a long time big companies in the banking and insurance sector as well as all countries in
Western Europe have focused their long-term orientated human resource management strategy
on managing their internal labour market.
Until the 1990s, workers with a lower educational level were recruited and it was the companies
which guaranteed their employees long professional careers (lifelong careers) with the possibility
of continuous further training and internal professional advancement. More than other sectors the
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financial services sector was characterised by its internal vocational training and promotion pos-
sibilities.
The Labour Force Survey statistics shows an important proportion of “senior and management
officers” who only have a relatively low initial qualification level. This corresponds with this tradi-
tion.
In view of important changes in this sector and the
need to increase the general skills level, big com-
panies in the sector have resorted to permanent
training in all Western European countries. The
technological changes, product innovations,
changes in the customer relations, the changes in
the distribution channels and now the need to
rebuild confidence with the clients make the com-
panies in this sector the most active regarding
internal training of their employees.
The European CVTS (“Continuing Vocational
Training Survey”) study coordinated by EURO-
STAT for the whole economy and carried out in
1993, 1999 and 2005, proved that the practices of
the European companies became more and more
similar.
The financial service sector, which mainly consists of large companies, is in line with the tenden-
cies described. Companies in Austria, Germany, Denmark, Estonia, the Netherlands, the United
Kingdom, France, Sweden, Luxembourg and the Czech Republic are active in the field of further
training of their employees, be it in the form of training courses or in less classical training meth-
ods (“on the job learning”) like in the United Kingdom.
In contrast, Bulgaria, Hungary, Poland, Lithuania and Greece are less orientated towards training
their employees. Only 16% of their employees are trained once a year. The other European coun-
tries are in between these two groups.
The German example of BVR (Bundesverband Raiffeisenbanken – National Association of Ger-
man Co-operative Banks) shows a strong investment in permanent training. The German co-
operative institute provide banking training from a medium level to university level as well as initial
vocational training and further training. These institutes also provide training for social compe-
tence, relational competence and communication skills. 90% of the employees of the German co-
operative banks benefits from this training.
In addition to this, most of the big German companies in the sector have their own “internal
schools” (for example the insurance group Allianz, interview with Dr Daniel DIRKS, Executive VP
Group HR). The German insurance industry provides a network of organisations for vocational
training (BWV). The network offers services to over 400 German members of the association. In
2007, the German insurance industry spent an average of 1,300 euros per employee on voca-
tional training.
Similarly in France, 80% of employees in the banking sector receive annual training. Continuous
professional training represents 4.2% of the total wages in all companies. (Source: Association
Française des Banques, rapport d'Activité 2007.) For the French insurance sector 87% of em-
ployees receive training every year and the investment of companies in training represents 5.4%
of the total wages.
The Swedish group SEB (Scandinavian Enskilda Banken) has also a highly developed further
training policy: managers can continue their studies and pass a MBA or a PhD (which is financed
by the company); "training budget is decided every year and there is an unwritten rule that each
employee has to participate in two seminars a year. Training budget is stable". This interview
proves that the Swedish model of the “teaching enterprise” was “exported” to Lithuania. This
Expert panel views
There was consensus among the expert panel
participants that training is the key to future develop-
ment in the financial sector. The long-term re-
orientation as well as ethic change has to be com-
municated by the training system. Training should be
improved at all levels of formal training. Diversity will
be important as well as standards and certification.
A strong debate emerged about financing vocational
training: the responsibility of company is to maintain
employable staff while the responsibility of the
employee is to continuously update their compe-
tences and sense of ethics and responsibility.
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practice has not always been the case in the New Member States and further training will strongly
need to be developed.
In Italy the BNL (Banca Nazionale di Lavoro), bought by the BNP-Paribas group, has, since 2007,
raised the number of training hours for its employees up to a yearly average of seven days per
employee.
