The Financial Times reports that Royal Bank of Scotlandwill this week kick-start the integration of ABN Amro’s investment bank into its global markets division in a process that is likely to trigger the loss of about 7,000 jobs – or about 25 per cent of the combined 28,000 workforce.

The Scottish bank, which last week announced a £12bn rights issue, has so far made only relatively modest cuts to ABN’s investment banking unit, which it acquired in October as part of the €71bn break-up bid for the Netherlands lender.

However, RBS is now under pressure to act more aggressively, as its integration process gathers pace and the market downturn hits the financial industry more widely.

The bank is expected to start writing to staff just below senior management level as early as Wednesday this week, asking them to submit information about their career histories as part of a formal consultation for planned redundancies in the investment bank.

This consultation, which is expected to take four to six weeks, comes amid internal fears that ABN staff will face heavier cuts than their RBS counterparts.

The process will include a works council comprising representatives from each business unit. Some, but not all, employees whose jobs are at risk will be summoned for interview.

In recent weeks, a number of high-ranking individuals have left including Justin May, head of debt capital markets, and Clive Roberts, European head of sales trading. Mr Roberts is moving to Exane, the French stockbroker.

“We are entering a phase where people are moving on on a daily basis,” said one banker.

The planned headcount reductions come amid signs that investment banks are becoming more aggressive in cutting jobs in Europe in response to the credit crunch.

Last week, Merrill Lynch began consultation on around 500 redundancies in Europe, with roughly 100 coming from its fixed income unit.

JPMorgan’s London-based property analysts forecast earlier this month that as many as 40,000 jobs could be lost in the City this year. The Centre for Economics and Business Research predicts 11,000 job losses in London this year, and a further 8,200 in 2009.

RBS is under heightened pressure to make the ABN deal pay off since asking shareholders to fund a recapitalisation which has been made necessary in part because of the expense of the deal.

The FT also reports that Germany risks falling into crisis because of government indecision over economic reform in Europe’s largest economy and increasingly loud demands from trade unions for higher pay and less flexibility, one of the country’s leading businessmen has warned.

Franz Fehrenbach, chief executive of Bosch, Europe’s largest privately-owned industrial group, told the Financial Times that the “very dangerous mixture” of electioneering by politicians, higher wage deals and a push for a minimum wage came at the worst possible time as “the risks for 2009 grow every day” for the continent’s companies.

“This mixture, I fear, could lead us into the next crisis. And that at the same moment when we face all the other problems in the economy” such as the credit crunch, he said.

The starkest warning so far by a German chief executive over reform reflects the unease felt across the country’s business community over how the government is doing little to help them at a time when the financial crisis is threatening growth prospects. Berlin’s decision to raise pension payments was seen as particularly controversial – Mr Fehrenbach spoke of “electoral presents” – and comes alongside unions becoming increasingly vocal, not just on pay – where several deals have been above inflation – but also on flexibility measures such as temporary workers. Another chief executive of a leading German company said:“Germany is facing a perfect storm.”

Mr Fehrenbach, who has headed the industrial conglomerate since 2003, also expressed his unease at the shrill debate in Germany about the level of management pay and the image of business after a tax scandal claimed Deutsche Post’s chief executive as a victim:“Business has become the bogeyman . . . The whole discussion in the country is a danger. When we as managers let ourselves be described as asocial [as one politician called them] there is an issue.”

Bosch, which had revenues of about €40bn ($63bn) last year and is the world’s largest car parts supplier, is feeling the effects of the credit crunch already in the US and Japan, Mr Fehrenbach said, but “the rest is practically not affected”. He expected world growth to be 3 per cent this year, one percentage point lower than last year.

“We don’t see a big crisis,”he said, before adding: “A much more critical question is how 2009 will be. It depends on how long the crisis in the US lasts.”

He also warned that the focus on the euro-dollar exchange rate overlooked the yen, a more important currency for much of industry because of competitors in Japan. “The weakness of the yen is much more important [than the dollar] – especially for the European automotive industry,” he said.

Bosch’s views on the economy carry weight because it is also a leading manufacturer of power tools, industrial machinery, household appliances and boilers.

The New York Times reports that the mortgage industry, facing the prospect of tougher regulations for its central role in the housing crisis, has begun an intensive campaign to fight back.

As the Federal Reserve completes work on rules to root out abuses by lenders, its plan has run into a buzz saw of criticism from bankers, mortgage brokers and other parts of the housing industry. One common industry criticism is that at a time of tight credit, tighter rules could make many mortgages more expensive by creating more paperwork and potentially exposing lenders to more lawsuits.

To the chagrin of consumer groups that have complained that the proposed rules are not strong enough, the industry’s criticism has already prompted the Fed to consider narrowing the scope of the plan so it applies to fewer loans.

