The Royal Bank of Scotland (RBS) is set to make 3,500 job cuts to its investment bank, in which advanced IT plays an integral part to operations, leaving technology staff fearing the worst.

The 3,500 cuts, across all functions, come on top of 3,500 technical and back office support role job losses in 2010. After the latest changes, the investment bank will have shed around a third of staff, and will be left with 13,400 employees globally.

RBS, 83 percent owned by the taxpayer, declined to reveal a breakdown of who will be affected by the cuts. But in spite of the magnitude of the change, the cuts are less than the 10,000 job "worst case scenario" considered by chief executive Stephen Hester last month. The bank also insisted that it will retain a focus on developing and running "world class" IT systems.

RBS will split its wholesale operations into a markets division for trading and risk management, and an international business that will combine its corporate banking with the foreign operations of its Global Transaction Services arm. But it will exit cash equities, corporate broking, and mergers and acquisitions advice, and is looking to sell those operations.

Hester said today that the strategic changes made so far had knocked £600 billion off the bank's balance sheet. "But for our strategy to be effective, it must adjust to fresh challenges. And it is clear that, particularly in the wholesale banking arena, significant new pressures have emerged," he said.

The cuts have enraged trade unions. David Fleming, at Unite, said: "It is a disgrace that while on a daily basis, stories are emerging about the massive bonuses at the top of the bank, increasing numbers of jobs are being cut from amongst the hard working staff."

IT staff at banks have hoped that the 'ringfencing' - or operational separation - proposed by the recent Vickers report would reinvigorate the job market, but analysts have said this will not be noticeable until at least 2016 because of a long planning process.

RBS was heavily criticised in a report last month by the Financial Services Authority, which lambasted the aggressiveness of its £48 billion move to take over Dutch bank ABN Amro, and said it was continually operating without the right risk management systems and processes.

IT staff at RBS have been working hard on improving the bank's systems in the wake of its near-collapse, and they have played a key role in its day-to-day functioning and strategic growth.

The job cuts come at a time when RBS is spending £6 billion on specific IT and marketing projects, as it attempts to roll out standardised technology across its global operations. A number of projects are focused around SAP enterprise resource planning and SAP for Banking software, the standard core platforms it is implementing.

RBS IT staff fear the worst as bank considers 10,000 job cuts

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