In Poland the Polish Association for Insurance and re-insurance brokers provides training pro-
grammes according to BIPAR propositions (interview with the Lithuanian Central Credit Union). It
offers training programmes for its members in order to ensure they have the required qualifica-
tions that consist of regular training about IT , accounting, internal control, risk management, time
management, planning etc., and it often participates in European projects.
7.5. Relocation
In general the relocation of certain activities – call centres, administrative services, IT services –
are not an answer to the lack of competencies, but it represents more of an answer for productiv-
ity problems and cost problems (UK with the examples of AVIVA, a large group of insurers, the
banking group HSBC which relocated some units in India, and the example of France with the
AXA insurance group creating new platforms and new services in Morocco).
From experts’ and human resource officers’ point of view, relocation will not concern a large part
of employees in the financial service sector, except if they adopt the low cost business model.
8. Implications for education and training
8.1. Implications for the initial vocational training system
8.1.1. Two different training streams for occupations in the financial services
The increasingly strict separation of purely financial activities (investment and business banking,
corporate banking, assets management, operations on the global capital market) and the sales
services for financial products (retail banking, savings for households and professionals, retail
banking for SMEs, life insurance products, non-life insurance products) leads to two very different
training schemes:
• On one hand, the personnel for financial “retail” activities are recruited at a minimum of
mostly university entrance qualification level + 2 to 3 years. They could be trained in voca-
tional schools and institutions linked to the professions, or in the context of the dual voca-
tional training system, which does not necessarily require university entrance qualification
level (Germany, Nordic countries). They could also be recruited when they graduate from
university and then get a first period of training in the company (for example, the Italian group
UNICREDIT has installed a training course in cooperation with a university institute, the UTU
Technical School, to train new employees).
• On the other hand, the personnel in the core financial activities (who represent about 10% of
the employees in the sector) will always only be recruited with a tertiary education degree (at
least 5 years of study) from business schools, university management departments or some-
times from engineering schools. The high level of knowledge in mathematics, economic the-
ory and IT, which is standard in these institutions, is increasingly appreciated in the financial
activities. This level of knowledge is considered a plus for the profession of an actuary, for
prognostic tasks and forecasting models, for traders and of course for statistical tasks. Euro-
pean universities and business schools have now adopted the American curricula and now
the decision makers in the business banking sector consider the training received in Europe,
including the New Member States, as being of very good quality.
Despite the fact that universities, business schools and engineering schools regularly have an
exchange with the companies in the banking sector, competition among the young high gradu-
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ates for their first job is very strong. As an example, the Frankfurt School of Finance and Man-
agement is a foundation in which all the big German banks are involved (see Interview with Dr
Thomas Heimer). The recruitment offices point out that when leaving these higher training institu-
tions the three most attractive sectors are banks, auditing and consulting companies and IT ser-
vice companies.
8.1.2. The increasing need for graduates with higher education
All the scenarios show an increasing need for graduates with higher education and this holds true
for all countries to replace some of the people leaving for retirement and to develop new activi-
ties.
In the New Member States of the European Union, the distinction between the two models of
initial vocational training is, and will be, less strict because, as we saw in Chapter 3 (mapping the
employment in the sector), the employees in the financial services sector generally have a higher
university degree compared to countries in Western Europe.
This means that in the future the competition to hire young graduates when they leave vocational
schools and universities will be much stronger. The interviewed companies in the New Member
States point out that they already have a shortage of qualified labour.
It cannot be excluded that the companies in these countries have to change their recruitment
policy and hire new staff at a lower educational level (2 years of post secondary studies instead of
5) and then develop the professional competence and the qualification level of their employees.
In addition to this, the employment of workers in positions for which the employee is overqualified
can be a reason for dissatisfaction and create problems concerning the human resource man-
agement. Without any doubt a significant part of the high rate of job turnover (yearly about 25% in
the countries covered in this study – Romania, Poland and Lithuania) is due to this reason.
