European banks are set to slash more than 20,000 jobs as tougher capital requirements and negative interest rates bite into the sector’s profitability, putting fresh pressure on many lenders to cut costs further.

Dutch lender ING Group said yesterday that it would get rid of 7,000 positions over five years as it focuses on internet and mobile banking and automates systems. ING expects to save about $1bn (£780m) a year through its job-cutting programme.

Commerzbank last week revealed plans to ditch 9,600 roles. Germany’s second-largest bank plans to trim about one in five jobs, suspend dividends and shrink securities trading in the biggest overhaul since the lender’s bailout during the financial crisis.

Meanwhile, Spain’s Banco Popular Espanol said it would lay off up to 3,000 staff. ING’s biggest Dutch rival, ABN Amro Group, said last month that it would get rid of up to 1,375 jobs, or six per cent of the workforce, by 2020.

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“You have non-performing loan books, erosion of capital and regulatory headwinds,” said Simon French from Panmure Gordon.

“I think problems facing the European banking sector are symptomatic of a Eurozone monetary policy which isn’t appropriate for large parts of the economy. In an ideal scenario monetary policy would be a lot looser for the southern periphery and quite a lot tighter for Germany.”

It is thought that crisis-struck Deutsche Bank is on the verge of an agreement with labour representatives that will allow it to eliminate about 1,000 jobs in its home market as part of cuts it announced last year.

In October 2015, chief executive John Cryan said he planned to eliminate 9,000 jobs, or about nine per cent of the global workforce, including 4,000 positions in Germany.

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Financial firms have seen their value shrink by an estimated $280bn in 2016, with the Euro Stoxx bank index down around 30 per cent since the start of the year.

“This is something that’s been emerging for quite some time in terms of higher capital requirements, ongoing pressure from regulatory changes, changes to business models and overall economic activity which means banks are unable to generate significant revenues in higher margin areas of the business,” PwC analyst Andrew Gray told City A.M.

The banking sector has suffered heavy job losses since the credit crunch eroded profitability and caused a sovereign-debt debacle.

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Bloomberg reported that headcount across 26 European banks has fallen by more than 150,000 to 2.1m staff since the end of 2007.

Technology is having a significant impact, due to competition from innovative fintech startups and the temptation to replace jobs with automated programmes. “Banks are increasingly looking to use new technologies to further automate their services,” Gray added.

“We have seen a significant increase in the use of mobile banking and fintech solutions. Utilising technology will be essential for firms to compete in the future.”