Banks have been among the first to be hit by the relentless slowdown in economic growth spreading from the United States.

With fee income falling sharply, the world's largest investment banks are all focused on cost-cutting these days.

Some 25,000 jobs have been axed to save money, mainly in the US, while employees have had to come to terms with draconian and quirky cost-cutting measures.

So far, the Irish subsidiaries of the big players have not been directly affected but there are fears jobs could be lost at companies based in Dublin's International Financial Services Centre if the chill economic wind continues to blow.

This week, Citigroup, which employs 1,250 people at its Citibank operations at the IFSC, was the bearer of bad news, telling employees that some 3,500 will be leaving the organisation globally this year.

Similar announcements have flowed from JP Morgan, Chase, Credit Suisse First Boston, ABN Amro and Merrill Lynch in the recent past, as they tighten their belts to cope with the downturn in fee-generating corporate activity in a more difficult economic environment.

Citigroup's news came as a surprise to the market, as the bank had shed 7,400 jobs last year. More than 2,000 of the job cuts will be in the US and there is an expectation that a small number of Irish jobs may be affected.

Citibank's chief executive in Ireland, Mr Aidan Brady, believes the impact of this announcement will be minimal.

The group operates 20 different businesses from the Citibank office in Dublin. Citigroup has set aside $177 million (€194 million) of its second quarter earnings to cover severance payments for the workers to be laid off out of its workforce of 242,000.

The lay-offs are being sought in what is expected to be one of the toughest years for profits at investment banks since 1994.

Just how many more jobs will be lost in this sector this year will depend on the extent to which profits are eroded.

IDA Ireland, the State agency responsible for attracting international investment into the Irish economy, will keep a close eye on any further job loss announcements but is not overly concerned about any immediate knock-on for the IFSC.

"I am not too worried but that is not to say the IFSC won't escape job cuts," said Mr Brendan Logue, IDA Ireland director of financial services.

"The type of business carried out at the IFSC tends not to be directly affected by a downturn in capital markets activities.

"Indeed, a number of financial institutions are currently interested in establishing new businesses at the centre," he said.

About half of the world's top 50 banks have operations at the IFSC, with many of the 9,000 jobs there involved in funds administration, processing investments for international fund managers.

The profitability of these businesses is dependent on the performance of the stock markets, with fees based on investment gains.

In a year when stock markets have been weak internationally, fees earned from this kind of activity will be lower.

Mr Logue notes though that the volume of business IFSC companies have won is continuously growing and this should offset any reduction in fee income.

In the meantime, businesses are trying to contain costs wherever possible.

Staff on this side of the Atlantic can expect any number of cost-cutting measures, judging by what has been happening in the US. Staff at investment banks in London have also been hit.

Perks such as on-the-job training and tuition and telecommuting, are considered to be cost-effective and are likely to be retained by many companies wanting to improve morale and staff productivity. But many basic niceties have been eliminated.

Goldman Sachs for instance has eliminated free fruit. At other companies, staff have been asked to adopt an office plant to save the company the cost of employing maintenance staff.

Subsidised tea, coffee and lunches have also been hit. In some cases, subsidies have been removed entirely. There are also reports of companies reducing the number of fluorescent bulbs in the office, while some banks now ask guests to bring their own sandwiches to meetings.

The Irish banks say they haven't been reduced to recycling the tea bags just yet, mainly because they have either downsized their staff numbers or are in the process of seeking voluntary redundancies. Bank of Ireland is looking for 1,000 voluntary redundancies from its 17,000 workforce.

At the same time, it is recruiting staff for its business banking operations and expects to hire around 300 staff on a short-term basis to assist with the euro changeover.

Ulster Bank and National Irish Bank have also restructured their businesses. AIB has centralised its business to achieve greater efficiency and is also currently recruiting staff.

The Irish banks are still reporting strong profit growth in the domestic market. With economic growth expected to continue at a rate or more than 5 per cent this year, they are not under pressure to take the drastic steps their US counterparts have embraced.

Internationally, bankers are warning they will be forced to be more aggressive if there is no improvement in business in the autumn.

Banks such as Schroder Salomon Smith Barney, JP Morgan and Credit Suisse First Boston are reported to be bracing themselves for further cuts. Just how many more jobs are lost in the financial services sector here and internationally will depend on whether economic conditions deteriorate or improve in the coming months.