Germany represents a specific situation in this respect: a high number of employees in the finan-
cial services sector are “medium qualified” employees who are recruited and qualified in the sys-
tem of vocational training also often called the “dual vocational training system” (see the Tables
on the structure of employment and on the education attainment). But today this form of training
is sometimes criticised and in order to meet the needs of a high qualification level, this system
has to change in the coming years. In the opinion of experts, the presence of this high number of
“middle skilled” employees seems to be one reason for the relative delay of German banks con-
cerning their modernisation. Also, the Head of the Faculty for Finance and Management of the
Frankfurt School of Finance and Management stated that "our school tries to overcome the Ger-
man separation between non-graduate and graduate vocational training, and to make careers
more conductive and flexible. The number of intermediaries’ skills will decline substantially in
favour of highly trained specialists" (Interview with Dr Thomas Heimer).
As for the BVR representatives, they think that the system has to be improved, but successfully
serves trainees and co-operative banks alike. It can be the basis for further development, and
university level courses and degrees can be obtained after successful completion of the voca-
tional training.
8.1.3. Developing new apprenticeship systems
Similarly, companies have to review their recruitment policy; many training experts in the sector
think that the training through apprenticeships should be developed in many countries.
This is the case in France and Belgium where the number of apprentices – at all educational
levels – is continuously increasing.
This is also the case in the United Kingdom were the FSSC (Financial Services Skills Council)
states that "to often employers report an escalating shortage of work-ready young talents". In
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different regions of the UK, in 2008 the FSSC developed new forms of apprenticeships (espe-
cially in Scotland and Wales). This was a response to the skills gap which can be observed in
many regions in the country.
8.1.4. The controversial question on how to recruit and train the sales force
While the whole service sector is developing towards a strong demand for graduates with post
secondary degrees, human resource managers in the sector ask themselves what are the skills
which are really needed for the employees in the sales sector.
Firstly, we can state that the companies use the term “salesmen and sales women” to describe
any employee working in direct contact with the client: for example a "customer consultant” who
answers all questions asked in an agency. But the characteristics of a good “salesman” corre-
spond to clearly defined skills: understanding the needs of the customer, conviction, persuasive-
ness, the ability to build confidence. Those who are responsible in the company have understood
that high graduates are not necessarily good salesmen (ING Direct, UNICREDIT, confirmed by
the training managers: Dr Thomas HEIMER, Gabriella TUDOR, director of the Romanian Banking
Institute), and are asking for changes in the recruitment policy: "we have a change in favour of
less skilled sales-workers" (Dr Heimer).
"For customer advisers, we are looking for skills profiles as acquired in mass distribution and
travel agencies", declared the head of human resource management of the French bank Credit
du Nord. (Le Monde, 11.09.07).
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8.1.5. Focus on the New Member States
While in the Western European states a shortage of employees is only observed in the financial
sector, in most New Member States there are general recruitment problems linked to the neces-
sity to develop the sector despite the crisis.
Also in Romania, the managers of Bancpost (Valentin Pauna, Country HR Director and Mihaela
Mindristeanu, Head of training) claim that the education system only provides 30% to 40% of the
labour needs. The number of students studying courses which will prepare them for banking
occupations is not sufficient and there is a need to raise the student numbers in the future.
Hired employees come from different study courses (university entrance level plus 3 to 4 years of
university studies) and then have to be trained when they start their banking career. Bancpost
has established an obviously insufficient two week training module on financial products and
customer relations, the newly recruited are then tested and trained on the job.
In the case of Romania it is the entire further training system which needs to be improved: "We
could be innovative in our approach to training. I want to build a complex programme in order to
provide each employee with specific training for her/his post" (Gabriela Tudor, Head of the Ro-
manian Banking Institute).
To summarise:
• Increasing demand for graduates with higher tertiary education in all countries: no risk of
labour shortage in the western countries but problems in the New Member States.
• A need for more high level study courses for the financial services in the New Member
States including their modernisation and their orientation towards financial services. Other-
wise, the development of financial services consultancies for individuals and companies will
be hampered.
• A need for a first phase of “professionalisation” of the work force (if there is no dual voca-
tional system).
