Royal Bank of Scotland decision to axe 160+ branches linked to botched IT gig – Unite Plans by the Royal Bank of Scotland to shutter 162 branches and slash 800 jobs were today pulled apart by union Unite, which accused the bank of "shambolically poor management" after claiming it spent £1.8bn on a failed IT project. For its part, RBS blamed the closures on its failure to find a buyer for 300 branches that were …
...the bankers get away with it.
I say never mind the lawyers, first thing we do, let's kill all the bankers.
Sadly that won't happen, but hopefully (assuming the bunglers of Westminster pull off any form of Brexit) the bankers will all decamp to Paris and Frankfurt. I'd quite happily forgo the tax income of the financial services sector in return for a national economy that wasn't dominated by their interests and their obscene salaries.
I don't think this one is entirely the bankers fault. There may be an IT cock-up in the background of course. And the union might know that, but they're not exactly a disinterested source when it comes to job losses in the offing. Particularly as they used that line about RBS being taxpayer-funded. Which isn't really true. It's taxpayer-owned (well 80% odd anyway), but it's having to fund its own losses and re-capitalisation since that injection of government cash for equity. Hopefully we'll be able to sell it off soon, like Barclays has been. It was given huge loans in 2008 (like all the banks) - but that was done with printed money which has long since been paid back and un-printed. That's what Central Banks are for.
This one is also down to the regulators. The EU competition and banking regulators have made a pretty pisspoor job of it since the financial crisis. Lloyds were forced to sell off branches because of the emergency merger and RBS because of the state aid. But that state aid was required in order to avoid the British economy becoming a smoking crater. Meanwhile several major European banks have been allowed to pass piss-easy stress tests and then collapsed immediately afterwards. What we needed was a bit more common sense, and a bit less wishful thinking.
RBS were told to sell those branches. Who to? In 2008, who wanted to buy into retail banking? Well Virgin Money looked at it, but didn't. So then RBS had to spin off Williams and Glynn, but that means a head office and more importantly lots of spare money. Something RBS are a bit short of, what with having to meet increasing requirements from the Bank of England for Tier 1 capital and cover their restructuring losses. The new management didn't need that extra fun-and-games taking away time and budget from the important business of trying to save the whole shebang. They've wasted billions on this.
Yes, they should have been forced to divest NatWest and allowed to keep and expand the RBS branches. That way we would have had two strong players in the market. The regulators were taken for a ride with the idea that RBS might be willing and able to create their own competitor that would be anything other than DOA.
RBS were told to sell those branches. Who to? In 2008, who wanted to buy into retail banking? Well Virgin Money looked at it, but didn't. So then RBS had to spin off Williams and Glynn,
Santander went a fair way down the line. They even reissued cards (RBS-branded) as they started to tease out the accounts that would be transferred. That deal fell apart and with no new buyers interested, they looked at spinning out to W&G.
My take on it was that after we voted to leave the EU they thought "We've spun this out long enough - if we hang on a bit longer we can just ignore the EU ruling on state aid and forget the whole thing".
> RBS were told to sell those branches.
Really? Locally, we had so much banking competition, that the only bank for 40 miles was forced to closed by the regulator? The same in all kinds of vulnerable communities. No, RBS were simply cutting costs and maintaining bonuses, something the regulator really doesn't seem to mind
RBS had to divest 5% of it's revenue business and chose to do so by setting up a full service bank (retail and commercial) involving the 300+ branches in England and Wales plus half a dozen NatWest branches in Scotland.
They chose to clone the existing RBS systems (those that ran the other 95% of the revenue). You can see immediately there was going to be a major cost of ownership problem. And so it proved. Sure the task of cloning turned out to be harder than first thought (surprise surprise) but it was progressing when RBS used the Brexit outcome as an excuse to pull the plug on W&G.
So in autumn 2016 cue redundancies for the IT team employed to stand-up the bank. Also cue a deafening silence on behalf of Unite who were meant to represent those IT staff. The branch closures, the £800m funding for new competitors etc. is all the outcome of those decisions.
MyffyW,
To be fair to RBS management, they had tried to sell a bunch of their customer base first. But nobody was buying. As with Sabadell / TSB, it turns out buying banks and merging their systems can be hard...
They spent a couple of years doing that, and then as they were forced to do it, had no choice but to try and spin it out as a new independent bank.
