The Globalist by John Walsh

Author:John Walsh
Language: eng
Format: epub
Publisher: HarperCollins Publishers
Published: 2019-09-16T17:00:00+00:00

15

CLIPPING GOODWIN’S WINGS AT RBS

ON 6 FEBRUARY 2009, SUTHERLAND AND SIX other directors stood down from the board of the Royal Bank of Scotland. The previous October, the British government had pumped £45.5 billion into RBS in return for 82 per cent of its share capital in order to prevent the bank from collapsing. It had all been so different when Sutherland joined the board in 2001. Formed in 1727, for most of its history up to the early 2000s the bank had enjoyed a reputation for being conservative, dependable and most of all prudent.

That had all begun to change in the 1990s. In the Anglo-Saxon world, the precept adopted by most governments at the time was that markets were efficient and largely self-regulating. There was a logical progression from this belief towards a model of light-touch regulation. For well over a decade, it was a creed that served many countries well, at least fiscally. The financial sector, a marginal component of the economy for most of the twentieth century, dwarfed most other industries from the 1990s onwards. But the rise of RBS from a stalwart of the UK banking sector to a global behemoth cannot be separated from the controversial career of one man.

Even though the financial sector is a complex industry, it is still driven by human emotions. Take for example Richard Fuld, the chief executive of Lehman Brothers at the time of its spectacular demise in September 2008. Fuld, a man with both an innate inferiority complex and a superior sense of his own strategic nous, had spent the previous decade pursuing an aggressive growth agenda so that Lehmans would be taken seriously by the blue bloods of Wall Street. Meanwhile in Ireland, Seanie Fitzpatrick, stung by the slights heaped on Anglo Irish Bank by Bank of Ireland and AIB, spent most of his time as chief executive of Anglo Irish trying to put it on a par with the big two. He eventually succeeded, but again with disastrous consequences.

Fred Goodwin came from working-class roots in Glasgow. He was the first member of his family to go to university and subsequently trained as a chartered accountant. Goodwin, who had gained a reputation early in his career as a ruthless cost-cutter – earning him the nickname ‘Fred the shred’ – joined RBS in 1998 as deputy chief executive at the age of forty.

In the BBC documentary The Bank that Nearly Broke Britain, made to mark the tenth anniversary of the near collapse of RBS, a former executive of the bank recalled how he got a telephone call from a former colleague at Clydesdale to say they had been partying for four days following the announcement of Goodwin’s departure. A charitable interpretation of Goodwin’s management style was that it was uncompromising. Former RBS executives described how his morning meetings became known as ‘morning beatings’. But his stock was rising within RBS. A seminal moment in the history of the bank is the 2000 acquisition of NatWest. The move was

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