• A need for "salesmen and sales women" with a lower qualification level but with social com-
petencies, communication skills and sense of responsibility.
8.1.6. The skills needs of intermediaries (insurance agents and brokers)
The intermediaries dispose of a more differentiated initial education and training profiles.
This sector is dominated by SMEs – often with 1 to 4 employees – where experience counts for
more than a diploma. However, a need for more qualifications is also visible in this sector: for the
past few years a qualification level corresponding to university entrance qualification plus 2 years
of training is required at European level to open an office. However, the European regulation also
allows for some years of professional experience in this sector as an equivalent qualification.
Like in the other sub-sectors both the managers and the employees in the SMEs increasingly
need a double competence: on one hand knowledge about and experience with different financial
products, yet on the other hand they have to be competent in IT applications. Insofar as the dis-
tribution of financial products is developing in the direction of “multi channel” contacts with the
clients, the training for banking jobs and for insurances and brokers must be very specific and
combine the knowledge of financial products and IT skills. This is the reason why the initial edu-
cation for jobs in the financial services sector has to be specific and designed in close coopera-
tion with the professionals of the sector.
As an example, in Poland the Polish Association for Insurance and reinsurance brokers, set up a
“ continuing professional education” taking into account the numerous and variety of insurance
products, the fields of law, and the need of responsibility.
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8.2. The new needs for further training and lifelong learning
8.2.1. Structural training needs in the New Member States
We could observe that the big companies in the Western European States are very engaged in
the training of their employees, but so far in the New Member States this engagement is not
sufficient.
Different professional education institutions are aware of this problem and try to use European
programmes to solve it (FSE, Leonardo etc.). However, it is necessary to encourage the creation
of new private organisations and institutions offering education and training.
Moreover, in these countries especially the subsidiaries which are not encouraged by their hold-
ings to invest more in further training have to make an effort.
In the upcoming years, companies and training institutions in the New Member States have to
make a big effort to develop their further training structures to respond to the new skills needs.
As long as the initial training structures do not respond to the needs of the sector and do not train
enough graduates specialised in financial services, recruitment is more open to graduates from
all disciplines. If the further training efforts fail in closing the knowledge gap, the quality and effi-
ciency of the services could suffer and so weaken the whole sector. Moreover, this could lead to
an increasing importance of low cost structures, characterised also by lower job stability.
It is well known that the EU member states would need to more than double their investments per
tertiary-level student to match the spending level in the US. Since the adoption of the Lisbon
strategy, public investment in education and training as a percentage of GDP has grown signifi-
cantly and is comparable with the US level (and higher than in Japan). However, rates of private
investment in educational and training institutions are modest in most Members States compared
to the leading countries in the world (European Social Fund support to education and training
2007-2013).
The need of intermediaries for further training deserves special attention. In most markets the
training infrastructures for intermediaries is well developed and continues to be enhanced further.
New regulation imposes the minimum qualification, and the development of the distribution meth-
ods of the financial and insurance products force intermediaries to focus more on tailored consult-
ing functions for the clients. Consequently, they will have to continue and acquire these skills
where not yet done.
8.2.2. Training needs in the context of structural changes and crisis
Beyond the need of permanently updating the content of further training (new technologies, new
products, new competitive environment, new regulation instruments, new customer relations etc.),
the fundamental changes and the impact of the crisis in the sector will also completely change
jobs. One major change concerns the diminution of the administrative back office jobs and the
rise of front office jobs, which are in direct customer contact.
Since the 1990s (and since 2000 in some countries such as Italy, Greece, Spain and Portugal),
companies have already had to face the changes in this business. Two possible strategies have
been developed:
• external recruitment from outside the company, new people with new skills for new jobs
• organising internal redeployments and, with the help of large training programmes, internal con-
version programmes
The first strategy has often been used in the case of setting up call centres or telephone plat-
forms: “tele-consultants” have been recruited in the external labour market (UK, France, Germany
where a different collective agreement was negotiated). In this case, the skills level of the existing
staff rose only slightly.
