Worst RBS job cuts in Scotland are over says RBS chief executive Stephen Hester

Published on Wednesday 25 November 2009 22:04

THE worst of the job cuts at the Royal Bank of Scotland is over, MSPs were told yesterday by the man brought in to save the fallen financial giant.

RBS chief executive Stephen Hester claimed there would be no more big cuts as he gave evidence to the banking inquiry being held in Holyrood.

He also told MSPs that a 75million technology investment is to be made in Edinburgh which will see it retain many "high-value" jobs and create a small number of new posts.

His comments came at the end of a month in which the largely state-owned RBS said it would be cutting 3,700 jobs UK-wide, 800 of them in Scotland. But Mr Hester said any future decision on cuts north of the Border would be much smaller in scale.

He claimed the RBS restructuring programme is the "largest and most far reaching" of any bank hit by the crisis.

Unions warned the full effects of the job cuts are yet to be felt and pointed out that Mr Hester had not ruled out further job losses. His statement was also met with scepticism by Scottish Liberal Democrat leader Tavish Scott. He said: "RBS's promise that Scotland has seen the worst of its share of the job losses, will be cold comfort to those already out of work and those who have to continue working under the threat of yet more, albeit smaller scale, job losses."

Mr Hester also told the economy, energy and tourism committee that the bank was to remain headquartered in Scotland and dismissed claims that board meetings are being increasingly held outside Edinburgh.

This follows fears raised at the inquiry earlier this month by RBS's former chief economist Jeremy Peat that the "centre of gravity of Scottish finance is shifting to London".

But when asked by SNP committee member Rob Gibson where the bank's top executives lived, Mr Hester said RBS was run like most "multinational" companies around the world and that it did not matter where executives lived. He also compared RBS to Switzerland-based Nestl which has 95 per cent of its employees in other countries. "To be successful, you must serve your customers and that means having people where your customers are," he said. Of the bank's 14 million customers, 1.7 million of these were in Scotland, he said.

Mr Hester also spoke of the "sense of loss" in Scotland when its two major banks were caught up in the economic crisis and described RBS as "part of the fabric" of the community, which he wanted to continue.

Lib Dem leader Mr Scott raised further concerns about these comments. He said: "The challenge for RBS as part of Scotland plc is to demonstrate that commitment to Edinburgh and Scotland. We are all concerned by the loss of HQ functions down to London. So while the brass plaque might remain at Gogarburn, I would continue to be concerned about the loss of important parts of the business south of the Border."

The bank reported a third-quarter loss of 2.1 billion this month but Mr Hester said this was a legacy of the past. He claimed the problems at RBS were "obvious to all" before the crisis took hold and said its balance sheet was "too big and too vulnerable".

Asked what differences there were to risk management now, compared with his predecessor Sir Fred Goodwin's tenure, he said: "I'd like to avoid personalising things, I wasn't there in the past, so my observations have some limitations to them.

"But I think that the real issue around risk management, not just in RBS but in Scotland and the financial crisis around the world generally, was that what was missed was obvious to all, and that's its tragedy.The failure of risk management was macro … as opposed to things that were hidden in drawers, not visible. That is not to say that things hidden in drawers and not visible should not be risk-managed, that's an incredibly important part of any bank."

He added: "We are unfortunately politicised and some of the political kicking that comes with that can damage us and the taxpayers' interest and delay our return to health."