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Bank's move will open the floodgates

For almost three years after the Government was forced to unconditionally guarantee the deposits of the Irish-owned banks, employment in the banking sector held up remarkably well.

While Halifax pulled the plug on its Irish retail operation last year with the loss of more than 700 jobs, and NIB closed half of its retail branches, the Irish-owned banks, desperate not to offend the previous government, announced relatively few job losses.

That has all changed. In February Permanent TSB announced that it was shedding 350 jobs, a fifth of its total workforce. Now comes the biggest jobs cut so far from the banking sector, with AIB planning to axe 2,000 staff, a sixth of the total.

The AIB move is likely to open the floodgates with all of the major Irish-owned banks set to unveil big job cuts over the next few months. With the government committed to shrinking the Irish-owned banks to just two "pillar" banks, AIB and Bank of Ireland, there are going to be huge job losses in the banking sector, which employed 50,000 people at its 2007 peak.

How severe are these job losses going to be? Very severe indeed. A year ago the IBOA, the union which represents bank workers, reckoned that 6,000 jobs had already gone. Since then several thousand more jobs have been cut.

With AIB and Permanent TSB having already shown their hands, no-one now expects Bank of Ireland, which reports its annual results later this week, not to take the cleaver to job numbers also. By the time the dust has settled, several institutions including Anglo, Irish Nationwide, EBS, Halifax, and probably Permanent TSB, will have disappeared while most of the surviving banks will be shadows of their former selves.

Hundreds of bank branches will close and the branches that do survive will be no more than shop fronts, with most banking activities being carried out at central locations. It is difficult to see how the new, slimmed-down banking system will be able to support much more than half of the jobs it did four years ago, ie. over 20,000 job losses.

Today's AIB announcement may have been the biggest banking job cut so far. It won't be the last.