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The second strategy was widely used by the Swedish banks at the beginning of the 1990s when
they faced a big restructuring crisis. A special fund (the labour fund) managed by the social part-
ners was created for the banks as well as the insurance companies. The aim of these funds was
to support the conversion process with further training. In some cases the conversion to other
sectors was also supported. More recently, Swedish banks facing the financial crisis and job
cutting plans are not hesitating to propose jobs in public agencies such as the Finance Inspection
Agency and the Agency for Endebtment.
In the United Kingdom, some companies have negotiated with trade unions (especially the Union
BIFU ) and the "staff associations" partnership agreements to favour internal staff mobility and
therefore provide the required training at company level (or at the sector level in the case of Swe-
den). One can find similar examples in the Netherlands and in Belgium.
The Belgium group KBC (Kredit Bank Central) – shareholder of Warta in Poland - has established
a huge retraining programme: "As a result of the centralisation process for administrative opera-
tions, people from back offices (administrative staff) were transferred to headquarters and sales
functions" (Anna Bugalska, HR and Development Director of Warta, Warsaw).
The Western European financial groups which developed their business in the New Member
States are using the same practises regarding personnel management: as in the Swedish group
SEB (Scandinavian Enskilda Banken) in Lithuania, "the back office was reduced by the process
of centralisation (five years ago there was a back office in each branch) and administrative staff
were "changed" into sales forces". In some cases the structural changes even have a “cross-
border” effect: SEB has restructured its Riga office in a way that it is now working for the 3 north-
ern states.
9. Main recommendations
While European governments are actually combating for the survival of the financial system, this
report develops a longer perspective which goes beyond the present turbulences. Our recom-
mendations for human resource related policies for the European financial sector suggest a long-
term strategy for skills and competences which is able to reduce the risks of such a crisis happen-
ing again.
We are convinced that human resource policies play a pivotal role in the reform of the financial
systems. The financial sector was obviously unable to establish a sustainable business model
and assess risks correctly. This is not only a matter of management and business regulation but it
also depends on the deep understanding of the functioning of financial markets. Employment-
related policies should therefore address the need for adequate training and increased R&D
investments in this sector. Two priorities emerge in this context:
• Training policies should be reoriented towards the economics of capital markets, the princi-
ples of decent client consultation, controlling and risk assessment. Governments should take
initiatives to implement these new types of training in the financial business sector.
• As the tools of risk assessment failed to indicate long-term risks, R&D programmes should
be launched to improve these instruments. Controlling principles should be reappraised in
order to develop strategic controlling.
Human capital appears as the key to restructuring in this sector, and public institutions can raise
the pressure on the financial sector to develop a sustainable business model. Education and
training is one way to proceed along that route.
The following Section develops our recommendations under six headings:
• Reform of the financial system
• Employment and human resource policies
• Skills adjustment
• Equal opportunities
• Regional policies
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• Knowledge of skills
The recommendations are addressed to different policy actors at European, national and regional
levels. Moreover, companies and social partners are included (Table 37).
