RBS crisis: Fred Goodwin under pressure to step down

Published on Wednesday 8 October 2008 10:30

PRESSURE is mounting on Royal Bank of Scotland boss Sir Fred Goodwin to step down if the company accepts the Government's rescue funds.

The Edinburgh-based bank is expected to be one of the main recipients of the rescue fund, which will see the Government invest up to 50 billion in shares in some of the country's leading lenders.

However, it is understood that the Government would be reluctant to consent to RBS's participation in the bail-out if Sir Fred stays in a job, despite publicly denying that it has any involvement in management changes.

Ministers are understood to believe that it would be unacceptable for the man who led RBS to the brink of failure to retain his position at its helm while at the same time accepting rescue funding.

Analysts have said that a key trigger of the bank's turmoil was its part in the 49bn acquisition of ABN Amro last October, at a time when the economy had started to suffer a downturn.

Roger Lawson, director of the UK Shareholders Association, said: "We'd like to see people who followed risky strategies and got us into this mess – particularly the non-executive directors who didn't make sure they understood what their companies were doing – share the pain.

"Shareholders would particularly like to see the chief executive and chairman of Royal Bank of Scotland depart in due course."

Despite the mounting speculation, RBS has denied that Sir Fred or chairman Sir Tom McKillop are set to step aside.

In early morning trading today the FTSE 100 Index picked up following yesterday's severe falls.

The index of the UK's top 100 companies had plunged in value by five per cent yesterday following the Government bail-out and decision to slash interest rates by 0.5 per cent.

But in the first quarter hour of trading today, it rose by 1.5 per cent to 4431.62. RBS was among the biggest winners, with its value surging by 17 per cent to 106.5p, while HBoS was up 14.7 per cent at 134.2p.