RBS is a changed bank. A reformed character. It’s no longer the devil-may-care, shoot-first-ask-questions-later outfit it was in the Fred ‘The Shred’ Goodwin era. It’s a bank that puts the public interest first and the abject pursuit of profit second.
That’s the message the majority state-owned bank has been consistently sending anyway, particularly under the stewardship of Kiwi CEO Ross McEwan. ‘But we’re different now,’ is the response every time a fresh fine comes RBS’s way.
It’s a lovely idea, but it doesn’t square very well with the frankly damning set of documents leaked to BuzzFeed News and the BBC that reveal how the bank snapped up assets from struggling businesses in the years following the crisis, affirming earlier accusations by former government advisor and entrepreneur Lawrence Tomlinson.
In basic terms, the documents (available to view in more detail in this BuzzFeed News report) claim that:
- Approximately16,000 firms were sent after the crash to RBS’s Global Restructuring Group (GRG), which ‘charged huge fines and fees to boost the bank’s profits’.
- Firms considered ‘viable’ were charged these higher fees and asked for equity or assets in exchange for being returned to the main bank. Firms that weren’t considered viable faced demands for full repayment, often forcing them into insolvency.
- In the case of insolvency, GRG ‘collaborated closely’ with RBS’s property division West Register to acquire their assets on the cheap.
- Though GRG was designed for at risk firms, some were sent there even though they weren’t in financial distress. Break-downs in relations with managers or even threatening to change banks could do it. Often businesses would find themselves there because the bank had unilaterally re-valued their securitised property assets to below-market rates.
- Bankers were encouraged to find ways of ‘forcing customers into loan restructuring’ to protect their bonuses, in a project named ‘Dash for Cash’.
- GRG made a substantial profit for RBS, peaking at £1.2bn in 2011 alone.
The bank’s response was measured. Some things it strongly denied:
‘We have seen nothing to support the allegations that the bank artificially distressed otherwise viable SME businesses or deliberately caused them to fail... we have found no evidence that the bank either inappropriately targeted such businesses to transfer them to GRG or drove them into insolvency. Nor did it buy their assets at a lower than market price,’ it said in a statement, adding that it lost £2bn in SME lending between 2008 and 2013.
In other cases, though, it offered a mea culpa, of sorts:
‘We have already acknowledged that, in some areas, we could, and should, have done better for SME customers... we could have better explained to customers any changes to the prices and fees we were charging. We also did not handle customer complaints well... we continue to learn the lessons of the past and seek to do better for our customers. RBS is a different institution today as a result.’
That was an apology?
All of that could well be true, or at least a matter of interpretation. But that’s not how people will see it - some of these documents, the authenticity of which RBS isn’t denying, look really bad. And given that this bank’s main shareholder is a less than entirely pro-business government with something to prove, what the general public thinks matters even more than it usually would.
To be truly contrite, you need to admit exactly what you did wrong, apologise unreservedly and without condition, resolve not to do it again and attempt to make amends. RBS is currently scoring one or at best two out of four.
It’s admitted some wrongdoing (though whether to the full extent is clearly debatable) and that it wouldn’t do it now, but there’s no sign of a sorry or an attempt to make it right to those it admits it didn’t treat well enough.
Perhaps RBS is just being wise in its restraint, given that an FCA investigation into this very issue is still ongoing, but without full contrition its reformed character story falls short.
Ultimately, full contrition may never come of course. If banks were being totally honest, they’d admit they are all at their heart businesses that necessarily profit from the imbalance of power between creditor and debtor – if debtors didn’t take the bigger risk, there’d be no credit market and we'd all be poorer for it.
Banks also all quite sensibly employ and incentivise very shrewd people to find ways of maximising that profit. It should come as no surprise therefore that when their backs were against the wall these people found legal, if unsavoury, methods of squeezing customers. But then that doesn’t mean we can’t expect better of them.
RBS came in a lowly 218th in last year’s Britain’s Most Admired Companies list, which gauges how businesses are perceived by their peers. Where will they come this year?
Image credit: Catiemagee/Flickr