Table 37 List of recommendations
Topic 1: Reform of the financial system
EU
• make European regulatory systems more efficient
• maintain and develop a pluralistic financial sector
• develop a supervision culture in Europe
• protect customers and investors by introducing more rigorous liability rules
National authorities
• participate in international regulation of financial markets
• reinforce national regulations
• improve market transparency and obligatory client information
• reform bonus systems and top management remuneration
Companies
• rebuild trust with clients
• develop self-controlling and reinforce the middle office function
• promote transparency and provide liable information to customers
• reform bonus payments and top management remuneration
Topic 2: Employment and human resource policies
EU
• prevent high replacement demand
• contribute to human resource investment
• support active ageing policies
• support good practices in restructuring
National authorities
• contribute to human resource investment
• support active ageing policies
• support good practices in restructuring
Companies
• preserve the knowledge base
• refuse early retirement schemes
• set up good HR practices and career path developments to struggle against turnover
and attract newcomers in the sector
• build mobility solutions within the sector instead of lay-offs
Social partners
• support HR policies without early retirement and an effective ageing policy, new
career paths
• promote agreements about employment, restructuring, ageing policies
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Table 37 continued
Topic 3: Skills adjustment
EU
• reinforce new competence standards to promote sustainable business models
• promote R&D in financial services in the areas of risk assessment and strategic
controlling
National authorities
• promote the introduction of sustainable business models by improved training stan-
dards
• reinforce training institutions in the sector
• promote R&D in financial services in the areas of risk assessment and strategic
controlling
• raise training standards for intermediaries
• support cooperation between companies and training institutions
Companies
• develop lifelong learning
• develop middle office apprenticeship training and trainee periods for newcomers
• develop finance related ICT knowledge
• adapt labour force to the principles of sustainable finance
• invest into R&D in the areas of risk assessment and strategic controlling
Social partners
• reinforce involvement in training issues
Topic 4: Equal opportunities
EU
• encourage female students towards scientific studies and IT courses
National authorities
• encourage female students towards scientific studies and IT courses
Companies
• promote women in management positions
• improve the proportion of women in IT-jobs
Social partners
• support and negotiate agreements about equal treatment of men and women
Topic 5: Regional policies
Regional authorities
• support decentralised banking and insurance services
• attract innovative capacities
• develop regional centres for supportive services
• address restructuring in financial services and void risks of high specialisation in a
single sector
Social partners
• address employment issues at the local level
Topic 6: Knowledge about skills
EU
• develop a monitoring activity for employment and skills in the sector
• improve the European classification and statistics so they are more relevant for the
services sector (ISCO, ISCED)
National authorities
• support prospective sector studies
Regional authorities
• support prospective sector studies
Companies
• support skills monitoring
• present regular and transparent information
Social partners
• develop social dialogues for employment, skills and training needs
• promote a common understanding of the sector and develop a strategic view
Source: DKRC/Economix
9.1. Reform of the financial system
The only possible way of ensuring a sustainable development of Europe’s financial sector is by
reforming financial services. This appears to be an indispensable precondition to re-establish the
strength, dynamics and future development of this business and to safeguard workplaces in face
of the present systemic crisis. Even though this is not the theme of this report, we will briefly
indicate the principles of this reform:
• Making the European regulatory system on financial markets more efficient, and if possible im-
proving worldwide regulation: We can keep in mind some of the conclusions of the OECD Eco-
nomical Outlook (2008): “Reform of financial market supervision and regulation is clearly neces-
sary to build a more resilient financial system. Our efforts need to be focussed on identifying the
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markets imperfections that gave rise to the incentives for excess risk taking and high leverage, as
well as the regulatory failures that together cause this unprecedented financial crisis. This will in-
volve strengthening and streamlining the prudential oversight of financial and capital market and
plugging the gaps in regulatory regimes. It also requires enhancing transparency of market in-
struments, transactions and the governance rules that determine corporate incentives and deci-
sions. The tendency for pro-cyclicality of financial markets (fair value rules) and macroeconomic
policies also has to be corrected and ideally reversed.” (Klaus Schmidt-Hebbel, OECD Economic
Outlook, November 2008).
• Moving towards more transparency and better information for the clients: the present crisis leads
to a wide lack of confidence. Confidence in global financial institutions and markets has been
badly shaken. It will take a long time to rebuild this relation with customers and citizens. Restor-
ing confidence is one of the major tasks and the financial services staff will have a role in achiev-
ing this task. This can hardly be done without raising the liabilities of financial consultants and rat-
ing agencies.
• Developing a pluralistic financial system: Europe is a pluralistic society and economy. For the
financial services sector this means developing different types of financial institutions: private
banks and insurance companies, co-operative banks and mutual insurance companies, savings
banks, local public financial institutions. This development should be conciliated with the need for
improved capital strength, also through consolidation of the industry in Europe. This should be
complemented with efforts to build a single European market for financial services and creating a
real European supervisor.
