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 is 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 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 company's chief executive is Fred Goodwin (also known as 'Fred the Shred' for his ruthless cost-cutting exercises),[4] considered by Scotland on Sunday as the most influential man in Scotland.[5] Peter Sutherland, a non-executive director of RBS Group, is also chairman of BP (see RBS funding of BP project, the Baku-Ceyhan pipeline), and was formerly a director general of GATT and the WTO.

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

[6]

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.[7]

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.[8] 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.[9] Also celebrated were its services to Element Six, an Irish-based company mining diamonds in South Africa, formerly known as De Beers Industrial Diamonds.[10] It is also a major funder of Peel Holdings, which owns Liverpool airport.[11] 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.[12]

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.[13]

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.[14]

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.[15] Threats of legal action and a mass consumer boycott persuaded the bank to reopen the accounts a few days later.[16]

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.[17]

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.[18]

RBS and animal rights

The Royal Bank of Scotland was one of the major financiers of the Huntingdon Life Sciences animal testing centre,[19] but gave up their support when they were informed that their staff and customers could become targeted by the animal rights movement.[20]

People

Board members

Executive Directors

Non-Executive Directors

  • Colin Buchan
  • Jim Currie
  • Bill Friedrich (age 56) Appointed to the Board in March 2006, Bill Friedrich is currently deputy chief executive of BG Group plc and prior to this he was corporate legal counsel to several of the world's leading financial institutions.
  • Archie Hunter (age 62)Appointed to the Board in September 2004, Archie Hunter is a Chartered Accountant. He was Scottish senior partner of KPMG between 1992 and 1999 and president of The Institute of Chartered Accountants of Scotland in 1997/8. He has extensive professional experience in the UK and North and South America. He is currently chairman of Macfarlane Group plc, a director of Edinburgh US Tracker Trust plc, Convenor of Court at the University of Strathclyde and a governor of the Beatson Cancer Research Institute.
  • Charles 'Bud' Koch (age 59) Appointed to the Board in September 2004, Bud Koch is an American national. He has extensive professional experience in the USA and is currently chairman of the board of the Federal Home Loan Bank of Cincinnati, chairman of the board of John Carroll University and a trustee of Case Western Reserve University. He was the chairman, president and chief executive officer of Charter One Financial, Inc. and its wholly owned subsidiary, Charter One Bank, N.A between 1973 and 2004. He is also a director of Assurant, Inc.
  • Janis Kong (age 55) Appointed to the Board in January 2006, Janis Kong is currently a non-executive director of Portmeirion Group plc and a member of the board of Visit Britain. She was previously executive chairman of Heathrow Airport and director of BAA plc.
  • Joe MacHale (age 54) Appointed to the Board in September 2004, Joe MacHale is currently a non-executive director and chairman of the audit committee of Morgan Crucible plc and a trustee of MacMillan Cancer Relief. He held a number of senior executive positions with J P Morgan between 1979 and 2001 and was latterly chief executive of J P Morgan Europe, Middle East and Africa Region.
  • Sir Steve Robson* (age 62) Appointed to the Board in July 2001, Sir Steve Robson is a former senior UK civil servant, who had responsibility for a wide variety of Treasury matters. His early career included the post of private secretary to the Chancellor of the Exchequer and secondment to ICFC, (now 3i). He was also a second permanent secretary of HM Treasury, where he was managing director of the Finance and Regulation Directorate. He is a non-executive director of JP Morgan Cazenove Holdings, Xstrata Plc and Partnerships UK plc, and a member of the Chairman's Advisory Committee of KPMG.
  • Bob Scott* (age 64) Appointed to the Board in January 2001, Bob Scott is an Australian national. He is the senior independent director. Bob Scott has many years experience in the international insurance business and played a leading role in the consolidation of the UK insurance industry. He is a former group chief executive of CGNU plc and chairman of the board of the Association of British Insurers. He is chairman of Yell Group plc, a non-executive director of Swiss Reinsurance Company (Zurich), Jardine Lloyd Thompson Group plc and Focus DIY Group Limited. He is also a trustee of the Crimestoppers Trust and an adviser to Duke Street Capital.
  • Peter Sutherland* (age 59)Appointed to the Board in January 2001, Peter Sutherland is an Irish national. He is a former attorney general of Ireland and from 1985 to 1989 was the European commissioner responsible for competition policy. He is chairman of BP plc and Goldman Sachs International. He was formerly chairman of Allied Irish Bank and a director general of GATT and the World Trade Organisation.
  • Miller McLean (age 56) Miller McLean was appointed Group Secretary in August 1994. He is a trustee of the Industry and Parliament Trust, a non-executive chairman of The Whitehall and Industry Group and a director of The Scottish Parliament Business Exchange.

Former Directors

People

  • Derek Weir Managing Director, Corporate & Commercial Banking, (in 2003)
  • Andrew Wilson former spin doctor and now Deputy Chief Economist
  • Stephen Lamport Group Director for Public Policy and Government Affairs and former diplomat.[2]

Affiliations

Think tanks and Institutes

PR and lobbying agencies

References

  1. ↑ RBS record losses raise prospect of 95% state ownership, Guardian, 26 Feb 2009
  2. ↑ http://www.gcal.ac.uk/ceppcg/advisory.html
  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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