In a gesture toward public outrage over bankers’ pay, Ross McEwan demanded he takes over as chief executive on a lower salary than Stephen Hester – £1 million as opposed to £1.2m – and waive his bonus for 15 months.
Some may regard that as just reward, since most of the heavy-lifting has been done by Hester who may rightly feel hard done by. He has stripped out most of the toxic assets, got the bank back into profit and paved the way for its return to the private sector.
That’s not to say it is “job done”. When McEwan takes over in October, the to-do list will stretch from resolving a number of legacy issues, such as the troublesome IT system, to reviving its lacklustre share price.
The New Zealander is largely an unknown on these shores and it is only 12 months since he was plucked from Commonwealth Bank of Australia to head up RBS’s retail business.
He has set about a major overhaul of high street banking and among his tasks for the next year will be overseeing the disposal of 316 branches – the so-called Project Rainbow, either to a trade buyer or via a flotation.
McEwan’s credentials will come under increased scrutiny and already much has been made of the fact that he was passed over for the top job by his previous employer and that he admitted to twice failing accountancy exams.
Some have already labelled him “lightweight” and point to the fact that he will be the lowest paid chief executive of a UK bank. That may be cruel and premature, but he will have to prove that he is not simply a government placeman.
Much was made of the need for a new chief executive to take the bank through privatisation, but the timetable and process will be determined and led by the government. It will be McEwan’s task to build on the improvement in the bank’s trading performance and, apart from those tasks outlined above, to assure investors that there are no more skeletons to be uncovered and that it can satisfactorily resolve outstanding legal claims, including the shareholder actions against the 2008 rights issue.
An early challenge will be determining with government whether RBS should be split into a good or bad bank, though this is seen as unlikely as it would be put to a vote of non-government shareholders who are thought to be largely opposed.
His appointment was largely confirmed by his vision for refocusing RBS as a UK-centric lender, helping to support the British economy. That was Chancellor George Osborne’s view and it was because Hester did not entirely share this strategy that a change at the top was required. Hester was always nervous about shrinking the investment bank too much and felt the pressure to sell Citizens in the US and other assets at a time of capital preservation meant they were being off-loaded below their true value.
If the job is not to be seen as little more than a glorified civil servant, then McEwan will need to balance loyalty to the Treasury with a determination to stamp his identity on RBS and prove to doubters that he deserves the job. If so, his salary sacrifice is likely to be quickly reversed.
Can Carney keep up momentum?
All eyes will focus on the Bank of England Inflation Report on Wednesday when the new governor, Mark Carney, makes his first public comments in the role and sets out what is largely expected to be a change of approach.
The new buzz phrase is “forward guidance”, or statement on the longer term outlook for monetary policy. It should include estimates on other measures, such as unemployment.
The market will welcome the shift in procedure as providing greater certainty and stability, though targets have a habit of slipping.
The 2 per cent inflation target has been missed for 43 months and Lord King, the previous governor, was forced to write 14 letters to three chancellors explaining why it was more than 1 per cent above the threshold.
Carney got off to a good start at his first meeting of the monetary policy committee last month, when his comments on long-term interest rates led to the biggest one-day rise in the FTSE 100 since September 2011. A repeat trick is surely out of the question.