It was a stupid thing for the regulator to ask them to do. At a stupid time, and in a stupid way.
The UK and the US fucked up our banking regulations before the crisis. And have worked quite hard to sort them out since. And done a reasonable job - so far. A few EU countries had a good old gloat, as the subprime crisis hit (remember Sarkozy and his comments about ze anglo-saxon capitalism?) - only to have to eat rather a lot of humble pie when it turned out their banks were equally pisspoorly run, and regulated. But then have spent the following ten years flailing and failing to fix the Eurozone - and sort out the government/banking debt "doom loop". At the Basel III talks they were desperately trying to water down tough new international banking standards because their banks were too weak to meet them. Actually so were the US and UK ones at the time.
Which is why the Bank of England stress-tests require UK banks to be able to weather someothing like an 8% drop in GDP recession, including 0% inflation and a 25% drop in house prices - and our banks have to meet Basel III capital adequacy requirements after that (8% I think - the EU argued for 7%), which means they seem to need about 12-13% tier 1 capital.
Whereas the ECB stress test from 3 years ago was talking about banks being able to cope with only 1% inflation, when the Eurozone inflation rate had already dropped to 0.5% and Italy and Greece were in actual deflation! I think they actually passed one of the banks that had already gone bust, due to the 9 month gap between tests and publication.
Obviously this particular clusterfuck was brought to you by the competition commissioner, but some joined-up thinking would really have helped.
Just for completeness of information, RBS didn't create Williams & Glyn. Back in the day (sometime in the 1970s I think), I, as a longtime customer of Williams & Glyn received a breathlessly enthusiastic letter from the bank along the lines of "We've entered into this really cool 'joint venture' with the Royal Bank of Scotland. This means that RBS will now be able to do business in England & Wales, while Williams & Glyn will be able to take advantage of all the commercial opportunities Scotland has to offer". Yes, that's what I thought too.
Anyway, the following Monday I walked past my branch to see workmen removing the Williams & Glyn signs and replacing them with Royal Bank of Scotland.
I assume RBS didn't dissolve the old company after all.
Bought out then rebranded ... much like TSB except, until they're out of their IT mess, TSB won't have a spanish name and a Catalan bull branded on its arse so people will still think they're failing part of Lloyds ...
RBS have simply resurrected the Williams and Glyn name to spin off so there was no actual 'selling to W&G' per se as it was simply a dormant company and just an accounting tweak on the books. The 'sale to' really happens if W&G is actually passed to a third party but 'selling W&G' arguably sounds better than 'selling off RBS branches' although in reality it's almost identical. There's also the possibility that there's a tax dodge going on too with the technical sale of assets from RBS to W&G but that obviously isn't the case as the banks are whiter than white and would never do such things.
It's not just branches, it's also customers I think they had to get rid of. Hence they had talks to transfer some customers and branches over to Virgin Money, and maybe other buyers in around 2010. But nobody sensible wanted that.
Then they had to try and spin out a new company - which was very expensive and would possibly have failed - so I guess they've given up.
I presume the Brexit excuse is that once we've left the EU, they won't be subject to EU competition rules, and can maybe get a more sensible decision from the UK government. Or they've managed to lose sufficient customers by natural incompetence to meet the requirement?
I think both RBS and Lloyd's were offering the branches they had to sell off to all the possible buyeres including Virgin Money and Santander ... after all Lloyd's nearly off-loaded their branches to Co-op until at the last minute Co-op realized that (even with Lloyd's offering to let them use their IT setup) merging their IT setup with the accouints coming in from Lloyd's wasn't going to fix their existing inability to merger their IT setup with the accounts they'd already acquired from Britannia.
You were a customer of "Williams & Glyn's Bank" not "Williams & Glyn"...
When the brand was 'revived' they tweaked the name because "people don't understand apostrophes and it will make choosing a domain name much easier"
Anonymous as that was told to me by member of W&G's Digital team before he was canned
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It turns out that customers under 50 prefer banking on their phones, or online if they have to and don't want to queue up for someone to key their information from a paper form onto a green screen terminal.
Those who do like queuing up complain when their bank or post office closes and they've got no-one to talk to about their problems and the unions find branch staff easier to recruit than IT staff.
