Royal Bank of Scotland

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RBS - Royal Bank of Scotland - is one of the largest financial services groups in the world.

Financial crisis 2009

In February 2009 it was announced that RBS had suffered the biggest loss in British corporate history - more than £24bn. On 26 February the bank agreed terms with the government to take part in its asset protection scheme, which lets it pass most of the potential losses on its riskier assets on to the taxpayer. It has also raised up to £25.5bn in fresh funding from the UK taxpayer. UK taxpayers could end up owning 95 per cent of the bank if its losses continue to mount.[1]

History

Founded in 1727, RBS was not only the biggest company in Scotland,[1] but the second largest bank in the UK and Europe after HSBC, ranking sixth in the world. 70% of the top 100 companies in Europe bank with RBS.[2] It is in the top five of all companies listed on the UK stock exchange.

In 2008 RBS bought Dutch bank ABN Amro. In Feb 2009, RBS was forced to admit that the acquisition of ABN Amro helped towards the bank’s near demise, although it could not put a figure on how much RBS will have to write down to cover loses made.

In March 2000, The Royal Bank of Scotland Group completed the largest takeover in British banking history with its hostile acquisition of NatWest in a £21 billion deal, which also cost 18,000 jobs. Its assets at 30 June 2004 totalled £519 billion, its profits over the previous half year up by 17% before tax.[3]

The Group also includes Ulster Bank in Northern Ireland, which also has a strong presence in the Republic of Ireland; Ireland's First Active Plc; Coutts Group, which provides banking to 70,000 wealthy customers in 38 countries; Direct Line, providing insurance and financial services by telephone; Citizens Financial Group, based in Rhode Island (USA), the second largest bank in New England; Churchill, one of the UK's largest providers of insurance products; the asset finance company Lombard; and Style Financial Services Limited, providing retail credit and store cards. In addition to the UK, the Group has offices in Europe, the US, and Asia. It is developing its financial service activities across Europe with Santander Central Hispano of Spain. Tesco Personal Finance, a joint venture between RBS and Tesco, is one of the main supermarket banking brands in the UK.

RBS investments

[4]

Friends of the Earth ranks the Royal Bank of Scotland among the least ethical pension scheme providers in Britain, with a score of only 1 out of 15, based on the degree to which ethical, environmental and social considerations were even taken into account, and the mechanisms for customer control and the monitoring of policies in place.[5]

RBS signed up to the Equator Principles, which set certain environmental and social guidelines which any project must meet before they will lend money. However, it is funding the Baku-Ceyhan oil pipeline, which has been shown by Friends of the Earth to break these principles on over 150 counts.[6] The Royal Bank of Scotland financed the pipeline by about $100m. Another bank, Intesa of Italy, has already pulled out of the project due to safety concerns. The Royal Bank of Scotland has ignored all concerns, and seems likely to fund similar projects in future.

The bank's 2003 (most recent) annual report flag-shipped RBS as a major financier of oil services company Petrofac's acquisition plans.[7] Also celebrated were its services to Element Six, an Irish-based company mining diamonds in South Africa, formerly known as De Beers Industrial Diamonds.[8] It is also a major funder of Peel Holdings, which owns Liverpool airport.[9] The Bank is heavily involved in funding the civil aviation industry through its subsidiary RBS Aviation Capital, based in Dublin, which finances at least 98 civilian airlines in 36 countries.

In 2004, RBS initiated the refinancing, together with HBoS, of Abbot Group Plc, an offshore drilling, inspection and drilling support company to the tune of £80.2million.[10]

Natwest, part of the Royal Bank of Scotland Group, financed the Asia Pulp and Paper Company (APP), which was responsible for the destruction of 280,000 hectares of Indonesian rainforest over the space of 10 years. They are also in dispute with indigenous peoples over land rights.[11]

Corporate issues

RBS and racism

In June 2004 RBS US subsidiary, Citizens, was accused by Fair Finance Watch of racism in its lending practices. The group alleges that Citizens 'continues to disproportionately exclude and deny African-Americans' and Latinos' applications for mortgage loans'. It cites statistics from a number of US cities, such as Philadelphia, where it claims Citizens rejected 14 out of 15 mortgage applications from African-Americans in 2002. Only 6 out of 15 white applicants in Philadelphia were rejected, it is alleged.[12]

The group Friends of Al-Aqsa (FoAA), a British-Palestinian solidarity organisation had its bank accounts abruptly closed by the Royal Bank of Scotland in January 2005. The group is not under sanction by the government, although an organisation with a similar name is on a Home Office 'watchlist'. The bank has refused to discuss the issue, and merely informed Ismail Patel, chair of the Leicester-based FoAA, that a review had been conducted and the bank was no longer willing to provide him with facilities. He was given 30 days to transfer his personal and business accounts and the FoAA account.[13] Threats of legal action and a mass consumer boycott persuaded the bank to reopen the accounts a few days later.[14]

RBS accounting mismanagement

A report by the US Bankruptcy Court investigating the Enron affair found that 'RBS aided and abetted certain Enron officers in breaching their fiduciary duties', and was aware of Enron's accountancy juggling concerning a power plant in Teesside. The report names four RBS executives, claiming they were among those involved in the deal.[15]

RBS was fined £750,000 in 2002 for breaches of money laundering regulations after it failed to show adequate documentation of customers’ identities for some accounts.[16]

RBS and animal rights

The Royal Bank of Scotland was one of the major financiers of the Huntingdon Life Sciences animal testing centre,[17] but gave up their support when they were informed that their staff and customers could become targeted by the animal rights movement.[18]

People

Board members

  • Sir Philip Hampton, chairman from Jan 2009. Replaced Sir Tom McKillop who was held responsible for the downfall of RBS in 2008/09.

