Scotland’s Ghost Banks

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The Bank of Scotland on the Mound, Edinburgh

We ought still to be spitting, furious at how easily the guardians of our world renowned banks let their institutions collapse into moral decline and bankruptcy, and how swiftly lumbering Gordon Brown and his hireling Lord darling, sold them to their corrupt English equivalents.

There was no thought to keeping the profitable departments and junking failed ones. The taxpayer was asked to fork up our taxes and pensions to keep the bank executives in the privileged manner to which they were accustomed. “You want the best talent, you will have to pay for it!” argued one smug, self-serving CEO amid rapturous cheers from his comrades in crime.

Not much has changed since 2008, other than the banks we, the public are supposed to own, are quietly sacking staff, removing wall tellers critical outlets for villages and the poor, and shutting branches, seemingly with the purpose of pushing us, their customers, to use online services, not paper or coin currency, and pay by bank card for almost everything. For the most part, our banks still have freedom to invest your savings in phantom schemes and bankrupt themselves, secure in the knowledge they are ‘too big to fail’, rescued again by the taxpaper.

Ian McConnell, Business editor of the Newsquest Group, has published an article more nostalgic than lamenting or lambasting the demise of our bank’s greatness. And though far too respectful in attitude to what was the biggest theft from the poor to the rich in modern history, no one jailed, I republish it for it has some interest in the implicit warning that the shift of power and wealth is still south. An independent Scotland may need to guard our new banks with army tanks.

Scots Money Goes South

by Ian McConnell

Walking past The Mound in Edinburgh on a recent evening felt for a moment like being on one of the Scottish capital’s famous ghost tours – but in this case a journey which evoked memories of big corporate headquarters now gone.

Memories of the hubbub of events attended by the top brass of what was until 2001 an independent Bank of Scotland came to mind, as did interviews and conversations with those who led the venerable institution in decades past. The Mound remained the seat of power, in some important ways, after the bank’s 2001 merger with Halifax. However, in other ways, the southward drift of decision-making power began from there.

Across in Edinburgh’s New Town, there were, of course, also many meetings with board members of Royal Bank of Scotland in St Andrew Square. Later, these meetings were sometimes held at the Gogarburn campus built by Royal Bank at a time when it was a huge player on the global banking stage, ahead of the financial crisis.

So it was impossible, when walking past The Mound and recalling how the very top brass of Bank of Scotland and Royal Bank had been so firmly ensconced in Edinburgh in those days, not to reflect on how different things are now. And on the events which have led us to where we are.

Back in the 1990s, there was, of course, always the worry from a Scottish perspective that one or other or both of the big two banks in Edinburgh would be acquired, most likely by a major London player.

When Standard Life put a big minority stake in Bank of Scotland up for sale in the mid-1990s, there was a strong and broad will in the political sphere for the Scottish institution to remain independent. The importance of Bank of Scotland’s head office to Edinburgh and the broader economy north of the Border was widely recognised. And, in the end, the Standard Life stake was not sold to a single buyer but placed widely among investors, and the takeover threat was averted.

The thing which struck home, thinking back to this period while looking at the building on The Mound recently, was the huge amount of political and public discourse a quarter-century ago about the importance of the Bank of Scotland headquarters to the nation.

This did not appear particularly rooted in any views, one way or the other, on Scotland’s constitutional future. Rather, it revolved around the importance of having the head office in Edinburgh to the economic prosperity of the city and Scotland. It was about how crucial it was that top-level decisions were made here, and the knock-on benefits of that for the likes of professional services firms. And it was, of course, also about Scotland’s status as an important financial centre on the international stage.

What has been demoralising in the new millennium has been a seeming dissipation of such passion about the importance of major companies being based in Scotland. Of course, we should celebrate impressive Scottish inward investment successes such as US financial giant JP Morgan Chase’s European software centre in Glasgow. And investment management giant Baillie Gifford’s huge success, as it has pursued its own path on the global stage from its Edinburgh head office insulated from the whims of consolidation in this arena by its partnership structure, has undoubtedly boosted the reputation of Scotland’s financial sector.

The effective loss of the headquarters of the two big Scottish banks this millennium is a major blow to Edinburgh and the nation. Of course, in the end, this did not occur as anyone would have thought back in the mid-1990s. In 1999, Bank of Scotland and Royal Bank of Scotland fought it out in a hostile bid battle for London-based NatWest. Royal Bank won this contest in early 2000, and made a great success of integrating NatWest. All looked very good for a while, and it seemed that, against all the odds given its previous relative size, Royal Bank had done what many had thought it would not be able to do and ensured its continuation as a venerable institution rooted firmly in Edinburgh. Then came Royal Bank’s blockbuster bid, in a consortium with Santander and Fortis, for Dutch bank ABN Amro in 2007.

