Case study of the impact of the MiFID II and digitalisation on the banking sector in Slovakia ( by Lucia Kováčová )

2.5.1. Introduction

Digitalisation and policy regulations aiming at increasing transparency and en-hancing compliance mechanisms are inevitably reshaping organisation of work, work arrangements, industrial relations and consequently a quality of working conditions for the banking employees. Impacts of these broad trends currently taking place at the labour market of the banking sector remain yet unclear and require further exploration from the perspectives of key policy stakeholders in the sector. The aim of this case study is therefore to examine the impact of (so-called MiFID II) and digitalisation in the banking sector. More particularly, the research aims at exploring the influence of the MiFID II regulation and the dig-italisation trends on the several aspects, mainly on the industrial relations, work-ing conditions (health and stress at the workplace) and skill management strate-gies.

2.5.2. Methodology

In this research two methods have been utilised (1) desk research; (2) semi-struc-tured interviews. Nine semi-strucsemi-struc-tured interviews were conducted between April – November 2020 with the representatives of the banks (managers of the de-partment of Human Resources, manager of the IT dede-partment), representatives of the trade unions both at the sectoral, at the company level and the former representative of the Ministry of Labour and one representative of the non-gov-ernmental organisation involved in workers´ rights protection. The sample of the interviews includes representatives of the smaller as well as larger banks to reflect the specificities arising from the size of the bank and the same applies for the representatives of trade unions. It also involved respondents with the knowledge and expertise in the digitalisation of services, provision of financial advices as well as organisational changes and industrial relations.

2.5.3. Social dialogue in the banking sector General characteristics about the banking sector in Slovakia

Currently (in June 2021), there have been 28 bank institutions operating in Slo-vakia, including 15 branches of the foreign banks, 10 banks with the foreign ownership, two banks without the foreign ownership and the Central Bank (Na-tional Bank of Slovakia, 2021). Most of them focus on retail and corporate

banking. More than 50% of the banking assets are controlled by three major bank institutions, namely Slovenská sporiteľňa (the ERSTE Group), VÚB Banka (the IntesaBci) and Tatra Banka (RBI Group). The market is therefore controlled by major three banking groups originally from Italy and Austria. Nevertheless, in the recent years the market share has increased in the favour of small and medium sized banks. Currently, there are 1 174 bank branches in Slovakia (EBF, 2020).

The number of employees in the Slovak banking sector has been steady during the last ten years. The number of bank employees has been oscillating around 18 500 employees. The peak in the number of workers employed in the banks can be observed between 1996 and 1998 when it was fluctuating around 24 000. This peak was followed by a gradual decline starting in 1999. The lowest numbers of the bank employees can be seen during the crisis period, mainly between 2009 and 2012 when the figure dropped by almost 9 %. There can be seen the signif-icant decline in the number of bank employees in the last twelve months as well.

From September 2019 to September 2020, the figure decreased by more than 4.5% (National Bank of Slovakia, 2021).

Similarly, the number of branches of the Slovak banks has recently declined. The bank representatives claim that the reason for reducing the number of branches is two-fold. First, reduction of the branches presents a strategy of cost optimisa-tion. According to the respondent from the trade union at the company level, the low interest rates make the Slovak banks seek for ways how to remain prof-itable; one of the strategies is to optimise their costs by reducing the number of branches and invest in the digitalisation of services. Second, the lower number of the branches reflects the digitalisation of financial services and online forms of communication that have become prevalent in the recent years.

Key stakeholders in the social dialogue in Slovak

The system of collective bargaining in Slovakia is characterised by a combination of organised and disorganised decentralisation while the dominant level presents the industrial one (Müller, Vandaele, and Waddington, 2019). Trade unions, em-ployers, and employer’s association (including confederation level) can be en-gaged in the collective bargaining. The most dominant is sectoral and multi-em-ployer bargaining, while the importance of the company level is increasing (Ka-hancová, Martišková and Sedláková, 2019). Collective agreements can be ex-tended if agreements are representative meaning that trade unions must be es-tablished in at least 30% of employers affiliated to the signatory employers’ as-sociation.

