Looking back, there are two extraordinary aspects to what’s happened to RBS over the last 10 years. One is the new depths to which the bank has plummeted. It’s doubled down on the worst excesses of the pre-crisis period, faced multiple investigations and has been mired in constant scandals. The second shocking fact is that the bank has done so under public ownership. The government has had the power to put a stop to RBS’s misdemeanours, but has chosen not to.
This Saturday marks 10 years since the moment when the government became RBS’s majority shareholder, rescuing the bank from imminent collapse. Despite the fact that people are fed up with our self-serving banking system, and despite the taxpayer having a controlling stake in one of our biggest banks, we haven’t seen any significant change over the decade, just disappointment after disappointment. The story of RBS is the story of the UK’s broken banking system: banks get bailed out and the public gets sold out. It’s also a story of the failure to adequately punish those who oversaw reckless and greedy behaviour and brought the country to the brink 10 years ago.
Seventy-two per cent of people think that banks should have faced more severe penalties for their role in the financial crisis. Fred “the Shred” Goodwin, the RBS boss who oversaw the horrendous practices leading to its collapse, now enjoys a £450,000 pension, and has received almost £6m since quitting a decade ago. After resigning in 2008, the worst penalty he faced was being stripped of his knighthood. How he deserved it in the first place is another conversation.
Ten years ago, RBS was the world’s biggest bank, after Goodwin led it through a number of dodgy takeovers. Since its near-collapse, its legacy of bad practices and scandals have streamed into the public domain. Only this August, RBS was fined £3.9bn for deliberately selling mortgage packages pre-2008 that were “total fucking garbage”, according to the bank’s chief credit officer in the US. Probably the worst is the debacle of the RBS Global Restructuring Group. In this scandal, RBS was alleged to have deliberately pushed small businesses towards insolvency in order to shore up the bank’s own capital position, before in some cases stripping them of assets.
The bank is currently presiding over a devastating programme of branch closures, adding to the more than 1,500 communities without a high-street bank. British banks such as RBS have a record of consistently failing to meet the needs of the UK economy, with the vast majority of their lending going towards speculation on property and other already-existing assets, and only a fraction going towards productive projects. As if that wasn’t bad enough, last week RBS boss Ross McEwan suggested that the bank has become even less willing to lend towards industries such as retail and construction. In doing so, it is denying the investment that could help save Britain’s struggling high streets and address the housing crisis.
In rescuing RBS, the government has chosen to have ownership but not control – the bailout package of £45.5bn of taxpayer money came with no strings attached. Perhaps this was panic and lack of foresight. Regardless, with its majority stake in the company, the government could step in to rein in these excesses, and put the bank to use for the good of the public. But instead it’s opting to press ahead with privatisation, which could mean a loss for the taxpayer of over £26bn. There are even rumours that RBS wants to get sold back quickly to the private sector because it fears a general election and a Labour government. Indeed, Labour has signalled interest in a proposal to break it up and turn it into a network of smaller, regionally based banks.
Perhaps that’s why this week chairman Howard Davies has suggested that RBS change its name; it’s clearly still a toxic brand. There are many things that we need to change urgently about RBS: its behaviour, structure and mission, but a superficial name change will help with none of them. McEwan is right to recognise that the bank still needs to regain the trust of the British public. But unfortunately he’s taking the wrong approach to making amends. RBS needs to work in the interests of the British public – instead of closing branches, ripping off small businesses and lending for speculation, it should lead the way in banking by serving local communities and the real economy. The future of RBS can be seen as a key battleground for a public that wants to see a banking sector that actually works in their interests. We mustn’t let the government sell it off.
• Fran Boait is executive director of campaign group Positive Money