• Creating a European culture of supervision. Rating agencies are under heavy criticism, notably
for having made errors of judgement in rating structured products. One of the reasons is that they
have been paid by the issuers of the financial tools rather than financial investors. The other rea-
son is the weak liability rules. They must be scrutinised by international regulators and public au-
thorities, and they must be made liable for their judgements.
• Protect customers and investors: there is a wide range of guarantee regulations for physical
products. Consulting services, however, can be provided without such commitments. As consult-
ing is a core element of financial services, traceability of services has to be improved and liabili-
ties of service providers raised.
• Reform bonus systems and top management remuneration: extraordinary incomes from invest-
ment banking are seen as one of the major reasons for the development of the financial bubbles.
Moreover, top management remuneration often does not include adequate malus components.
This needs to be changed in order to reflect long-term risks in remuneration systems.
9.2. Employment and human resource policies
Prevent high replacement demand with human resource investments
Regardless which scenario will become a reality by 2015, the number of employees in the sector
will certainly decrease in Europe. However, the population pyramid clearly shows that there is a
significant need for replacing retiring employees. In some cases, as in the UK and the NM10, the
need for recruitments also stems from high labour turnover.
Support active ageing policies
Companies will have to keep employees in their jobs for longer as national retirement regulations
are changing. This also represents an important instrument to avoid possible skill gaps. This can
happen in the following way:
• Abandon the possibilities for early retirement even when the crisis obliges to reduce staff.
• Develop special training programmes for seniors and make sure that permanent further training
programmes in the companies are also open for them.
• Establish lifelong career paths and management schemes.
• Reorient employees towards second careers within the company in either customer or service
oriented functions.
All these measures have to be prepared and negotiated with the representatives of the employ-
ees in the company and at sector level.
Support good practices of restructuring
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The restructuring process will become more severe in the course of the financial crisis. It will
therefore be important that the restructuring of the financial services will not simply be left to
market forces. Governments will have to support the emergence of a sustainable financial busi-
ness. They should promote pluralistic business models, safeguard competition among service
providers and support innovation. Public accountability of the financial system will have to be
reinforced.
9.3. Skills adjustment
Reinforce new competence standards to promote sustainable business models
The introduction of new competence standards is crucially important for rebuilding trust and con-
fidence. This is not only addressed to sales and consulting staff but reaches most if not all func-
tions: risk assessment, controlling, management. External and internal training should be com-
plemented with ethical standards and the principles of trust-based client relations. Training poli-
cies should be reoriented towards the economics of capital markets, the principles of decent
client consultation, controlling and risk assessment. Governments should take initiatives to im-
plement such new types of training in the financial business sector.
The European level can be useful for exchanging experiences and building partnerships. In this
context, the EBTN example is interesting: a network of banks for education and training with the
first concrete results in 2008 – the creation of a European Accreditation and Certification of
knowledge and competences.
Support R&D in financial services
As the tools of risk assessment failed to indicate long-term risks, R&D programmes should be
launched to improve these instruments. The application of approved risk assessment tools
should be mandatory. In all the companies self-control must be reinforced.
A second focus for R&D should be put on controlling principles. As controlling practices appear
to be inefficient for assessing strategic targets adequately, new methods should be reappraised
in order to develop strategic controlling.
Create sufficient training capacities
As skills requirements are increasing, companies will increasingly appeal for graduates with a
tertiary education. In some countries the number of graduates in study areas of “business”, “fi-
nance”, “banking management” and “insurance techniques” is not sufficient because these stud-
ies also have to supply graduates to other sectors. It is necessary that professional organisations,
decision makers in the education and training system and social partners are very attentive in this
respect and that they ensure that developments are monitored regularly. In the New Member
States it is necessary to strengthen study courses in universities and encourage the creation of
new training institutions.
