John McLellan: Ropey reputation refuses to let RBS go

RBS chief Ross McEwan knows he has to change public perception

The embattled institution is used to negative headlines but not inured to them, and chief executive Ross McEwan was in a combative mood earlier this week in a briefing for senior Scottish journalists at what to him feels like a relentless tide of criticism.

This should be a good year for RBS, announcing in February that 2017 was its first in ten years to record an annual profit, of £752 million. The positive news continued in April when a first quarter profit of £792m was revealed and then earlier this month it posted half-year profits of £888m despite a settlement with the US Department of Justice costing £1bn more than hoped. It was therefore able to announce its first dividend payment for shares, 62 per cent of which are still government held; as they used to say in 1970s variety show The Good Old Days, chiefly yourselves, the tax-payer.

This should also have been a good week in Edinburgh, with its Disrupt 2.0 conference at the official head office in St Andrew Square to discuss ways of harnessing technology to tackle social problems with the inventor of the worldwide web, Sir Tim Berners-Lee, amongst the speakers.

In addition, it launched the latest edition of its Little Book of Big Scams in conjunction with Police Scotland and the Scottish Business Resilience Centre, a clear and accessible guide to beating fraud, particularly cyber-crime, which McEwan rates as the number one threat facing his business, even including a disastrous EU exit for which RBS is now preparing.

Instead there was one media assault after another, starting on Sunday with the co-chair of the all-party parliamentary group on fair business banking, Kevin Hollinrake MP, demanding that the Financial Conduct Authority conducts a public inquiry into the mistreatment of small firms by RBS’s now-disbanded Global Restructuring Group. “This is the most shameful episode in British banking’s history,” he said.

Then on Wednesday the US Department of Justice published the shocking detail behind the settlement of around £3.8bn for misleading investors in mortgage-backed securities in the two years leading to the 2007 banking collapse. “RBS bankers joked about destroying the US housing market” said most publications after revelations from emails and telephone conversations, including senior US staff describing the loans they were trading as “total f****** garbage”. Replying to a friend’s email which said: “Sure your parents never imagine[d] they’d raise a son who [would] destroy the housing market in the richest nation on the planet”, an RBS trader joked: “I take exception to the word ‘destroy.’ I am more comfortable with ‘severely damage’.”

None of this happened on McEwan’s watch and he and his executives can claim the GRG and the lurid transcripts from America represent a culture which no longer exists. But then came the league table published by the UK Competitions and Markets Authority which put RBS joint bottom with Clydesdale for overall service quality out of 16 lenders. The survey of some 16,000 users asked about online and mobile banking, overdraft provision and services in branches and found only 49 per cent of RBS’s personal banking customers were likely to recommend it to friends. Just 47 per cent its business customers would endorse it.

“Britain’s worst bank” said virtually every newspaper, broadcaster and financial news website and with some understatement McEwan had to admit that “we are aware we have more work to do in order to improve our service standards and deliver a better experience for our customers.”

Illustrating the size of the task, First Direct was best for personal banking on 85 and Handelsbank for business on 84. Nor could the survey be regarded as a fluke because to much less fanfare a smaller study of 5,000 customers of 23 lenders by consumer watchdog Which? in June also put First Direct top on 84 and RBS second bottom on 60.

It is possible RBS is still dogged by the reputation of the Fred Goodwin years and customers are more ready to find fault. It’s also likely customers used to an old-fashioned branch-based service are more likely to be dissatisfied as it’s dismantled than those with online banks which never operated branches. But perception is reality.

“We welcome any initiative aimed at improving transparency and comparability,” said McEwan, but he will not enjoy the ignominy of having to post the CMA result in his branches as the rules require.

RBS is at pains to point out the success of its mobile app and the extent of its other four-wheeled mobile service, but such is the depth of the reputational damage still being inflicted by the Goodwin era that even ten years on it has to work far harder than other institutions to rebuild its credibility. Maybe it will overtake First Direct one day, but it might have to score a near-perfect ten to do so.

Press freedom in dock

RBS’s struggle to restore its reputation is in stark contrast to Sir Cliff Richard, fully exonerated after his successful privacy action against the BBC for its extraordinary coverage of the police raid on the singer’s home in pursuit of sexual allegations which never got close to sticking.

The case has already cost the BBC some £1.9m in costs and an initial damages award of £210,000, but now the BBC has decided not to appeal against the ruling Sir Cliff is clear to pursue the Corporation for full damages and will aim to recoup his costs, which he claims are around £4m.

The BBC’s capitulation means the legal principle that reporting a police investigation against someone who has not been charged is an invasion of privacy has now been established in law and the news industry is now seeking government intervention to ensure freedom of speech is not further restricted by the ruling.

The Society of Editors’ director Ian Murray warned that such matters should not be dictated by one ruling in a high-profile civil case, but precedent is how civil law works and it might be better to wait until a more defensible case comes to court to balance out Mr Justice Mann’s dangerous ruling.

That way the risk of anti-press campaigners once again trying to hijack media law reform to introduce statutory control can be avoided.