Executive Directors

Non-Executive Directors

Former Directors

Former People

  • Derek Weir Managing Director, Corporate & Commercial Banking, (to 2007)

PR and lobbying

Internal

PR and lobbying firms

  • Jefferson Communications, lobbying firm.
  • PHA Media was hired in January 2009 by Sir Fred Goodwin, widely dubbed ‘the world’s worst banker’, to help him cope with the media storm over the losses incurred by RBS in 2008/09.[6]
  • Media House International has been called in by RBS in early 2009 to handle its Scottish PR as it seeks to deal with the media fallout over RBS losses in Scotland, where it employs 22,000 people. RBS will ask Media House to liaise with Scottish media as it seeks to reassure customers, employees and stakeholders north of the border.[7]
  • Lansons Communications conducts PR for RBS Insurance

Previous contracts

Affiliations

Think tanks and Institutes

References

  1. ↑ RBS record losses raise prospect of 95% state ownership, Guardian, 26 Feb 2009
  2. ↑ http://www.gcal.ac.uk/ceppcg/advisory.html
  3. ↑ Charles recalls Lamport to oversee his coronation, The Telegraph, March 25, 2007
  4. ↑ Bankers apologies pathetic, PR Week, 11 Feb 2009
  5. ↑ Banking industry Insider's Guide: UK banks' reputation managers, PR Week
  6. ↑ Goodwin/RBS call for advice, PR Week, 28 Jan 2009
  7. ↑ Goodwin/RBS call for advice, PR Week, 28 Jan 2009
  1. Number 1 by rank in the Scottish Business Insider, 'Top 500 Companies', http://www.insider.co.uk/guides/index.cfm, last viewed 10.03.05
  2. Deloitte Annual Report 2004, 'Case study: Royal Bank of Scotland Group', http://clients.ctn.co.uk/deloitte/annualreport_2004/casestudies/rbs.asp, last viewed 10.03.05
  3. Scottish Business Insider, see note 233
  4. Richard Wachman, 'Fred the Shred: the irresistible rise and rise of a ruthless charmer', The Guardian, 27.07.03, http://observer.guardian.co.uk/business/story/0,,1006443,00.html, last viewed 10.03.05
  5. 'Scotland's most powerful', Scotland on Sunday, 27.04.03, http://news.scotsman.com/archive.cfm?id=470422003, last viewed 10.03.05
  6. All unreferenced information is from the investors' own websites or from Trustnet, http://www.trustnet.com/
  7. Friends of the Earth Briefing, 'Top 100 UK Pension Funds. How ethical are they?', http://www.foe.co.uk/resource/briefings/top_100_uk_pension_funds.pdf, last viewed 10.03.05
  8. Friends of the Earth Website, Corporates, 'Tell Royal Bank of Scotland - Put your money where your mouth is', www.foe.co.uk/campaigns/corporates/press_for_change/email_btc_banks/, last viewed 10.03.05
  9. Royal Bank of Scotland Group Annual Report 2003, http://www.rbs.co.uk/Group_Information/Investor_Relations/Financial_Results/2003/report_accounts.pdf, last viewed 10.03.05
  10. Ibid.
  11. Royal Bank of Scotland Group, Done Deals: England and Wales,Winter 2003, http://www.rbs.co.uk/CBFM/Brochures_&_Publications/downloads/publications/archived_done_deals/done_deals_-_england_&_wales_(winter_2003).pdf, last viewed 10.03.05
  12. Scottish Business Insider, see note 233
  13. Friends of the Earth Briefing, 'Finance Initiatives for Sustainable Development', http://www.foe.co.uk/pubsinfo/briefings/html/20020819133903.html, last viewed 10.03.05
  14. Conal Walsh, 'RBS 'excludes and denies' black Americans', The Observer, 06.06.04, http://observer.guardian.co.uk/business/story/0,6903,1232131,00.html, last viewed 10.03.05
  15. Faisal al Yafai, 'Palestinian aid groups' accounts closed', The Guardian, 03.01.05, http://money.guardian.co.uk/saving/banks/story/0,12410,1383161,00.html, last viewed 10.03.05
  16. Red Pepper February 2005
  17. Jim Stanton, 'RBS chiefs named in Enron court papers' The Scotsman 31.12.04 http://news.scotsman.com/topics.cfm?tid=163&id=1479692004 viewed 31.3.05
  18. FSA website, 'FSA fines Royal Bank of Scotland Plc 750,000 for money laundering control failings' 17/12/2002 http://www.fsa.gov.uk/pages/Library/Communication/PR/2002/123.shtml viewed 31.3.05
  19. Jill Treanor, Steven Morris and Andrew Clark, 'Huntingdon Life: facing collapse in 36 hours' 3/1/01 The Guardian http://www.guardian.co.uk/uk_news/story/0,,423756,00.html
  20. Michael White, 'Straw attacks banks that dumped protest firm' 13/3/01 The Guardian http://www.guardian.co.uk/uk_news/story/0,,451053,00.html viewed 31.3.05
  21. Financial Times Freshwater UK Business Profile Accessed 4th April 2008
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