The NatWest success had appeared to cast doubt on conventional wisdom that a hostile bank takeover bid could not succeed because of the need for a detailed examination of the bid target’s books. The ABN Amro deal, from Royal Bank’s perspective, in contrast indicated that the conventional wisdom might well be right. By the time Royal Bank completed the ABN Amro deal, we were seeing what turned out to be harbingers of a global financial crisis which took a lurch for the worse in autumn 2008.

The rest is history. Royal Bank had to be bailed out to the tune of tens of billions of pounds by the taxpayer, with the UK Government taking a majority stake. The UK Government still owns the majority of Royal Bank, 13 years later. What it was difficult to see at the time of the bail-out, a rescue effected impressively by former prime minister Gordon Brown and erstwhile chancellor Lord Alistair Darling, was what would happen in terms of Royal Bank’s effective headquarters.

The shift of top-level decision-making from Edinburgh to London has become much more apparent in recent years. And it is only in the last couple of years that what most observers eventually realised had become an inevitability has been confirmed. The contract of Alison Rose, who succeeded Ross McEwan as chief executive of Royal Bank, makes it plain that she is based in London.

And it has been galling, from a Scottish perspective, to see the Royal Bank of Scotland name replaced at holding-company level by NatWest, a change which took effect in July last year. The NatWest name dates back to 1968. Royal Bank of Scotland, which has been retained as a brand name north of the Border, was founded in 1727. This change of name was implemented by Ms Rose, who worked for NatWest when it was acquired by Royal Bank back in 2000. She joined the English bank as a graduate trainee in 1992.

While NatWest’s head office remains technically in Edinburgh, it is apparently no longer a bank run from Scotland. This was already clear in terms of where Ms Rose has been based in the chief executive post. And it has most certainly been underlined by the elimination of the venerable Royal Bank of Scotland name at holding-company level.

The institution formed by the merger of Bank of Scotland and Halifax, HBOS, also had to be bailed out after the global financial crisis took a lurch for the worse in autumn 2008, with what was then Lloyds TSB mounting a rescue takeover of the institution. The resultant Lloyds Banking Group is based firmly in London.

So, in the end, it was not the conventional consolidation feared in the 1990s which led to the effective loss of the two big Scottish bank headquarters. Bank of Scotland did a merger deal which made it much bigger but then HBOS came unstuck amid the crisis. The need for a rescue takeover by Lloyds made the shift of all top-level decision-making to London inevitable. There had been a drift in this direction anyway, even before the financial crisis.

The loss of the Royal Bank of Scotland name on the global stage and the shift of decision-making from Edinburgh to London, looking back on it, have their roots in the global financial crisis. However, there is no particular reason the head office had to shift. That has been a choice of those who have held the decision-making power at Royal Bank (now NatWest), and it certainly appears the UK Government as the major shareholder is happy enough with what has transpired on this front.

NOTE: Ian McConnell is the Group Business editor of the Newsquest Media Group Ltd.

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2 Responses to Scotland’s Ghost Banks

  1. duncanio says:

    I worked for the RBS in its various incarnations from 1997 to 2007 i.e. both pre and post the takeover of National Westminster Bank plc in 2000.

    The result of the takeover was an enlarged entity called RBS Group a business comprised of 80% NatWest and 20% Royal Bank by book value.

    Sadly the new group failed to make the efficiencies required to its majority component part now formed by its erstwhile competitor. Worse, it did not reform the bad behaviours inherited (especially in the various operations in the US) and, in fact, took them on board. The outcome: 2007/08 crash.

    Fast-forward another dozen years and ‘RBS Group’ has now been re-badged ‘NatWest Group’, confirming what we knew all along, namely that the snake that swallowed the elephant now not only looked and acted like an elephant.

    It had become the elephant.

    Slightly tangentially I’ve always thought that the fate of RBS is somewhat analogous to the 5 fold enlargement of the SNP in a few short months after 18th September 2014 when it absorbed largely ex-British Labour Party members.

    The careerism, grasping greed, unbridled ambition and entitlement, nasty vendettas and perverted priorities thus inherited have come to undermine the primary purpose of the once principled and democratic SNP.

  2. xsticks says:

    We haven’t “lost” the Scottish banks. They’ve been stolen, just like so many of Scotland’s resources and assets. Even the reputations of the Scottish banks which were globally respected was used to plaster over the cracks in the corrupt and failing UK banking system.

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