Tag Archives: RBS

Unravelling the Royal Bank of Scotland

That intrepid BBC journalist, Robert Peston, has been at it again, with the apparently shock news that the Royal Bank of Scotland and Lloyds may be forced to moved their registered offices and HQs to England if Scotland becomes independent, full report here. This will happen as the result of an EU Council Directive. All of which comes as a bit of a surprise, not least the revelation that this Directive dates from way back to 1995. Doesn’t exactly inspire one with much confidence in these two banks if they are only now aware of an EU Directive from 1995.  What else have they missed? Sticking to the letter of the law does not seem to have been one of the strong points of either bank. Leaving that aside, the real issue is, does it matter where the registered offices and HQ of these banks are located?

In the case of the Royal Bank of Scotland, or RBS, as it prefers to be called, much is made of the alleged fact that RBS is a “Scottish” bank. There is the added complication that there are in fact two companies called RBS. The first is the original RBS, the chain of retail branches which can be found all over Scotland. While this RBS does have some branches in England, it is predominantly a Scottish company, with its HQ in Edinburgh. The other company is known as RBS Group and though it also is registered and HQd in Edinburgh it is not a Scottish bank. A glance at their website will confirm this as it describes itself variously as a global banking and financial company or a UK centred banking and financial company. Which is not surprising as RBS Group is essentially a holding company. The real work is undertaken by the various companies which though all part of RBS Group, operate under their own name, with their own registered office and their own HQ.  As far as I can make out only two of these companies are based in Scotland, the old RBS retail bank and Adam & Co, a private banking and wealth management company. All the other companies are based and operate elsewhere.

This includes the USA, where there appear to be at least two RBS Group companies. One is Citizens Financial Group, which is based in Rhode Island. The other is RBS Securities which is based in Connecticut. RBS Securities is part of the Marketing and International Banking division of RBS Group. The other parts of this division operate from London and Singapore. All three are part of NatWest Bank. Which is not surprising, as by far the largest part of RBS Group is made up of NatWest Bank and its various subsidiaries. NatWest is of course one of the largest English banks and is as such registered in London. As are NatWest’s three private banking and wealth management companies – Coutts & Co, Child & Co, and Drummonds. Clearly there is a lot of private money around in London. It is interesting to note that to bank with Coutts & Co, for example, you need to have at least £1,000,000 available to invest, and this must exclude property. But I digress. NatWest has a few more subsidiaries, including Ulster Bank and Isle of Man Bank. The Ulster Bank is quite interesting on its own as it is made up of Ulster Banking Group, with HQ in Dublin, Ulster Bank Ireland, with HQ also in Dublin and plain old Ulster Bank, with HQ in Belfast. So much for the problems of running banks in different legal and taxation jurisdictions, not to mention different currencies.

The point of all this unravelling is that the key question is, how much of the business generated by all these RBS Group companies results in benefits to Scotland? Very little I would suspect. Only two, and two pretty small parts of the RBS Group empire operate in Scotland. With all the others, the employment, wages, spending and resulting taxes go to the countries in which they operate, whether that is England, Ireland or the USA. As RBS does not make any profits at the moment and is not likely to do so for a long time, we need not worry about where these profits would be taxed. Again I suspect very little would go to a Scottish Exchequer. Which leaves the employment and legal services that go with the Group HQ. While any loss of employment is to be regretted, I am sure the legal profession in Edinburgh will find ways of surviving this little loss. Especially as with independence there will be far greater demands for legal services, not least from an expanded government.

While there is no doubt some prestige and kudos to be gained from having the HQs of international companies in your country, it is not in practical terms that important. We can see this when we compare banking with two other stalwarts of the Scottish economy, North Sea oil extraction and whisky production. In both cases, most of the work is carried out by international companies whose HQs are located far away from Scotland. Shell and BP are two of the biggest companies operating in the North Sea. While BP is registered and HQd in London, Shell is a bit of an oddity. The parent company is known as Royal Dutch Shell and though its HQ is in the Netherlands, it is registered in London. Both companies operate in over 70 countries around the globe, apparently able to overcome all the uncertainties this must bring with all these different legal and taxation jurisdictions, all these different currencies, not to mention the political instability of many of these countries. Yet somehow the possibility of Scottish independence has them quaking in their boots.

