Bank of America's Overseas Workforce Has Grown Sharply

Friday 03 April 2009

by: Rick Rothacker | Visit article original @ The Charlotte Observer

Bank of America has been offshoring jobs at an increasing rate. (Photo: AP)

Percentage of employees has gone from 2 to 5 with acquisitions of Countrywide and Merrill Lynch.

Boosted by acquisitions of Countrywide Financial and Merrill Lynch, Bank of America's offshore operations have grown sharply in the past two years, exceeding 14,000 employees in India, the United Kingdom, Mexico, the Philippines and Costa Rica, documents obtained by the Observer show.

This overseas staff, which handles technology, processing and other back-office tasks, now equals about 5 percent of the company's total employees. In 2007, the bank said it had about 4,000 employees in its main India offshoring operations, or about 2 percent of total workers then. Bank of America's workforce has jumped to about 301,000 from 200,000 at the beginning of 2007.

The growth comes as Bank of America cuts thousands of jobs companywide because of acquisitions and the weak economy. Banks that have accepted government bailout funds also are increasingly being asked to justify their compensation, marketing, corporate jet use and other business practices. Bank of America has accepted $45 billion in government loans.

For years, financial institutions have been on the leading edge of offshoring as they look to save on wages and tap overseas talent. Critics say the expansion comes at the expense of U.S. workers, a particular concern as unemployment is hitting the highest level in decades.

Experts say banks are looking to move more work overseas as they seek to cut costs in the recession. Financial institutions with significant offshore operations on average have 7 to 8 percent of their workforce overseas, according to the Deloitte consulting firm.

The economic stimulus package signed into law in February makes it harder for banks to hire foreign workers who come to the U.S. on visas, but it doesn't have any specific restrictions on offshoring. In January, Rep. Sue Myrick, a Charlotte Republican, won House approval of a provision that bans government-funded banks from outsourcing any new call center jobs to foreign-based companies. But that bill hasn't passed the Senate.

"I don't think it's unreasonable to demand that American workers are used to fill any new customer service jobs for the companies who are assisted with American taxpayer dollars," Myrick said in a January speech on the House floor. She couldn't be reached for comment Thursday.

Bank of America spokesman Christopher Feeney declined to provide specific numbers on the bank's offshore workforce. But he said the increase comes primarily from acquisitions. These employees were located overseas before the bank received funds from the Troubled Asset Relief Program, he noted. With the Merrill and Countrywide deals, Bank of America operates in 52 countries, up from 36.

"As we've grown globally, that part of our operations has grown globally," Feeney said. "These teammates are an important part of our company."

Offshore operations - known internally as the Global Delivery Center of Expertise - continue to account for a single-digit percentage of the workforce, he noted. These overseas employees handle a wide variety of tasks, from reviewing loans to preparing investment banking reports, but they perform functions with little direct customer contact.

According to internal memos, the bank gained back-office processing operations in Costa Rica from the Countrywide acquisition and added to its India presence with the Merrill deal. LaSalle Bank, acquired in 2007, had overseas locations as well. The bank also has hired new employees in offshore operations, according to the memos, and job openings are listed on the India unit's Web site.

Ruben Berumen, Global Delivery Center of Expertise executive, recently hosted town hall meetings in Mumbai and Chennai, India, to welcome new Merrill employees, according to a posting on the bank's Intranet last month. "Please keep in mind the critical role you play in our collective success," Berumen said.

Bank of America has said it's cutting 42,500 jobs in the Countrywide and Merrill acquisitions, but the bank hasn't provided specifics on where those cuts are occurring.

Meanwhile, Wells Fargo is examining its offshore plans after buying Charlotte-based Wachovia last year. Wachovia was a bigger player in offshoring than the San Francisco-based bank.

"As part of the merger integration process, we continue to thoughtfully evaluate offshoring capabilities for the combined company in the context of the best approach for customers, shareholders, team members and communities," spokeswoman Mary Eshet said. "We have no plans to meaningfully increase offshore operations during the integration process."

JPMorgan Chase, which acquired Bear Stearns and Washington Mutual last year, has offshore operations, but spokeswoman Jennifer Zuccarelli said she couldn't comment on future plans. Outside the banking realm, the Wall Street Journal reported last month that technology giant IBM Corp. planned to lay off about 5,000 U.S. employees, with many of the jobs being shifted to India.

Eager to reduce costs amid the nation's banking crisis, financial institutions began ramping up offshore efforts last year, but many are now reassessing their plans amid the current regulatory environment, said Peter Lowes, a principal with Deloitte, the consulting firm. Myrick's amendment has caught their attention as well as a provision in the stimulus bill that gives the Treasury secretary broad powers to oversee the TARP program, he said.

"There was an inflection point where it went from guns blazing to a lot of things frozen," said Lowes, the global leader for Deloitte's outsourcing advisory services practice. Some companies may consider adding operations in the U.S. if they can tap incentives in the stimulus package, he added.

Deloitte, which will soon release a new survey on offshoring, has found that banks are sending less customer-related work overseas, but they're continuing to add back-office processing operations, where they are gaining increased efficiency and cost savings. The largest offshoring banks have as much as 20 percent of their workforce overseas, Deloitte found.

Ron Hira, a professor at the Rochester Institute of Technology, said offshoring will continue growing unless the Obama administration or Congress takes action. Companies looking to cut costs and boost profits, for example, can pay an accountant in India $5,000 a year versus $60,000 a year in the U.S., he said.

Hira, a longtime offshoring critic, said lawmakers missed a chance to restrain offshoring when they failed to put any restrictions on TARP recipients. Policymakers also should consider tax incentives to keep jobs in the U.S. or tax penalties for offshoring work, he said.

Offshoring "is not good for the economy," Hira said. "If part of the solution to get out of the recession is to create jobs, you could do it a lot more effectively by putting strings on the TARP money."

Before setting any curbs on offshoring, Lowes said policymakers should consider the downside. U.S. banks would have a competitive disadvantage with foreign banks and could face a backlash from overseas customers. "It's a balancing act they have to work though," he said.

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