The debate over new mortgage standards comes in response to a severe crisis in the housing and financial markets that many economists trace back to overly loose credit and abusive loans. Those practices, combined with low interest rates, led to inflated market values that have declined rapidly in recent months as investors have begun to lose confidence in the financial instruments tied to those loans.

Four months ago, the Fed proposed the new standards on exotic mortgages and high-cost loans for people with weak credit. The Fed’s proposals came after it was criticized sharply as a captive of the mortgage lending industry that had failed over many years to supervise it adequately.

Proposals are pending in Congress on mortgage standards, but it is not clear whether they will be adopted this year. The Fed has its own authority under housing and lending laws to adopt mortgage standards.

The plan presented by the Fed was proposed by its chairman, Ben S. Bernanke, and Randall S. Kroszner, a former White House economist in the Bush administration who is now a Fed governor and leads the Fed’s consumer and community affairs committee.

The plan would not cover existing mortgages but would apply only to new ones. It would force mortgage companies to show that customers can realistically afford their mortgages. It would require lenders to disclose the hidden fees often rolled into interest payments. And it would prohibit certain types of advertising considered misleading.

The Fed is expected to issue final rules this summer.

Earlier this month, as the comment period was about to close, the Fed was deluged with more than 5,000 comments, mostly from lenders who said the proposals could affect loans that have not presented problems. Some bankers and brokers also said the rules would discourage them from lending to some creditworthy borrowers.

The plan was criticized in separate filings by three of the industry’s most influential trade groups — the American Bankers Association, the Mortgage Bankers Association and the Independent Community Bankers of America. More modest concerns about some of the provisions were also raised by the National Association of Home Builders and the National Association of Realtors.

Regulators have been meeting about the proposals with bankers, brokers and consumer groups in recent weeks and are continuing to do so.

Some of the groups seeking changes maintain that the proposals threaten to make borrowing for a home far more expensive and would unfairly deny mortgage brokers the right to earn certain fees.

Small community banks, which have played no significant role in the housing crisis, have urged the Fed to limit the scope of the proposed rules so that they do not discourage them from issuing loans. Lending groups have also raised concern that they would lead to frivolous and expensive litigation.

“We support many of the provisions in the proposed rule, but we do have concerns about the increased regulatory burden, liability and reputational risks that lenders might face,” said Kieran P. Quinn, chairman of Column Financial, Credit Suisse’s mortgage lending subsidiary in Atlanta, and the chairman of the Mortgage Bankers Association.

On at least one major aspect of the proposed restrictions — how broadly they should apply — the industry appears to be making headway. In a recent speech, Mr. Kroszner suggested that in response to criticism that the plan was including too many kinds of loans the Fed was considering whether to narrow the plan.

“We have heard from commenters who have expressed concern that in the current market environment, the proposed trigger could cover the market too broadly, and we will carefully consider the issues they raise and other possible approaches to achieve our objective,” Mr. Kroszner said last month at a conference of the National Association of Hispanic Real Estate Professionals.

Before this year, the Fed had applied an extra set of protection from abusive lending practices to a subset of subprime borrowers under the Home Ownership Equity Protection Act of 1994. The Fed has applied the law to fewer than 1 percent of all mortgages — those with interest rates at least eight percentage points above prevailing rates on Treasury securities.

Some economists and housing experts say the Fed’s lax oversight helped enable lending companies to reap enormous profits by providing millions of unsuitable and abusive loans to homeowners who often did not fully understand the terms or appreciate their risk.

As of January, the most recent month of available data, about a quarter of all subprime adjustable mortgages were delinquent, twice the level of the same period last year. Lenders began foreclosure proceedings on about 190,000 of these mortgages in the last three months of 2007.

The new rules would apply extra protection to any mortgage with an interest rate three percentage points above Treasury rates. Officials said that they would cover all subprime loans, which accounted for about a quarter of all mortgages last year as well as many exotic mortgages known in the industry as “Alt-A” loans.

These loans are made to people with relatively good credit scores but who might provide little documentation of their income or assets, or who make smaller than usual down payments or purchase loans that have unusual terms, like interest-only payments for an initial period.

Many mortgage brokers and bankers complain that the lower threshold would unnecessarily include many borrowers who are not at risk from abusive practices.

“There are a lot of community banks that have shied away from these loans because nobody wants to be a higher-priced lender,” said Karen Thomas, a lobbyist for the Independent Community Bankers.“With the trigger being set so low, it is encroaching on traditional, common sense mortgages. Our fear is it will result in less credit availability, which is not what we need in an already tight credit market.”

But consumer groups say that the proposed rules are already weak and that efforts to further weaken them would render them all but useless.

