HSBC HSBC Holdings PLC

By Margot Patrick and Max Colchester 

LONDON--When Barclays PLC hired a new chief risk officer last week, Chief Executive Jes Staley had to override a firm-wide ban on adding new staff to the payroll.

Dogged by high costs and the need to cut thousands of staff to improve returns, banks across Europe are instituting hiring freezes in key areas or across their entire operations. Barclays froze new hiring last fall as it and rivals, including Deutsche Bank AG and Credit Suisse AG, restructure their businesses and try to get a grip on costs. On Friday, HSBC Holdings PLC told its roughly 260,000 employees they wouldn't get pay rises this year and that no new staff would be added.

The moves come as all of those banks are trying to cut thousands of jobs in response to new regulations, tough market conditions and a wave of fines and litigation. Other measures to save money have included curbing the use or cutting the pay of outside contractors and moving jobs to lower-cost countries such as Poland and India.

Despite promising to radically cut back staff numbers, European banks have been slow to reshape. Regulatory pressure to hire compliance staff, negotiations with unions and the cost of firing workers have slowed progress in chopping staff. Banks have also been reticent to take the revenue hit which comes from exiting certain businesses.

At HSBC, this year's hiring freeze is aimed at reversing rising employee numbers that came even as the bank tried to cut costs. CEO Stuart Gulliver said last year that the bank's regulatory and compliance staff had mushroomed to keep up with global rules. Staff numbers grew to 259,834 at the end of the third quarter, up by 2,231 from the start of 2015. A memo to staff Friday laid out the plans.

Between 2012 and 2014, Barclays cut nearly 7,000 jobs. To accelerate cost cuts, the bank has made it impossible for new payroll number to be created in some functions, helping it cut around 4,400 jobs since the freeze started, a person familiar with the matter said.

In practice such bans are rarely watertight. For example, Barclays will still make hires in its U.K. retail branch network, a person familiar with the matter said. The bank is also hunting for top executives to refresh its management team. Last week the British bank announced it had poached C.S. Venkatakrishnan, J.P. Morgan Chase & Co.'s operational risk head.

Some analysts have taken heart form the banks' announcements.

HSBC's action "is the thing you want to see from a bank that is trying to deliver on their promise of flat costs from 2014 to 2018," said James Chappell, a banking analyst at Berenberg. "The way to go about that is to take tough decisions on pay."

Deutsche Bank has curtailed its hiring outside of areas such as technology, compliance and certain trading desks where it wants to grow, such as equities trading, bank officials have said. CEO John Cryan said last week that employee morale had been hit by the continuing cost-cutting and restructuring. The bank aims to cut a net 9,000 full-time jobs by 2020.

Write to Margot Patrick at margot.patrick@wsj.com and Max Colchester at max.colchester@wsj.com

(END) Dow Jones Newswires

February 01, 2016 07:08 ET (12:08 GMT)

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