If staff at investment banks thought they had put the worst of the cutbacks behind them, they should think again. Investment banks will need to take out between 6% and 8% of their costs in the next 12 to 18 months if they are to meet their reduced return-on-equity targets, with as many as 20,000 back and middle-office jobs likely to go in the process, according to the report from Morgan Stanley and Oliver Wyman.

Cost cutting is likely to be a major priority for the industry in 2011, as banks adjust their business models in preparation for the new constrained regulatory environment. Several European investment banks such as Barclays Capital, Deutsche Bank and UBS have started to cut costs in anticipation of a slowing environment, increased competition and tougher regulation.