The investigation into RBS’s infamous Global Restructuring Group by Buzzfeed/Newsnight is excellent: take some time to read it.
It has given a comprehensive and human treatment to the GRG story that had been covered in the Tomlinson Report from 2013, and picked up a year later in journalist Ian Fraser’s exhaustive Shredded: Inside RBS, The Bank That Broke Britain. But it goes further, revealing documents and sources that demonstrate the treatment of small business customers, the bank’s own criteria for what constituted a breach of covenant, and inter-company narrative reflecting the banking culture set by management.
It’s our problem
While we await the Financial Conduct Authority’s review of these practices, the investigation will undoubtedly add to the blowback on RBS. But let’s not forget that this a bank still majority owned by the taxpayer, after a (too-big-not-to) bailout during the financial crisis.
As such, it provides an object example of why the government should not retain ownership of parts of the banking sector. That UK Financial Investments, the body established by the government to manage and sell these stakes, is a core shareholder consulted on the restructure of RBS’s non-core business shows just how muddy the water can become.
This is the current board of UKFI. It includes a senior government official nominated by the Treasury and is accountable to the chancellor, and ultimately to Parliament. As covered in the story, the House of Commons’ Treasury Committee did a good job forcing the bank to admit the nature of the GRG business.
But there is a clear problem when the government itself is for the best part of a decade the principal shareholder in a bank that is attempting to reduce the risk and size of its balance sheet, and thereafter to reform its working practices. The shareholder’s interest and the national interest do not necessarily align.
Dust is gathering on last year’s report from investment bankers at Rothschild arguing that increasing the free float (selling the public stake and so increasing the number of shares in circulation) might provide some upward momentum to the share price. The government should have ignored criticism of selling the stake at a loss, and argued that it was more important that one of our major commercial banks be returned to the private sector, where it could keep a clearer eye on it.
Don’t know about you, but I’m looking forward to Newsnight…