Fallen Knights and Tartan Tigers

Bankers, bonuses, knighthoods and politicians, for RBS this has been a rather toxic mix. The bank has found itself at the forefront of public scrutiny recently due to the annulment of the former Sir. Fred Goodwin’s knighthood and Stephen Hester’s reputed bonus. The phrase “How the mighty have fallen” comes to mind. It seems a long way from the heady although controversial days of the Natwest takeover. Some at RBS may wonder how what was once, one of the world’s biggest banks has reached such a hiatus and I’m sure our former knight of the realm must query this himself.

Twenty shilling banknote of the Royal Bank of Scotland,1727

It seems altogether ironic that the roots of RBS lie in a scheme intended to avoid negative financial consequences from the Act of Union of Scotland and England. The Scots found themselves in receipt of compensation for agreeing to bear a proportion of the English national debt and were exposed to costs from the failure of “The Company of Scotland”.  The Scheme bore the name “The Society of Equivalent Debt”, becoming “The Equivalent Debt Company” in 1724 and after the first foray into banking, “The Royal Bank of Scotland” in 1727. Given the cost to the taxpayer of RBS some in England must surely be wishing that the Act of Union never took place.

Despite the Union, RBS could hardly have been called a UK bank in its early years as it remained strong in its’ Scots identity and focused on expansion north of the border and the issuing of Scots bank notes. But ambition can’t be held at bay forever and the rich pickings beyond Scotland couldn’t be ignored. The Scots lion had to be sated. The US bank, Citizens fell to the tartan giant in 1988. The millennium saw the appointment of the ill-fated Fred Goodwin as chief executive. Despite the acquisition of Citizen, RBS still felt like a big fish in a small pond and remained anxious to expand into the City, a feeling shared by their old Jacobite rival, “The Bank of Scotland”. Gordon Pell, RBS Retail Markets Executive put it thus “They both took the view that they had to jump to something bigger to avoid dependence on the Scottish economy”

The subsequent, hostile takeover of NatWest was deemed by RBS to be such a success that they soon developed further cravings for growth. As human nature prescribes Goodwin and RBS wanted more! Some must have wondered what could stop the Scottish juggernaut.

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