Martin Waller: Business commentary
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So just what do you have to do to get fired around here? At Royal Bank of Scotland, gross moral turpitude and some energetic expense fiddling might just do it. Apparently, the worst loss in British banking history may not.
Sir Tom McKillop will stand up as chairman of RBS today to announce a loss of as much as £1.7 billion. He will, we can assume, attempt to justify last summer's €10 billion purchase of ABN Amro. Bad timing, couldn't see it coming, huge opportunities still, you can probably write the script.
RBS is a curious beast. Until the purchase of NatWest in 2000, its word went unchallenged in the incestuous Scottish establishment. You can bet that if anyone on an Edinburgh newspaper wrote in the above terms, the matter would be raised on the golf course with the writer's editor and his or her career would take an abrupt detour.
When RBS bought NatWest and raised its exposure south of the border, it ran into the sort of brickbats and occasional abuse that is the lot of the average FTSE 100 company. The bank and its minders reacted, I can personally attest, with extreme sensitivity. Any criticism of its palatial new HQ in Gogarburn seems to raise particular paranoia.
Now RBS stands accused of frittering away billions of shareholders' funds on the usual rubbish loans. A third of the £5.9 billion writedowns already announced came from the ABN Amro book. McKillop failed to restrain the gung-ho Sir Fred “The Shred” Goodwin because he had no experience in banking and, frankly, only got the job because it had to go to a Scottish grandee, of whom there was a limited supply. Various institutions now want his head.
What can be said in RBS's defence? Well, in the same way that it is hard to blame someone who bought a house last July for not waiting until now, there was no credit crunch when they signed the deal. But it was pretty obvious, even last summer, that buying banking assets at that stage in the cycle was a high-risk strategy.
It has been argued that it is a bit rich for them to come after the board now, given that 95 per cent of shareholders approved the deal. Nonsense; they approved it because they were advised to by said board.
Actions have consequences. It cannot be said too often that, apart from Northern Rock, a unique situation, not a single UK banker has willingly taken the drop.
Even Steven Crawshaw at Bradford & Bingley went because of ill health. It is the institutions' job, if UK banking plc lacks any sense of shame, to take the necessary action.
In an ideal world, McKillop should stand up today and announce his resignation. Goodwin should say that, while shareholders have asked him to remain for a couple of years to oversee the integration of ABN Amro, a job he is clearly suited to, he will also be off thereafter. And no huge payoffs.
Don't hold your breath.
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McKillop and Goodwin should resign or be fired. They should repay bonuses which they have received during the last two years. These bonuses will partly have been based on the increase in RBS's involvement with lendings to people who can't repay?
David (Retired lending banker), Poole,
How come my son gets given a £2000 credit limit on his credit card without a job or any references. When tackled NatWest assured me that the had a strict lending code.!!!!
Nigel, Farnham, UK
Has RBS and other British banks written down their respective builders loans yet?
Have these same institutions adequate reserves to cover current and future UK mortgage lending?
Any new ceo of a bank would aggressively revalue exisiting impaired assets. Do shareholders and Regulators want this?
Ian, Madison, USA
Tom McKillop had a satisfied grin on his face in your latest photo which I presume was after he knew the results. On this basis I don't think he will fall on his sword .
We live in a world where failure is now rewarded.
V Cooper, Somerset, UK
Average profit of £5 Billion over two years, not bad for doing little more than pressing a few buttons.
Jim, Consett, UK
As someone with scottish ancestry it gives no pleasure to say the scottish mafia has done immense damage to the economy and clearly protects its own e.g. Brown/Darling or McKillop/Goodwin. It's about time they paid the price for failure - we have.
Janet, London,
So Sir Tom Mckillop is going to resign is he this is typical of a captain deserting a sinking ship if you can't take the blame get out before you're kicked out for making a mess of everything
Barry Stone, Pinner, United Kingdom
To get fired at RBS? Be a junior member of staff.
Richard, Cambridge,
"So just what do you have to do to get fired around here?"
Tell the truth?
Tell the media about the elite controlling the banks and how the whole credit crunch and oncoming recession was engineered by them and there cronies around the globe.
Andrew, Hartlepool, England, UK
And who shall we give credit to the 60% share price drop?
Andrew Brodie, London, UK
We're an RBS customer. We're leaving. Why?
Because in two years I don't think they have managed any single admin task correctly. We've got quite a stack of apology letters, but a working bank account?
That we do not have.
It might be hard to get fired at RBS, but RBS can certain get fired.
Katie, Cambridge, Cambs
The more conservative parts of the media were forecasting a £1.2 billion loss. It does make you wonder how RBS managed to scrape together adjustments of +£500 million at the last moment. Somebody should get a good bonus for finding them.
Frank Upton, Solihull,
Can someone please tell me who actually approves these huge bonuses and pay-offs and golden handshakes? These obscene amounts of money have to "belong" to somebody - so presumably it's the shareholders?
Ruth, Edinburgh,
On the day RBS are posting the highest loss in history this Advert, appearing immediately below the Times Online article, seems particularly apt.
0% R.B.S. Credit Cards
Apply Online. 13 months 0% on Balance transfers.
www.RBS.co.uk/Credit_Cards
DONALD LEGGET, WEYBRIDGE, UK
Scott, subprime was never rated AAA
bob, an actual banker, London ,
£1.7billion??? The actual figure has been confirmed as less than £700 million. By the end of 08 back in profit and back to normal in 09. How would you like your humble pie served Mr Waller? Hot or cold??
Andy, Alderley Edge,
But whoever resigns at the top over anything nowadays ? Most of the High Street Bank Chairmen/CEO's should fall on their swords. What about the First Sea Lord over the Iranian kidnap fiasco ? What about the NoW Editor who has given slimeballs a privacy Act ? What about Prescott over Tracey ? Etc,etc
Mike, Leatherhead, England
The boards of these banks must have been aware of the scale of business being undertaken in the sub prime sector. You would have thought someone would have had the wit to know that sub prime institutions do not have AAA customers, therefore there was no basis for sub prime debt to ever be rated AAA.
Scott, Bangkok, Thailand