“The Fed has accurately diagnosed that this is a brain tumor and responded by prescribing an aspirin,” said Kathleen E. Keest, a former state regulator who is now a senior policy counsel at the Center for Responsible Lending, a group supporting home ownership. “In the industry, there is a fair amount of denial. They just don’t get it. There is a calamity within the industry, and they don’t have a new script yet, so they rely on the old script, which is that regulation will raise costs.”

But, she went on,“What we now see is that the unintended consequences of deregulation are worse. Their line is that regulation will cut back access to credit. That’s been their line ever since the small loan laws were adopted in the early 1900s.”

At the same time, letters urging the Fed to further tighten the rules were sent by Sheila C. Bair, the Republican head of the Federal Deposit Insurance Corporation, as well as senior members of the House Financial Services Committee.

In her letter, Ms. Bair, whose agency regulates many banks, urged the Fed to apply the proposed restrictions to loans that are three percentage points or higher than equivalent Treasuries. To prevent lenders from evading the limit by creatively structuring the loan and fees, she also suggested that the Fed impose the tighter restrictions if the loan fees exceeded a dollar amount.

While the Fed plan would require disclosures that could make it harder for lenders to include hidden sales fees that are usually paid to the mortgage broker, Ms. Bair suggested that the plan go further and ban some practices.

The plan, for instance, would require subprime lenders to explicitly describe fees that are now hidden. But Ms. Bair has proposed the elimination of such fees, saying such a ban would “eliminate compensation based on increasing the cost of credit and make the amount of the compensation more transparent to consumers.”

Ms. Bair also proposed making it easier for borrowers to sue lenders without having to show that they were engaged in a pattern of abusive practices, which is a requirement under the proposed Fed rules. She said that forcing borrowers to show a pattern of abuse “clearly favors lenders by limiting the number of individual consumer lawsuits and the ability of regulators to pursue individual violations.”

Ms. Bair also recommended that the Fed eliminate a so-called safe harbor provision in the proposal that protects lenders who fail to verify the income or assets of a borrower in some circumstances.

The NYT also reports that in a long career, Robert Thomson has left a trail of happy reporters in his wake — at The Financial Times and more recently at The Times of London, where the newsroom under his guidance was, in the words of a former colleague, “the happiest place to work on Fleet Street.”

He’s got his work cut out for him at The Wall Street Journal.

Last Wednesday morning Mr. Thomson, who is 47, walked into the morning news meeting at The Journal, his first day as the de facto editor in the wake of the resignation of the managing editor, Marcus W. Brauchli, whom Mr. Thomson has known since the 1980s when the two were foreign correspondents in Beijing.

With editors assembled around the table, Mr. Thomson said the paper would not rush to replace Mr. Brauchli, and he assured the group that people who thought the paper was straying from its traditions were misinformed. Then, he said, he offered something no reporter or editor could resist: more space for more words.

Mr. Thomson said that the News Corporation, which is controlled by Rupert Murdoch and which bought the newspaper’s parent company, Dow Jones, last year for close to $5 billion, would invest $6 million a year to add four pages for international news.

Adding heft to a paper at a time when cutbacks are the industry norm — The Journal’s advertising revenue, like other newspapers, declined in the first quarter — is a nice start for Mr. Thomson to ease the anxieties of Journal staff members whipsawed by change. But the vagueness of his role — publishers do not typically attend news meetings — has everyone wondering what else he has in store.

“As far as I can tell, he is a mystery man,” said one editor at the paper who spoke anonymously because he was not authorized to speak publicly. “It’s better for him to turn out to be a nice guy and an inspired journalist than for him to start out telling us he loves us, and then turn out to be Darth Vader.”

Mr. Thomson will soon become much more familiar to The Journal’s staff, because he is the one charged with executing Mr. Murdoch’s vision for the newspaper. He may be the publisher, but his responsibilities include few of the business tasks that title usually connotes.

“I’m the head of content, that’s the simplest way to say it,”he said.

Mr. Thomson’s own story is an up-by-the-bootstraps tale of ambition and guile. The tabloid version would read like this:

Born in rural Australia, he falls hard for the newspaper life as a child watching his father in a home-based part-time job proofreading galley sheets of the local paper. He initially bypasses university (he earns a degree later in life) to become a copy boy at age 17 at The Melbourne Herald, where one of his tasks is to fetch milkshakes for the reporters to coat their stomachs before their after-work drinking sessions.

“It was what people imagine to be a journalistic upbringing,”Mr. Thomson said in his 11th floor office in Lower Manhattan.“It’s the most interesting job on the planet. You are being paid to be curious.”

He later earned credentials as a reporter by uncovering corruption in the Australian judiciary — which he turned into a book in 1987 called “The Judges” — and covering China, including the events at Tiananmen Square, for The Financial Times and The Sydney Morning Herald.

In China, Mr. Thomson became friendly with Mr. Brauchli, but many people who know both say their friendship has been overstated in the press.

