Leader: Cutting RBS down to size: painful viewing

ALMOST brick by brick, the RBS global banking edifice created by former chief executive Sir Fred Goodwin is being dismantled. Yesterday brought confirmation of the loss of a further 3,500 jobs in its investment banking operations in London, Hong Kong and the US as part of a multi-billion-pound withdrawal from what are now deemed non-core activities. The bank has already shed some 30,000 staff over the past two years, 22,000 of these in the UK.

Hoare Govett, the corporate brokerage – another Goodwin acquisition – is also being put up for sale. Scotland has been relatively unscathed by this massive down-sizing, though the ripple effects on companies supplying goods and services should not be overlooked.

There is bound to be some unease that the scale of this retreat confirms not only the demise of RBS as a major global investment bank but also a surrender of any future gains it stood to enjoy through a recovery in years to come.

But this is no ordinary cyclical downturn. It is an epochal change with no prospect of a return to status quo ante.

Given the losses being borne by the taxpayer, the scale of RBS’s exposures and the imperative to reduce its bloated balance sheet, the retreat from the folie de grandeur of the past decade is a necessary precondition of any recovery as a reputable and sustainable business.

So problematic is the outlook over the next few years – here, America and in Europe – that the bank will do well to avoid further retrenchment. This painful but wholly necessary biting of the bullet was welcomed in the market yesterday. But a break-even for the taxpayer still looks a long way off.