Some 12,800 jobs will be trimmed from the combined work force of 217,000, and another 10,800 positions will migrate to cheaper offshore locations, the banks say.

ABN Amro has embraced strategic outsourcing and offshoring much more agressively than Barclays in recent years. It employs about 4000 back-office workers in six centres in Mumbai, Chennai and New Delhi and it has outsourced much of its infrastructure and technology related processes.

One technology supplier to ABN Amro says that he expects Barclays will take advantage of the Dutch bank's more established offshore centres to help drive the cost savings and that the two banks' offshore application development operations will be consolidated.

"The picture is not yet clear as to what this merger would mean for existing outsourcing and IT contracts in place at the two banks," he says. "On the one hand this will make it much more difficult to hit any cost savings targets on the outsourcing contracts, but it will also present opportunities for all the banks' technology partners."

ABN Amro also announced today that its Chicago-based La Salle Bank would be sold to Bank of America for $21 billion. While it says this is not necessary for the Barclays deal to go ahead, some speculate that the cash from this deal would help kickstart the complex integration work required to merge the British and Dutch banks.

The Children's Investment Fund, a hedge fund that owns two per cent of the Dutch bank and has pushed for the bank's breakup to improve shareholder earnings, says it is studying the proposed deal. But voting on any merger proposals won't take place at ABN Amro's annual general meeting (AGM) this Thursday because the agenda for the meeting had to be fixed last month. Instead, any proposals will need to be voted on at an extraordinary general meeting.