Trade Union Association of Banking and Insurance Workers (hereinafter the Trade Union Association) is the only sectoral level trade union representing the

employees in the banking and insurance sector. In total, 11 unions in the banks and 6 unions in the insurance companies are associated in the Trade Union As-sociation. It also associates about 4 500 individual members, while 3 500 of them are employees of the banking sector, the rest of them are employees of the in-surance sector. The trade union is also affiliated to the UNI Europe since 2007.

According to the data of the Trade Union Association, trade unions have been established in 13 out of 28 all bank institutions operating in Slovakia. The Slovak Bank Association (SBA) presents the employers association at the sectoral level.

The SBA currently represents in total 27 employers which makes 99% of the whole banking sector. The Slovak Bank Association is a member of the National Union of Employers since 2006 which presents a social partner at the tripartite level. Since 1996, the SBA is a member of the European Banking Federation (EBF) and European Payment Council (EPC) (¹⁶).

According to the former representative of the Ministry of Labour, the Slovak Bank Association, does not follow own bylaw and does not attempt to be actively involved in the collective bargaining at the sectoral level. The bylaw has been changed by the SBA and has not include a claim about being involved in the social dialogue at the sectoral level. The employer´s association was in 2018 asked by the Government to resume the dialogue with the trade unions, although the association replied that the collective bargaining will remain present primarily at the company level. As a response to these obstacles, the former Government (2016-2020) attempted to amend the Civil Code since the SBA has been launched based on the Civil Code instead of the Law on Association of Citizens. The latter act would oblige the Slovak Bank Association to be engaged in the social dialogue and collective bargaining at the sectoral level and, thus, the SBA could be forced to comply with the law and do not breach the social dialogue. The attempts to change the law to make the SBA change its legal form were not successful. The respondents from the trade unions also stressed that a weak role of the legislation in collective bargaining is a key cause for problems in social dialogue in the bank-ing sector on the sectoral level.

There have been two collective agreements in the financial sector (the insurance sector and the banking sector); The Trade Union Association signs a higher-level collective agreement with the Slovak Bank Association. The collective agreement on the company level is currently signed in 13 bank institutions (out of 27). The sectoral collective agreement in the banking sector was lastly signed in 2014 for 2014-2016. In 2019, the Trade Union Association proposed a new version of the collective agreement. According to the representative of the Trade Union Asso-ciation, it contains several key requirements, mainly (1) to increase of the basic salary of all workers in the banking sector by at least an inflation rate (for 2020-2022); (2) to increase the average wage by at least 3 % per a year. The proposal

(¹⁶) For more information see www.sbaonline.sk e ozppap.sk.

also consists of other provisions such as establishing control mechanisms to tackle wage inequality regulating overtime work and overtime work pay.

2.5.4. Impact of digitalisation and the MiFID II on the banking sector Digitalisation and skills management

The bank representatives pointed out that the demands for digital skills are rap-idly increasing in the recent years in comparison with other types of skills. Addi-tionally, they stressed that not all the groups of employees are as adaptive as others and require different approach in trainings and, thus, acquiring digital skills. The respondents also claimed that there is an increased demand for social skills due to novel communication channels and ways that have currently been implemented by the FinTech companies. There is an increased demand for very prompt responsiveness in combination with strong problem-solving skills. Since clients now tend to make their own decisions in the financial world, the banking employees are supposed to navigate them through the whole process of decision-making.

