Royal Bank of Scotland’s tarnished reputation could take another ten years to recover from its role in the financial crisis and a string of scandals, the lender’s chief executive has admitted.
Ross McEwan said that, while the bank had managed to regain its financial footing since its £45 billion bailout by the UK taxpayer in 2008 – recording its first annual profit in a decade this year – customers were still distrustful of it.
“There are two things that any financial service organisation has... one is our financial strength and the second is our reputation,” he said.
“And what RBS did ten years ago, it had lost both of those.
“It got very close to collapse and with that went its financial reputation. And we’ve been hit with reputational issues as a consequence of what happened in the financial crisis, from conduct to litigation issues to GRG [the Global Restructuring Group] to all sorts of issues that over the last ten years have embroiled this organisation.”
RBS, which is still 62 per cent owned by the UK taxpayer, this year reached a £3.8 billion settlement with the US Department of Justice (DoJ) over the mis-selling of residential mortgage-backed securities between 2005 and 2008.
While RBS has not admitted the allegations put forward by US authorities, documents released by the DoJ show that RBS bankers admitted at the time that they were selling “total f***ing garbage” to investors and made light of destroying the housing market in the lead-up to the financial crisis.
The now-defunct GRG was caught up in a separate scandal, having been accused by victims of pushing firms towards failure in the hope of picking up assets on the cheap, but was let off the hook by UK regulators in July.
Those scandals have contributed to a drop in public esteem for the bank, which Mr McEwan said resulted in a “fall from grace”.
RBS recently came at the bottom of recent service rankings by the Competition and Market Authority for both business and retail banking, although other brands under the RBS Group umbrella – NatWest and Ulster – fared slightly better.
Mr McEwan said he was “concerned” and “disappointed” but not surprised.
“I think the reputation piece will take another five to ten years – and that’s what it is when your reputation gets tarnished so badly,” Mr McEwan said.
However, he is surprised that it has taken this long for the bank to recover from the 2008 crash.
He admitted that former executives “made a mess of mistakes” in the lead-up to the crash but said they were caught up in an insatiable quest for growth that led to the bank’s near-collapse.