Morgan Stanley has revised its forecast, suggesting that European banks may eliminate 20% of jobs due to AI.

      The May estimate is now twice what the bank projected in January, and workforce reductions are already taking place at UBS, ABN Amro, and HSBC. Morgan Stanley has revised its forecast for AI-related job losses in the European banking sector, now predicting that up to 20% of total banking jobs could be eliminated by 2030 as banks integrate generative-AI tools into back-office, risk, and compliance processes. The updated estimate, which Bloomberg reported on Thursday, raises the figure to approximately 400,000 jobs from the previous projection of 200,000 jobs, or 10%, shared in January.

      The doubling of the forecast is significant. Five months ago, Morgan Stanley analysts believed that AI implementation would lead to around 200,000 job cuts by the decade's end, primarily in back-office roles, KYC and AML compliance, and middle-office risk monitoring. The May revision retains this focus while significantly increasing the overall number.

      The change over the past five months, according to the bank's perspective, is the speed at which individual European banks have started publicly committing to restructuring led by AI, along with indications from earnings calls that productivity improvements from generative-AI deployment are occurring more quickly than the optimistic projections for 2025 had anticipated.

      Concrete evidence varies from bank to bank. ABN Amro announced in November that it plans to reduce approximately 20% of its full-time workforce by 2028, largely via automation. HSBC aims to cut around 20,000 jobs, attributing the reductions to the automation of back-office tasks rather than cost-cutting. UBS, currently navigating the integration of Credit Suisse, has initiated another round of job reductions in Switzerland, aiming to achieve around half of its $10 billion cost-saving target by 2026. Meanwhile, Société Générale's CEO Slawomir Krupa stated in March that “nothing is sacred” in the bank’s cost-cutting strategy. BNP Paribas, the largest bank in the eurozone by assets, has combined its AI-focused cost management with a prominent partnership with Mistral in foundational modeling.

      A regulatory concern is whether European labor laws will allow bank-by-bank reductions on the scale predicted by Morgan Stanley. Countries like France, Germany, the Netherlands, and Spain have works-council and collective bargaining frameworks that make swift workforce cuts much more difficult compared to the US's at-will termination practices. Morgan Stanley's 20% estimate presumes that the cuts primarily occur via attrition, early retirement, and managed exits over five years rather than through mass layoffs.

      The potential impact of intensified cost pressures on the regulatory framework remains uncertain. The ECB’s stance is also pertinent. The European Central Bank's supervisory body has actively been urging eurozone banks to enhance their AI cybersecurity measures in response to threats from tools like Anthropic’s Mythos. This necessitates increased technology and data engineering capabilities within banks, even as back-office headcounts decrease.

      Consequently, Morgan Stanley's analysis indicates that the workforce shift will be a structural realignment rather than a simple reduction: data engineers, AI platform operators, and model risk specialists will be brought in, while traditional compliance officers and back-office personnel will be phased out. Nevertheless, the 20% estimate is a forecast rather than a concrete measurement. The earlier 10% projection aligned reasonably well with what listed European banks have disclosed so far; however, the doubling in the May revision implies a conversion of productivity gains into headcount reductions that has yet to be proven on a large scale within the industry.

      The optimistic view is that AI-driven productivity will directly translate into workforce reductions exceeding 20%; the more cautious perspective suggests the figure might range between 10% and 20%, varying based on how individual bank boards manage shareholder expectations against the political implications of significant job losses in Europe. Regardless, the structural trend is becoming evident. By 2030, European banking will be a significantly smaller sector in terms of headcount than it is now. Whether the workforce reduction will hit 200,000 or 400,000 jobs will influence how disruptive this transition will be for the broader European labor market.