Has the reduction of employment been efficient in the restructuring of banks in Europe? An insight into the overbranched sector in Spain

Abstract

ABSTRACT This study examines whether the reduction of the number of employees has actually been efficient in the restructuring undertaken in the European banking sector, focusing on the case of Spain but providing insight into restructuring and downsizing issues similar in other southern countries in Europe. In Spain, the concentration process has been more intense because of the financial crisis. For this purpose, the evolution of the number of employees in the subsector of the listed banks was analyzed during the 2003–2012 period in order to have a timespan that would enable the diverse hypotheses to be verified under the double scenario of the economic boom (2003–2007) and the subsequent financial crisis (2008–2012). It was also during this second period when savings banks disappeared and had to be converted into banks; meanwhile, other entities were involved in mergers, acquisitions, and also in hybrid and innovative formulas of concentration as the Institutional Protection Schemes (IPS). This transformation has given rise to a marked reduction of the commercial network. In this context, employment has been adversely affected. Using a model of linear regression with panel data, the results enable us to confirm that none of the findings obtained examining the relationship between downsizing and the increase of corporate efficiency allow us to conclude that the impact has been positive, as significant differences cannot be appreciated between the reduction of personnel and corporate efficiency.