Develop the middle office with apprenticeship training
It may also be important that social partners at sector level and companies take more initiatives to
develop apprenticeship training in financial services. In countries which apply apprenticeship
training this proved to be an efficient instrument for raising skills and competences at the inter-
mediate level. Moreover, internal training to professionalize young graduates coming from other
study courses will be important to improve their efficiency at intermediate functions.
Develop finance related ICT knowledge
In all countries the professions related to the financial services are directly connected to the de-
velopment of information and communication technology (ICT): these are the professions with
twofold competencies. That is the reason why all study courses for financial professions have ICT
training modules integrated. The function of ICT within the sector is of strategic importance: the
number of ICT employees and the required skills level is constantly growing: for these jobs there
are worries of shortages all the more so as the recruiting companies are in competition with the IT
companies or IT supplier companies. There will be a convergence concerning future employment
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developments in the IT function of the financial sector and the sectors directly devoted to the IT
industry.
Raise training standards for intermediaries
The occupations executed in the sub-sector of the intermediates need a certified financial exper-
tise and entrepreneurial skills: this can represent opportunities for younger applicants with some
years of experience in the sector or the possibility of second careers. These occupations should
be better known and recognised in all countries.
A high level of financial specialisation continues to be required for a number of jobs for financial
activities and for all wholesale banking activities: the preparation for these specialisations re-
quires co-operation between higher education, research institutes and the companies in the sec-
tor. These networks should be developed in all countries where they do not exist yet.
9.4. Equal opportunities
In all the sectors there is a strong presence of female employment, and their share in employ-
ment is growing. In the New Member States female employment is even more important both in
absolute numbers and as regards their shares in management positions. But this is not the case
in all countries, yet. Spain and Italy are marked by substantial backwardness in this respect,
Moreover the jobs in IT functions still remain strongly male dominated. Programmes should there-
fore be engaged to open up the frontiers.
This should be done by encouraging female students to participate in IT courses and promote
women in management positions
The search for job equality for men and women still remains a strong need in many countries and
a demand of many trade unions. Social partners should therefore continue to emphasise this
point by negotiating equal treatment of men and women.
9.5. Regional aspects
The problems of regional developments are not decisive for the financial sector. However, the
following needs have to be considered:
• It is important to ensure a more balanced regional redistribution of the capacity for innovation,
which is currently strongly concentrated on agglomerations. This issue also concerns the divi-
sion of capacities between the MS15 and NMS.
• According to the scenarios, the development of client relations based on telephone and inter-
net, particularly in the case of a low-cost scenario, could lead to centralised processing in big
administrative units and call centres. Suburban regions should develop as regional centres for
supportive services. This might work if cost differentials are used in combination with upgrad-
ing skills.
• For rural areas, the persistence of semi-public or mutual banks will remain important. Area-
wide networks of local insurance agencies and banking branches in proximity with the client
will remain important if a sustainable finance strategy is implemented. The other scenarios,
however, will deprive numerous rural areas of financial services. The extension of internet ser-
vices and the privatisation of postal banks could reinforce such developments. More than in
the past, the territorial presence of financial services in link with the ageing population will be
important.
9.6. Developing knowledge of skills in the financial sector
The work conducted in this skills scenario study showed the importance of a profound knowledge
of evolutions in different functions, occupations, professions and skills. This knowledge needs to
be developed at different levels:
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• At the European level, the introduction of sector-related monitoring systems in the area of
employment, skills and competences will be important. Common statistical standards and
harmonised statistics covering the entire financial services would be very much welcomed.
• A revision of ISCO and ISCED classifications could be thought of to take the specificities of
the services sector into account. In particular, occupational data should be classified by
multi-dimensional data, allowing to describe occupational tasks in more detail and make
them comparable across countries.
• There is a need to improve statistics on intermediaries.
• The work tools for obtaining sector-based analysis and prospects of future developments
should also be promoted at member state level. For the time being they are not developed in
the new members states in particular.
• The tools for the anticipation of change should be developed within the social dialogue.
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