European banks may cut over 200,000 jobs by 2030 because of AI: Morgan Stanley report

A significant shift in the European banking landscape is on the horizon, with projections indicating that over 200,000 jobs could be eliminated by 2030 due to the increasing adoption of artificial intelligence. A recent report from Morgan Stanley, as highlighted by the Financial Times, suggests that this reduction could represent about 10 percent of the workforce across 35 prominent banks in Europe. The analysis underscores a trend where banks are leveraging AI technologies to enhance operational efficiency and cut costs. This shift is accompanied by the closure of physical branches, as a growing number of customers opt for digital banking solutions. Job losses are expected to be concentrated in back-office operations, such as risk management, compliance, and internal processes—all areas that involve significant data handling, document verification, and reporting, tasks where AI can outperform human workers in speed and cost-effectiveness. Morgan Stanley's findings indicate that banks anticipate achieving efficiency improvements of up to 30 percent by employing AI tools for tasks like transaction monitoring and regulatory compliance. This technological shift is driven by mounting pressure from investors for banks to lower costs and enhance their profit margins, which have consistently fallen short compared to their U.S. peers. Several banks have already begun implementing layoffs. For instance, Deutsche Bank’s asset management division, DWS, announced plans to reduce its workforce by approximately 20 percent by 2028. Additionally, Société Générale's CEO, Slawomir Krupa, remarked that “nothing is sacred” as the institution seeks to manage its excessive costs. The report emphasizes that AI presents a vital opportunity for banks to improve their cost-to-income ratios—a crucial metric for investors. The accelerated digital transformation is anticipated to significantly alter the European banking sector in the years ahead, particularly in countries like France and Germany, where financial pressures are particularly acute. Banks are also exploring innovative applications of AI. For example, UBS has initiated the use of AI to develop analyst avatars that create video content for clients. Jason Napier, who heads European banks research at UBS, noted that the efficiency benefits realized from AI are already evident in sectors like auditing and legal services, although banks have yet to fully harness these advantages. In a bid to advance their AI initiatives, UBS recently organized an AI leadership summit at Oxford University, inviting 250 of its top executives. However, some banking leaders are advocating for a cautious approach. Conor Hillery, co-head of JPMorgan Chase for Europe, the Middle East, and Africa, cautioned against neglecting essential banking skills in the rush to adopt AI. He emphasized the importance of balancing AI’s capability to streamline routine tasks while ensuring that junior staff continue to develop critical expertise, warning that failure to do so could pose significant challenges in the future.