AI Layoffs in Banking? European Banks Could Cut up to 20% Jobs in Next Five Years, Says Morgan Stanley Report

European banks could witness significant layoffs over the next five years as artificial intelligence (AI) becomes more deeply integrated into banking operations, according to a new report by Morgan Stanley analysts. The report suggests that lenders may reduce their workforce by as much as 20%, driven by productivity gains and cost savings enabled by AI technologies.

According to the report, AI has the potential to improve productivity by nearly 30%, allowing banks to streamline operations and perform many tasks with fewer employees. However, analysts noted that the expected layoffs are likely to occur gradually through voluntary exits, including retirements and attrition, rather than large-scale sudden job cuts.

The findings come as several major banking institutions have already acknowledged that AI will reshape workforce requirements. Standard Chartered recently indicated plans to cut nearly 8,000 support roles over the next four years, citing increased adoption of artificial intelligence across its operations. Tech Layoffs Surge in 2026: 1,14,210 Employees Sacked by 150 Companies Amid AI-Driven Restructuring.

Meanwhile, HSBC Holdings is reportedly evaluating plans to eliminate around 20,000 jobs as part of efforts to reduce staffing needs in middle-office and back-office functions. The shift reflects a broader trend among financial institutions seeking to automate routine processes and improve efficiency.

Morgan Stanley analysts estimate that AI adoption could help European banks save between 4% and 9% in total operating costs. Commerzbank AG CEO Bettina Orlopp has also highlighted the technology's potential, stating that AI could generate approximately €350 million in cost savings over the coming years. Meta Layoffs 2026: What H-1B Visa Employees Were Told After Job Cuts Affecting Nearly 8,000 Workers.

Beyond cost reduction, banks are increasingly exploring AI-driven tools to boost revenue. Analysts believe AI can help lenders better identify customer needs, personalise product recommendations, and improve cross-selling opportunities. Banks with integrated retail banking, insurance, savings, and wealth management platforms are expected to benefit the most from these capabilities.

Concerns about AI-related layoffs have sparked debate globally, with many workers worried about the future of employment. However, some prominent technology leaders have recently pushed back against predictions of widespread job losses.

Speaking at the Commonwealth Bank of Australia's Accelerate AI Conference in Sydney, OpenAI CEO Sam Altman said rapid AI development had not yet resulted in the level of job displacement many expected.

“I thought there would have been more impact on entry-level white-collar jobs being eliminated by now than has actually happened,” he said.

Nvidia CEO Jensen Huang also criticised claims that AI is already causing large-scale layoffs.

“How is it possible that AI became productive and useful only six months ago, and they were somehow laying people off two years ago because of AI?...It was just a way for them to sound smart, and I really hate that. I think we're scaring people and that's irresponsible,” Huang said.

While AI continues to transform the banking industry, experts suggest the workforce impact will likely unfold gradually, with institutions balancing automation, productivity gains, and evolving employee roles in the years ahead.

(The above story first appeared on LatestLY on May 29, 2026 11:52 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).