As Citi prepares to move a chunk of its legal team to Belfast, Michelle Madsen asks: is this a trend for the future?

When banking giant Citi announced that it was to shift a sizeable chunk of its UK legal operations from London to Belfast, the move was predicted to cause waves – both at the bank and across the wider in-house community.

The impact of this move, or even the number of lawyers set to move to Northern Ireland, is currently unclear; but recruiters have claimed as many as 40 London legal jobs could be on the line. Citi has so far refused to comment. With continuing pressure on international banks to cut costs associated with operating in major financial centres, it is clear that Citi's banking rivals will be watching with interest.

In the meantime, lawyers at the bank are understandably uneasy, given the uncertainty regarding Citi's current sweeping shake-up. The first public indications of the scale of the restructuring came in April with chairman Chuck Prince's announcement that the bank was poised to cut 17,000 jobs from its 360,000 global workforce.

Citi said that an additional 9,500 jobs would be relocated to lower-cost regional centres. The bank's legal department was also named in April – alongside human resources and other support functions – as one of the areas that would be affected.

In a second announcement in May, Citi said that a newly-formed legal and compliance team would "create 39 new jobs". The site builds on Citi's so-called Belfast Centre of Excellence, the Northern Irish arm initially launched in 2004 to house some of the bank's support functions. The bank now has 400 staff working full-time in Belfast, largely for its IT and operations teams. With the legal and compliance team, that figure is projected to rise to 700 by 2009.

The bank has so far refused to comment on how many, if any, UK legal staff are set to transfer to Belfast, though it has indicated that redundancies are a possibility. The bank also refuses to comment on how many lawyers and support staff it currently has in its European legal team, which is currently overseen by regional general counsel Brad Gans.

Commenting on the composition of the Belfast team, Citi last month said: "Many of the new roles would be particularly suitable for law graduates and those who are professionally-qualified, although Citi will also recruit from the broad base of talent within Northern Ireland."

The bank said the new team would "play a critical role within Citi, supporting and advising many business groups in areas such as transaction negotiation, document execution, and compliance and regulatory requirements".

It is also confirmed that the team will cover Citi's Europe, Middle East and Africa operations across its markets and banking functions.

While details from Citi are currently thin on the ground, attention will focus on whether rivals, particularly in the banking community, are considering similar moves.

UK banks such as Lloyds TSB and HSBC have run provincial legal support centres for a number of years, but it is not only the commercial banks that have fallen in with the trend.

Investment banks such as Merrill Lynch and Goldman Sachs have also become wise to the benefits of setting up so-called 'captive sites', specially launched centres in lower-cost jurisdictions that handle back-office and support functions.

With an established legal services centre in India and another two primed to launch in South America, UK communications giant British Telecoms (BT) is another advocate of the captive site model. Having set up a team of 45 lawyers in New Delhi two years ago, Evangelos Apostolou, BT's head of special projects, says that he had also looked at Belfast when thinking about where to locate BT's offshore global services legal team.

Apostolou says that the success of captive site operations lies in the way relationships are managed between lawyers and their clients over long distances.

"One of the problems with the captive site model is that you find clients within the organisation treating the lawyers as if they were third parties," he warns. "While you can do the majority of deals by email, there is the issue that you cannot see people if things start to go wrong and people are reluctant to transact from a remote basis."

He also pointed out that if a bank or a company decides to relocate existing staff, it stands to eat considerable holes into its potential cost savings.

"Our philosophy is to recruit local lawyers in a fiercely competitive market," he says. "Bringing a UK lawyer over and giving them an ex-pat package goes against what we are trying to do."

Once clients have been won over to the idea that their lawyers will be considerably more than a train journey away, the next major concern for companies which are thinking of setting up their legal support services abroad is the recruitment and retention of the right sort of talent.

There can be a real problem for financial services institutions that are looking to shift all aspects of their legal operations away from expensive financial centres, argues First Counsel recruiter Chris Cayley. Lawyers specialising in securities, leveraged finance or derivatives are, says Cayley, unlikely to want to move away from major cities and are difficult to find anywhere else.

Taylor Root consultant Julian Stone agrees, saying that making a move out of the City is simply contrary to what many banking lawyers are about.

He comments: "Only about 20% of people in the market are really willing to relocate and, given that statistic, you have to rely on a decent talent pool in the location you are entering into."

There are also some banks that believe their lawyers should be located at the heart of its business. Schroders belongs to this camp, and general counsel Howard Trust says that, while cost-cutting is always a consideration, moving his lawyers away from day-to-day business would be a false economy.

"For our lawyers it is crucial that they are physically close to the business and their clients," he says. "It is inefficient if they are far away and not close enough to communicate face-to-face frequently. If you value your lawyers you will want to keep them close to the business."

All in all it seems that the case for substantial legal moves to foreign countries is still finely balanced, especially considering the difficulty of finding local staff with the right skill-set.

What could perhaps tip the scales is the development of centres in foreign jurisdictions such as South Africa or closer to home in Northern Ireland. Belfast, for example, is currently benefiting from an economic resurgence and high demand for commercial lawyers.

Such a move could potentially make the city an established hub for banks looking to transfer support functions. By the same token, excessive demand could send the cost of relocating staff there soaring.

But whether Belfast becomes an emerging legal hub or not, the cream of international banking will keep hunting for similar opportunities to cut costs.

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