UBS AG may be wielding an ax over 10,000 employees, but at least 2,000 workers in the state of Connecticut will survive.
Switzerland's biggest bank, which announced the layoffs last week along with a plan to virtually eliminate its bond trading business, has a massive trading floor in Stamford, Conn., comprised primarily people who trade and sell bonds.
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Several fixed-income employees in Stamford and New York City were fired by phone this week because the devastating storm Sandy that hit the region on Monday prevented them from traveling to their offices, a UBS spokeswoman said on Thursday.
Still, UBS and Connecticut officials said that the Swiss bank will carefully work to ensure that a sizeable staff remains working in that state east of New York.
At stake is a $20 million interest-free development loan that UBS got from the state in May. The bank signed a contract committing to keeping at least 2,000 people employed in the state, and has agreed to forgive the loan after five years if all terms of their contract are met.
"I have been assured that the layoffs will be structured in such a way that UBS will be able to meet the obligations it has under the agreement," Catherine Smith, commissioner of Connecticut's Department of Economic and Community Development told Reuters. "We feel relatively comfortable about it."
UBS spokeswoman Katrina Byrne declined to discuss the nature of the jobs that will remain in Connecticut but said more than 3,500 bank employees now work in the state. "We are honoring our commitment," she said.
Smith said she checked with UBS this week after reading press reports that some 3,000 employees around Stamford would lose their jobs.
In announcing the bank's plan to ax 10,000 employees over three years as it seeks to build a new business model, UBS Chief Executive Sergio Ermotti did not spell out details of the cuts. But he said last week that about 30 percent of the total investment banking layoffs will occur in the United States.
Smith and two UBS officials said the exact number of layoffs in the United States, and the areas that will be affected, are still being determined.
The state's concerns show how cash-strapped local economies have been affected by the global bloodbath in a financial services sector that has announced more than 100,000 job reductions this year. Many municipalities and other local government bodies are increasingly doling out sweetheart deals such as the loan to UBS in a bid to attract and keep businesses in their tax base.
UBS got the state handout earlier this year as it threatened to transfer many jobs to Manhattan. That negotiating leverage also meant the state had to agree to a looser contract than it would have liked.
Some bankers said UBS can easily keep its employment commitment and still replace high-paid banking jobs with lower-paying ones, yielding less tax revenue for the state.
Smith, who was chief executive of U.S. retirement services for Dutch bank ING Group before taking the state job last year, conceded the UBS contract was looser than many others it has negotiated by not including growth or job-level targets.
"We were faced with the concept they would actually pick up and leave, which was not a pretty picture," Smith said, referring to the bank's threats to move its traders to Manhattan. "We still value them as a partner in the Stamford community in terms of all they do for job creation and community-mindedness."
When UBS opened its Stamford trading floor in 2002, it boasted that the space, about the size of about two U.S. football fields, was the world's largest.
UBS has been slammed by trading and other investment banking losses since the financial crisis of 2008, punctuating other crises in which it has been accused of abetting tax-avoidance schemes for wealthy Americans and participating with other banks in fraudulent fixing of the London Interbank Offered Rate, a key determinant of interest rates.
Through the first half of 2012 its investment banking revenue was down another 55 percent from the same period in 2011.
The contract with Connecticut was negotiated under a prior regime of UBS executives who were committed to the fixed-income business but lost their jobs following a summer trading scandal. Connecticut Governor Dannel Malloy, who presided over the ceremony where the job commitment was made, is a former mayor of Stamford.
(Reporting By Jed Horowitz; Editing by David Gregorio)