The trade union representatives do not generally consider trainings provided by the bank institutions as flexible and effective. The banking employees frequently use their regular working time to get well-prepared for tests and since most of the test are mandatory, they often encounter unpaid overtime work. Besides that, they lack certain quality components of the trainings, such as peer-to-peer sup-port, consultations (with experts or lecturers) about ad hoc problems they encoun-ter in the process of learning or applying new regulations in practice. Some train-ings provided in the banking sector are frequently based on self-learning when the employees are provided with merely learning materials. Regarding this, the trade unionists claimed that there are no comprehensive skill management strat-egies, or they have no knowledge of them. Trade unionists would appreciate complex strategies on skill management adjusted to the needs of older employ-ees, and concrete plans to adapt to digitalisation.

The respondents among the trade unions as well as employers concluded that the number of tests and qualification requirements (required by the MiFID II regulation and other EU regulations) has considerably increased during the re-cent years. A key consequence of these changes is the increased volume of pa-perwork and documentation the employees must deal with. The respondents from the bank institutions questioned whereas the level of transparency in-creased and both representatives of employers and trade unions pointed to the increased level of stress and workload the employees encounter in their usual work. As the trade unionists claimed, the digitalisation and automation of inter-nal processes within bank institutions seem to make the work easier for

employees, and the banking manager stressed that the bank attempts to imple-mented further innovations with the purpose to reduce the routine work of the employees must conduct. On the other hand, the trade unionists pointed out that still many internal processes require manual, routine, and repetitive tasks, and the volumes of the tasks are increasing due to requirements concerning transparency in financial decision makings which also refers to (but not only) the MiFID II regulation.

Overall increased workload in combination with the higher liability and low level of wages has contributed to the high fluctuation of workers in the banking sector.

Wage inequality affects mainly older workers who are offered lower wages than newly recruited ones who are usually offered higher benefits. The low wages are specifically common for the front desk workers and administrative workers, most of them are supposed to be women.

Organisational changes

A major organisational change in the banking sector present the cooperation with the FinTech and IT companies, and enlargement of the IT department within the bank institutions. According to the banking managers, most of the banks prefer to administer the whole IT infrastructure in-house, whereas the new product development is preferred to be subcontracted to the rapidly progressing FinTech companies and other technological companies operating at the market of novel communication tools, etc. As a result of digitalisation, the number of employees in branches of certain Slovak bank institutions have been recently reduced. As mentioned in the previous chapter, the reason is twofold: (1) a need for cost optimisation caused by the low interest rates; (2) digitalisation of finan-cial services that does not require personal meetings, but the finanfinan-cial decisions are executed online via e-banking systems. The reduction of the number of em-ployees may also negatively affect parents and their possibilities to reconcile work and family life. On the other hand, the bank representatives do not anticipate that the total number of bank employees will be reduced but rather novel job positions will be coined because of digitalisation such as skilled workers in IT sector (eBanking, online communication, cyber security, etc.) but also supportive services navigating clients in the portfolio of services.

2.5.5. Conclusions

The banking sector in Slovakia recently encounters substantial changes in skills demands, organisational changes, industrial relations and working conditions not only due to the MiFID II regulation but also due to the wider trends in digitali-sation and automation, and altering client demands and behaviours. A pivotal

impact of the MiFID II regulation is the increased volume of paperwork and documentation the banking employees must carry out. Regarding the working conditions, it seems that because of the increased paperwork, the level of stress and workload has surged and, as a result, there the banking employees demand fostering work life balance company level policies. Cooperation between the banking institutions with the FinTech and IT companies, and enlargement of the IT department within the bank institutions present a major organisational change in the banking sector. The research showed that respondents anticipate further penetration of the IT companies in the banking sector which may result in new forms of work organisation, new job positions. The research showed an increas-ing demand for social skills due to novel ways of communication ways that have currently been implemented by the FinTech companies. These new ways of online communication have also changed client behaviours and demands as there is a stronger demand for very prompt responsiveness in combination with strong problem-solving skills demanded from the banking employees. Altering skill demands encounters different obstacles in the Slovak banking institutions such as poor skill management strategies and ineffective trainings schemes for banking employees.

2.6. Finnish case study in the banking sector (by Tuomo Alasoini)