Williams & Glynn...what I heard down the pub was that some really stupid decisions were made early in the project (to clone existing IT down to the last NT4 server and Access database rather than port customer data to a new banking platform) but the whole project was commercially doomed before the IT project self ignited. Even if the IT portion had gone flawlessly, those branches would have closed as W&G chased the Digital market.
Anonymous because I work for one of the banks mentioned currently (but didn't when the events discussed in my comments occurred).
My father in law never used online or phone banking. In fact he never used an ATM as he didn't trust them and always went into the branch to get cash, and joined a queue of people just like him. He was in his mid 80's and passed away 4 years ago, as have so many of the people that used to go into their bank every week. It's little wonder that the banks are all closing branches.
I do love management sometimes. Fewer customers are using our branches, let's save money by getting rid of some. Check!
More people are banking online, let's save money by cutting IT spending. Huh! What there? Are you sure? Are you sure you're sure?
I believe I need to reset your logic circuits with this cattle-prod. Stand still...
So I guess they want to keep these very large expensive buildings, in prime locations, to keep people employed serving fewer and fewer customers. Then bitch and moan how much money gets wasted on XYZ.
I used to be a member of RBS, I visited the nearest branch (about 15 miles away) about, now lets see, twice in 15 years, each time the staff outnumbered the customers about 20 to 1. That RBS is less then 1 minute walk from the nearest NatWest in the same town.
I have two NatWests to choose from within 5 miles of where I live (not that I'm a member of NatWest or RBS now)
You never were a member of NatWest or RBS. Neither of those were ever mutuals (although they have probably absorbed ex-mutuals - I can't be bothered to check). You were a customer. You'd have to use one of the remaining building societies to be a member (Nationwide is pretty good, despite being larger than all the other building societies put together).
Was the failed £1.8bn project just a ruse to delay selling off the branches long enough that the EU would give up or water down their demands?
By setting up an impossible-to-deliver project, could they burn time and money then simply shrug and say look - we tried really really hard, now let us keep our branch network.
That thinking is exactly why they will get away with it. The EU mandated divestment was branches and accounts - 250,000 small business, 1200 medium business and 1.8m personal banking customers. Keeping these accounts but being able to still close the expensive physical branches on the basis of that loss is pretty much mission accomplished, wouldn't you say?
They should get away with it. Closing branches is an inevitable part of modern banking. We demand free banking in the UK for personal accounts, so we're not going to get the great branch services I used to get in Belgium (where I paid for every transaction). Plus a lot of people are banking online, and not going into branches. And the cheque is dying out.
If the bank weren't a threat to competition before state aid, why did they suddenly become one after. It's not like they gained advantage from that state aid. It wasn't to help them outcompete other banks, it was to stop them from imploding.
You can argue moral hazard, but that argument is what led the BofE to allow Northern Rock to go bust - which was actually very well run, and the US Fed to let Lehman Brothers go (which wasn't).
Instead the UK have put in place a new regulatory system to make future RBSes less likely. They have to have a wind-up plan, though to be honest I think that's pie in the sky, in an emergency state aid and partial nationalisation is the only option (and contains a punishment of soaking the shareholders). Their are also CoCos (which are loans that turn into shares if the bank is in trouble - so the bondholders are taking more risk, but don't just get wiped out and there's a transparent mechanism. We've also increased the captial adequacy ratios to well above 10%, and they're being annually stress-tested to determine the correct levels.
We've also stopped the banks from using their retail customers' money in their merchant banking activities. That's why RBS were in such bad shape, because they'd taken too many big bets with own-resources. Nice and profitable for them when it works, but no sharing with the customers whose money they're gambling. But if they lose, then the customers are sharing the risk, or if there's a state-funded guarantee, then the taxpayers are. So RBS have had to cut out their "casino-banking" side and finally got back to profit.
I think with all that new regulation being put in place, we didn't need to gild the lilly by kicking them when they were down with a competition law too. Particularly as that hurt us taxpayers, as the owners of RBS, who surely the competition authorities are supposed to be protecting.
But are they still too big to fail?
The changes you describe have made failure less likely and perhaps more controlled and containable.
But if there is still the remotest possibility that this entity could ever again create enough trouble to damage the UK economy for a decade, then have we done nothing more than put some extra rocks on a cracked dam?
The EU action that they successfully avoided by dragging their feet would have removed this risk and increased competition.
