Opportunities like this don’t come around very often. A bank- and not just any bank, but the onetime 5th largest bank in the world- lies in possession of the British state. For the moment it sits dormant, untouched by the Treasury, a priceless gem gathering dust in the national coffers. But it doesn’t have to be this way.
The Royal Bank of Scotland was nationalised in instalments from 2008-09 and is currently 82% owned by the British government. At the height of the financial crisis, a sum of money equivalent to £617 for every man, woman, and child in the United Kingdom was spent on rescuing the ailing behemoth.
Since then, a great deal of thinking has been had over what should be done with it. Ironically, although it was the British taxpayer who footed the bill for this make-or-break purchase, the public voice has been largely shut out of the debate. Yet this most exceptional of circumstances compels the government to do something with RBS that truly benefits the nation as a whole, beyond simply reimbursing the taxpayer for the billions lavished saving it from bankruptcy.
State ownership of the bank gives the government the opportunity to transform RBS into a living, breathing example of what a virtuous financial system could look like.
Progressives are not short of ideas on this. Those on the left recognise that the value to be gained from the public stake in RBS goes beyond returns on owned shares. The real prize would be to reshape the bank to serve the public good, rather than private gain. To do this, the government would first have to fully nationalise the bank by buying up the outstanding 18% share in RBS. This should be the easy bit, as the money spent ensures the state can exercise complete control of the group, allowing reforms to be made immediately.
Next stop, the retail brand. Greg Fisher, managing director of the think tank Synthesis, says RBS should devolve power to its high-street branches and grant local managers autonomy to tailor their service to the specific needs of their customers.
He suggests the bank could learn lessons from the Svenskehandel Bank in Sweden, which weathered the storms of its host nation’s financial crisis in the 1990s because of its decentralised operating structure.
Granting local staff the flexibility to manage their operations in accordance with the situation ‘on the ground’ and fostering a culture where the relationship between banker and customer is key would go some way to diminish the negative influence of an over mighty head office.
What about the commercial investment arm of the group? Liberal Democrats and Labour politicians alike are clamouring for the creation of a ‘British Investment Bank.’ Nationalise RBS and they have one ready-made. There would be no need to replace existing professionals with state bureaucrats, or give politicians free rein to play million-pound roulette with suspect small and medium sized enterprises (SMEs).
Instead, the government would draw up a new corporate charter redefining the aims and objectives of the investment bank, included in which would be an industrial strategy so traders had a clear idea of what sectors to prioritise, and a code of ethics to deter rogues and cowboys from playing fast and loose with taxpayer’s money. The government could then steer RBS without getting itself embroiled in wrongly financing ‘zombie companies’ or furthering politician’s business interests.
Yes, there remain a million little details to be worked out. However great national endeavours often begin as bold statements of principle. This is the right time to make another. This is the right time to transform RBS from an unwieldy corporate behemoth into a powerful engine for social good.
Louie Woodall is Assistant Editor of the Young Fabians Blog