Deutsche Bank plans to cut 18,000 jobs in a sweeping, 7.4 billion euro overhaul designed to turn around Germany’s struggling flagship lender The bank will also scrap its global equities business and scale back its investment bank. It expects a 2.8 billion euro ($3.1 billion) net loss in the second quarter as a result of restructuring charges.

Deutsche said that it would also cut its fixed income operations, especially its rates business. It will also create a new unit to wind-down unwanted assets, with a value of 74 billion euros of risk-weighted assets.

Chief Executive Officer Christian Sewing flagged an extensive restructuring in May when he promised shareholders “tough cutbacks” to the investment bank. The pledge came after Deutsche failed to agree a merger with rival Commerzbank.

Media reports had suggested that Deutsche Bank could cut as many as 20,000 jobs − more than one in five of its 91,500 employees.

In the event, the bank said it would reduce headcount to 74,000 employees by 2022.

The bank’s supervisory board met on Sunday to agree the proposed changes, one of the biggest shake-ups in the industry since the financial crisis.

Meanwhile, Turkish President Tayyip Erdogan sacked the central bank governor for refusing the government’s repeated demands for rate cuts, Hurriyet newspaper on Sunday quoted Erdogan as telling a meeting with his party’s lawmakers.

Governor Murat Cetinkaya, whose four-year term was due to run until 2020, was replaced by his deputy Murat Uysal, a presidential decree published early on Saturday in the official gazette showed.

“We told him repeatedly in economy meetings that he should cut rates. We told him that the rate cut would help inflation to fall. He didn’t do what was necessary,” Erdogan was quoted as saying.

The daily Hurriyet said Erdogan gave his explanation for sacking Cetinkaya, almost a year before his term was due to end, during a consultation meeting in Istanbul with the members of his ruling AK Party.

“We weren’t on the same page,” Erdogan added.

No official reason was given for the sacking, but government sources cited Erdogan’s frustration that the bank has kept its benchmark interest rate at 24% since last September to support the ailing lira currency.

In a written statement on Saturday, Uysal said he would independently implement monetary policy instruments focused on achieving and maintaining the primary objective of price stability.

Despite the new governor’s assurance, critics say the move once again showed that Erdogan was in full control of the monetary policy, and that Turkey would witness a period of rapid rate cuts.

“The sacking of the governor of the CBRT by presidential decree shows that Erdogan is in charge of monetary policy,” said Wolfango Piccoli, of the London-based political risk consultancy Teneo.

“The decision significantly undermines whatever credibility the CBRT had left. It also signals that overall institutional degradation continues unabated,” he added.

Under Turkey’s new executive presidency, which came into effect last year, Erdogan does not need cabinet approval to change the central bank governor.

A senior Turkish economist also said Erdogan’s surprise dismissal of Cetinkaya could further undermine perceptions of the bank’s independence.

“While the debate regarding the central bank’s independence continues, removing Cetinkaya, who apparently resisted some measures, and replacing him through an unusual method will only fuel this debate,” the senior economist told Reuters.

“We will see how he can convince the markets for a rate cut at a time when the independence is increasingly doubtful.” The central bank has kept its benchmark rate unchanged since it increased the rate by 625 basis points to 24% in September to prevent a full-blown financial crisis.

Several economists were already expecting a rate cut at a July 25 monetary board meeting as inflation fell to 15.7% in June, its lowest level in one year.

“Newspapers have cited Erdogan saying that Cetinkaya did not do what he was told on rates. It casts a shadow on Uysal, but he will be quite aggressive on rate cuts,” another Turkish economist told Reuters.  Turkey’s new central bank governor Murat Uysal, who served as deputy governor for three years before the shock dismissal of his boss, is known as one of the more dovish members of the bank’s interest rate setters.

He has less than three weeks to prepare for the next rate-setting meeting, under pressure from President Tayyip Erdogan’s calls for lower rates to kick-start an economy in recession..

A fall in inflation last month had added to expectations of a rate cut on July 25, but likely US sanctions over Turkey’s purchase of Russian air defence systems, combined with investor jitters over Erdogan’s sacking of the bank governor, could put the lira under renewed pressure and make it harder to cut rates.

Reuters