In my opinion, they're too big to fail. As are all the main UK banks. Even Northern Rock was too big to fail, because of the massive loss of confidence it created. And they were mostly a savings/mortgage bank, with many fewer current accounts.
The EU competition action had nothing to do with that anyway, they did it because of state aid. Too-big-to-fail is a job for the banking regulators, not the competition ones.
It's the complication of resolving the bankruptcy while a few million customers lose access to their savings and current account - and all the customers of other banks try to withdraw a few thousand in cash, so they don't end up in the same boat. That's what destroys economies and creates depressions. It's what the Eurozone deliberately did to Greece, and what made the 1930s Depression so awful. Well that and lack of social safety nets.
Technically all retail banks must have a plan to resolve them. I just don't believe any government would dare to use it. It's like the Eurozone. The Italian banking system has been on the brink of disaster since about 2011. The government are unable to borrow more money to bail them out, and the Eurozone have changed their rules so the only way to do it now is for savers over €100k to take losses and junior creditors to be bailed-in. That is so confidence destroying that nobody dares do it, unless at gunpoint like Greece and Cyprus. Worse the Italians and Spanish had a mis-selling scandal, where their banks were selling unsecured junior bank bonds to retail customers, as if it were as safe as a savings accounts! Even though the savings account is guaranteed up to €100k and these aren't.
I think moral hazard is a pipe-dream. There's moral hazard. If we're going to have banks, they must be able to be bailed out by the state temporarily, or we get bank runs.
However we've now ring-fenced the money in retail banking, which means that the bit of the bank you allow to fail is the rest of it. While keeping the retail bank alive.
The other thing we should do is probably to give bankers more of their bonus in shares, that they can't sell for years. So they have a financial interest in the health and survival of their banks. Sadly the EU had the bonus cap, done purely for reasons of populism, even though it's led to bankers getting paid more for bad performance. Yes people take risks for bonuses, but the system also allows banks to cut costs easily in bad times - and if we could make those bonuses into long-duration share options, that would probably also help.
> There's moral hazard. If we're going to have banks, they must be able to be bailed out by the state temporarily, or we get bank runs.
How about this instead:
1. the state reimburses depositors by putting an amount exactly equal to their original balance into some other, safe bank (maybe National savings), up to the protection limit.
2. then it allows the first bank to fail, in such a way that shareholders and management get nothing.
3. any remaining assets are sold off to to partially reimburse the state for step (1).
Is the amount spent by the state in this scenario larger than pumping money into a bad bank? I don't know.
But at least there is an incentive for management to manage properly, and shareholders to properly oversee the management.
Re :
"A consortium that included private equity investors and the Church of England ploughed £600m into Williams & Glyn in 2013 in return for equity once it floated in an IPO, but RBS shelved plans to spin off the subsidiary due to concerns over its survival post-Brexit."
Just wondering what happened to that £600m. Will they get it back? Or is there a very special corner of Hell being prepared for the CoE Financial Advisers? I would ask my parish vicar, but he is too busy coping with the latest CoE cutbacks.
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The banks don't actually want to be dealing with customers. They just want you to give them your money and have you do your own banking.
They've far better things to be doing, like calculating senior executive bonuses and gold plating the toilets and managing art collections in their HQ to be dealing with smelly little people coming in with their cheque books and actually attempting to speak to the bank!
Who do you think you are? Expecting personal service! The cheek of some people.
"I'd much rather get rid of the branches (or a significant number at least) if it reduced the cost of banking.."
Just write a cheque directly to the board and be done with it then :)
There are several places that the money saved from branch closures will end up. Paying management bonuses, dividends, political contributions and bribes etc. That it ends up either in the hands of front line staff or the customer is highly unlikely.
"How does a taxpayer funded institution spend £1.8bn on a failed IT project and in the next breath demolish the much needed local bank branches?"
Have they never read an article on government IT?
And yes, I know, it's taxpayer owned, not taxpayer funded, and not part of the government. But, still...
RBS's network is and has always been a joke, it falls over at the drop of a hat, and quite frankly deserves to be scrapped and started over.
I'm not supprised they dropped £1.8bn on a failed IT project, its par for the course with gov.uk funded orgs
They have had the CMA on their backs since they bought NatWest to sell the NW branches north of the border and the RBS ones south (the 300)
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