27 Feb 2014

RBS boss outlines plans after bank posts £8.2bn loss

Ross McEwan missed an opportunity to do something bold on Thursday. For starters, here’s a good way to restore trust in Britain’s most mistrusted bank.

Announce you’re pulling out of investment banking for good. Admit it was your disastrous acquisition of ABN Amro that got you into this mess, say sorry that bonuses will have to be paid until the wind down is complete and promise that not a single taxpayer penny will ever be spent on a bonus for an investment banker inside RBS again.

And while you’re at it say you’re going to shut down GRG, the controversial restructuring group that stands accused of deliberately busting small businesses to the benefit of the bank.

Not because you think it’s guilty but because enough people clearly do, it’s tarnished the reputation of the bank and it’s time to wipe the slate clean and start again. That’s what the people want to hear.

While it’s great Mr McEwan is cutting seven divisions down to three, speeding up the time it takes to set up a bank account and promising to treat new customers the same as the old ones – those aren’t the things that have made RBS public enemy No.1.

Like it or not, it’s mostly the bonuses that have done that.

So if RBS is serious about regaining the public’s trust, it chose a bad day to pay nearly half a billion pounds in hand-outs as it simultaneously announced its biggest annual loss since being bailed out.

No one begrudges bonuses to frontline, customer facing staff doing the nine to five at the till. But it’s the £237m of bonuses to investment bankers that will really grate.

And why? Because it was the £71bn acquisition of the investment bank ABN Amro at the height of the boom that epitomised everything that was wrong with the old RBS.

Mr McEwan said as much himself today. RBS was a bank that wanted to become the biggest in the world, he said, and we achieved it, but at what cost?

The cost today was £8.2bn, a staggering sum for a bank that was bailed out 6 years ago and which shows absolutely no sign of returning to the public markets any time soon.

And it’s largely the sins committed by the investment bank that have landed RBS in so much trouble, with more money today being set aside to cover the cost of past mis-selling scandals like interest rate swaps and sub-prime mortgages.

And Mr McEwan admitted the bank cannot yet draw a line under the past either, not least with the manipulation of foreign exchange indices currently on global regulators’ agendas.

Within that context, it’s no wonder that there was a collective intake of breath today – from the unions to Nick Clegg to Andrew Tyrie, the chairman of the Treasury Select Committee – at the size of the RBS bonus pool.

Of course the government is to blame too. Having chastised banks for rewarding failure and promising to crack down on the bonus culture once and for all, it somehow sees fit to allow RBS to pay out half a billion pounds in taxpayers money to bankers that may or may not have contributed to the bank’s downfall.

George Osborne welcomed the RBS statement and said it was great news the bank and its management was finally focusing on British businesses and British families.

Yet many would say there’s little evidence that that’s the case. And anyway, isn’t that exactly what the former CEO Stephen Hester promised to do too? And we all know what happened to him.

It would be a disaster to see Mr McEwan go the same way. He has less of the swagger than Hester and seems to genuinely care about the bank – rather than taking the job because it’s a high profile turnaround challenge.

Yet there’s no avoiding that’s precisely what it is. But unless Mr McEwan is prepared to take some bold actions – rather than tinkering round the edges – he’ll end up going the same way as Hester too.

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3 reader comments

  1. Mike says:

    The public should own this bank outright and all profits should go towards rebuilding this country and its economy.

  2. Bob says:

    How is Earnest Saunders, the Guiness guy these days?

    my fear re the Banks would be once they have taken as much as they can from the Treasury, Barclays will move to the US, HSBC to China, one to Frankfurt,

    cannot understand why the normal rules for companies was waived re the Banking crisis, we should have let them go under and picked up the pieces later, think would have being easier than what may be waiting for us in the next 5 years,

    but what do I know, I know nothing

    best wishes,

    Bob

  3. Barbara says:

    Maybe more powers for Scotland should include taking responsibility for the losses of RBS.

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