“I don’t think they were best buddies,” said Adi Ignatius, an editor at Time magazine who was a foreign correspondent in China at the time. “But there was a certain esprit de corps among foreign correspondents, especially in Beijing at the time.”

As he worked his way up the ranks of The Financial Times, eventually becoming United States managing editor in 1998, he befriended Mr. Murdoch, and by all accounts, sparks flew.

Andrew Gowers, who beat out Mr. Thomson to become editor of The Financial Times in 2001, recalled a visit he made to the New York bureau in which Mr. Thomson took him to lunch to meet Mr. Murdoch at the News Corporation’s Manhattan office. “There was something going on there, it was like a coquetry really,” Mr. Gowers said. “It was clear they had seen a lot of each other at that point.

“He has this intuitive way with people, which he’s deployed to a remarkable extent with Rupert.”

On Thanksgiving Day in 1998 The Financial Times published a scoop on its front page that made an unhappy holiday for reporters at competing newspapers: Exxon and Mobil were close to a merger that would create the largest public company in the world.

Mr. Thomson, new to his position as managing editor at The Financial Times, dispatched street hawkers to pass out the paper at the Macy’s Thanksgiving Day Parade several blocks away from the paper’s Manhattan offices, and appeared on television to promote the scoop. Then the early follow-up coverage suggested the deal might not happen.

“You just want to curl up and die at that point,”recalled Will Lewis, the reporter who wrote the article and who is now the editor of The Daily Telegraph in London. “Robert says, ‘I trust you. Go back to the prime source.’ He pushed me forward. And the story was then confirmed.”

Reporters who have worked for Mr. Thomson say he is loyal, almost to a fault. One reporter said he “can’t say no.” And many former colleagues say he is not the type of manager who is capable of easily firing workers.

In fact, the prevailing theory as to why he never became the editor of The Financial Times is because the paper needed to trim its ranks after a hiring boom during the dot-com days, and Mr. Thomson was not seen as the right person to do that.

When Mr. Thomson learned almost seven years ago that he would not be named editor of The Financial Times, he did what many defeated journalists might do — he retreated with colleagues to a dark corner of a bar. But then he turned to his friend Mr. Murdoch and took the helm of the mogul’s 217-year-old Times of London.

At The Times, he changed the appearance of a venerable newspaper — some would say a British institution. He shrank the paper from a broadsheet to a tabloid format, and increased circulation even as many traditionalists complained about the new format.

“In Britain, people think of it as stodgy, extremely traditional,”he said last year at a lecture at RMIT University in Australia, where he received a journalism degree in 1989.

“So, it took an Australian to shrink it in to a tabloid, or a compact,”he joked. “We used the ‘c’ word, so it was more socially acceptable.”

In the last two years Mr. Thomson persuaded Mr. Murdoch to attend the World Economic Forum in Davos, Switzerland, an event Mr. Murdoch had not attended in years. (Mr. Murdoch prefers the company of deal makers, like those at the annual conference in Sun Valley, Idaho, sponsored by the investment bank Allen & Company.)

From event to event at Davos, Mr. Thomson and Mr. Murdoch were often together. “It was like Rupert was on his arm,” said Mr. Gowers, who saw both men there.

Mr. Thomson also encouraged Mr. Murdoch to buy The Wall Street Journal and, according to one person who knows both men, was a driving force behind the News Corporation’s offer.

As a result, Mr. Thomson, who lost out at The Financial Times, is now running its biggest competitor. Beyond overseeing changes to the paper, he must confront a news staff that is recovering from Mr. Brauchli’s departure as managing editor.

“I thought he would figure out a way to survive for a year maybe, but plenty of people here didn’t think he was going to leave at all,” said one reporter, referring to Mr. Brauchli. “There were a fair number of rank-and-file people here who were naïve” said the reporter, who like others spoke only the condition that his name not be used.

Mr. Thomson declined to discuss Mr. Brauchli’s departure, but generally he has only good things to say about him. The notion that the paper is betraying its roots by becoming more general in its coverage, he said, is “fallacious.”

“Foreign correspondents were incredibly frustrated,” he said. “They couldn’t get international political stories in to the paper. That wasn’t Marcus’s fault. They just didn’t give him the investment.”

Mr. Thomson said he was not worried that expanding news coverage would alienate The Journal’s core readers. “We’ve increased the pagination to display more domestic and international news, not reduced the business story count,” he said. “It is highly amusing that left-wing media commentators who tend to regard all businesspeople as criminals or reprobates are worried about us alienating business readers.”

Traditionalists at The Journal take note: Mr. Thomson is unmoved by legacy. “There is a great temptation to be so respectful of history that you are haunted by it,” he said during the lecture at RMIT. “The truth is, if you are haunted by history, you will be history.”