It is similar with whisky, where many of our most famous distilleries are owned by international companies. These include Diageo, which is based in London and Campari, which is based in Italy. The key point in both whisky and oil production is that the revenues from whisky exports and oil production do come to Scotland and will remain with us in the event of independence. Some of the profits may end up in England or Italy, but virtually all of the employment comes to Scotland. Pretty much the reverse of what happens with our two overlarge banking groups. They are most welcome to leave Scotland and transfer their registration to England. As Robert Peston also pointed out, such a move would make a currency union all the more feasible and likely. Unless of course we decided that this would make rUK too dependent on a fragile and too big financial sector, and a currency union with rUK would be too risky for us.

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Alistair Darling and the RBS

Why are politicians in the No campaign so unwilling to answer questions from members of the public? I have tried on various occasions and each time, the reply, if it came at all, completely ignored my questions. The most recent example of this comes from Alistair Darling.

Now Mr Darling is apparently the leader of the No campaign and is rarely absent from our broadcast media. Constantly asking the Yes campaign to provide clear answers. Yet when he is asked to provide some clear answers, none are forthcoming! Recently I sent him an email in his capacity as leader of the Better Together campaign. I wanted clarification about comments he had made on the Sunday politics Scotland programme which was broadcast on 29th September of this year. In it he repeated the claim that an independent Scotland would not have been able to save the Royal Bank of Scotland at the time of the financial crisis way back in 2007/08. I have always regarded this oft repeated assertion as one lacking any substance.
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Though its HQ is in Edinburgh, RBS is not in any real sense a Scottish bank. When you check their web site you find that the bank describe themselves in the following terms, “The RBS group is a large international banking and financial services company.” (my emphasis) The RBS group has around 33 million customers globally. This equates to around:
24 million in the UK
3 million in Europe
5.4 million in the US
0.4 million in Asia.

Furthermore, across all their brands, they have around 3,700 branches globally:
around 2,200 in the UK
around 1,400 in the United States
around 160 in the rest of the world.

So, it is clear that a lot of money was needed to save the Royal Banking Group. However as they themselves make clear, they are an international company and not just a Scottish company. Indeed their chairman informed a UK parliamentary committee that only 3-4 per cent of the RBS group’s customers are in Scotland. Most of its UK customers will be with the National Westminster, which is an English bank and registered in London. The bit that operates up here in Scotland, the retail bank with branches all over Scotland – The Royal Bank of Scotland – is only a very small part of the RBS group, with around 300 branches in Scotland.

In light of these facts, I wanted to know why the government of an independent Scotland would have been expected to bail out the whole RBS group all on its own? If Scotland had been an independent country, would it not have been the rUK government in London which would have taken on responsibility for RBS group’s operations in England, Wales and Northern Ireland? Particularly as the RBS group received money from the USA government via its rescue package – TARP – for its companies in America.

I went on to point out that there seems to be a similar case at the moment in respect of Santander bank. Like RBS group, Santander describes itself as a global and multinational bank. In its case it is based in Spain. However one of its companies is Santander bank in the UK, which is registered in London. I asked Mr Darling which government would have the responsibility for Santander UK, if the Santander group was to suffer a financial crisis? Would it be the UK government or the Spanish government?

His response? Well, to my disappointment, Mr Darling did not reply at all. Instead I got a long winded email from a Nigel Anthony, Research and Engagement Officer, Better Together. In this response there was only one, single reference to RBS – The total support provided to RBS in 2008 would have been the equivalent of 211 per cent of Scotland’s GDP. Now despite Better Together’s dodgy record with numbers, I am prepared to accept this figure. However, it has absolutely nothing to do with my questions. Mr Anthony’s reply did not at any point make any attempt to provide some of the clarity they so demand of others. In fact from reading his reply, no-one could guess what the questions were. He just ignored them and dished out a dash of propaganda.

Very disappointing from the No campaign and even more disappointing that Mr Darling is happy to approve of this kind of shoddy and disdainful way to respond to a question from a member of the public. Then again, perhaps not. The last thing that Project Fear want is to be forced to answer direct questions. Much easier to just spread lies and scare stories to tame journalists.

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