Financial Reform

Tag Archives: Royal Bank of Scotland

RBS Considers Further Job Cuts Due To Slow Economic Growth

Royal Bank of Scotland (RBS) is mulling over more job cuts, the bank’s chief executive reveals in a conference.

Stephen Hester stated during the Bank of America Merrill Lynch Banking & Insurance CEO Conference, his bank will more likely increase job-shedding, as economic conditions are not improving. Moreover, its exposure to Greek debt  further depressed investment and customer activity, plummeted share prices, raised the threat of a double-dip recession, and caused lower interest rates to stay at a longer span of time.

He also said that gap between lending and deposit rates, including net interest margins, would be impacted; leading to an increased examination of the firm’s cost base and loan impairment trends.

He added that worries about bank and sovereign credit have affected funding markets, swelling wholesale funding costs and generating skepticism about demand for quantitative easing.

Mr. Hester said his bank is centralizing costs and is “actively working on further cost initiatives given the economic outlook.” He emphasized investment banking as a section where cost cutting would be pressured.

The bank’s boss’ comments followed Lloyds Banking Group chief Antonio Horta-Osorio’s announcement to cut costs by £1.5 billion by 2014.

This will see job costs amounting to 15,000 among Bank of Scotland, and Scottish Widows ahead of the 28,000 the bank has already made by joined Lloyds TSB and HBOS.

The RBS chief told the conference that the Independent Commission on Banking (ICB)’s scheme to separate the retail and investment banking arm were “at the tough end of market expectations”, and the delay of implementation to 2018 will give ample time for the bank to adjust.

RBS Bans Basic Account Customers From Using Rival ATMs

Royal Bank of Scotland (RBS) has barred its basic bank account customers from using competitor ATMs.  RBS and Natwest customers will only be allowed to withdraw from the bank’s own machines, Tesco’s and Post Office machines because the cash-strapped bank can no longer afford to pay for interchange fees charged at 20 or 30 percent “It is unsustainable for us to offer free access to other bank ATMs for basic accounts as we face a charge per bank transaction, which needs to be recovered elsewhere” said an RBS spokesperson.

Which? Policy adviser, Dominic Lindley, states, “If other banks follow RBS’s lead, we could end up with a scenario where some free-to- use machines are under threat.”

This “cash machine war” has raised concerns that loss of access to free ATMS may increase the number of fee-charging machines in areas where people have low incomes, like hospitals and universities. A recent report revealed that some of these ATMS have been placed in deprived areas.

Fears have heightened that these basic accounts, which were a forced movement by banks in 2004 to aid “unbanked” customers, would become increasingly unappealing, and would push customers to go back to cash-based transactions.

Previously, RBS initiated free ATMS in 300 communities who have no access to them. The bank declared its “commitment to offering free basic accounts for people who may otherwise struggle to access banking services” and promising account holders “continued free access to one of the biggest cash machine networks.”

However, the bailed-out bank had made a U-turn because of its huge hit from payment protection insurance (PPI), and its latest exposure to the Greek financial crisis.

New Economics Foundation Criticizes Reforms on Ring Fencing Banks as Not Enough

Research organization, New Economics Foundation, has criticized the reforms on ring fencing banks as “not enough” to cure the problem of Britain’s financial services industry which operations and its impact on the economy and its players (small businesses, taxpayers and consumers) is not thoroughly addressed.

[youtube http://www.youtube.com/watch?v=CDM2S-fzNVU]

At the recent Good Banking Summit, it labeled the proposal of separating the firms’ reserves and loan operations from their risky investment banking as simply “too narrow” of an approach in trying to revise the financial industry’s operations.

It said the proposed reforms do not give solution to the problem which was “too big to fail,” and that it was the taxpayers who often pay a costly price for their failure, to point the bailed out Royal Bank of Scotland (RBS).

Not only that, the think tank also criticizes the lack of reforms on the banks’ “culture of excessive remuneration” and tells wage process should be framed after John Lewis’ remuneration framework – even distribution and collective endeavor-based.

In addition, Britain’s over dependence on its overweight or ballooned financial industry (which makes more money than its government) continually exposes the country “to financial frailty and economic collapse”

Deputy Prime Minister: It Is Right The Public Enjoy Windfall Shares

Deputy Prime Minister Nick Clegg encourages the Treasury to give a total of 1,000 pounds worth of bank shares after nationalized banks RBS and Lloyds Banking Group are sold, saying, ” it is right the public enjoy the benefits of potential windfall profits”

He further stated, ” Psychologically, it is immensely important that the British public feel they have not just been overlooked and ignored” …”their money has been used to the tune of billions and billions and billions to keep British banking system on a life support system”

RBS is 83% owned by the British Taxpayer, and 43% of Lloyds, both banks were injected with ?67 billion pounds during the banking crisis in 2008.

The motion, supported by leading Conservatives, was started through a letter addressed to the Treasury, calling for their consideration to give every UK citizen an estimate 1,450 shares in RBS, and 440 in Lloyds, valuing presently up to 775 pounds in the market.

Britons would get a “floor price” or “free gains” made beyond the floor value – in other words – if shares increased to 1,500 and would be liquidated, individual taxpayers could receive 500 pounds after a thousand bounces back to the Treasury.

David Cameron who shares the idea of “widening share ownership”, gives his word to look into the scheme.

Even prior to 2010′s general election, George Osborne came up with the plan of selling shares at a “discounted price”, however, at that time, was dismissed by the administration, along with the Liberal Democrats, having not yet a clear plan on how to privatize banks.

The “People’s Banking System” would be the largest shares allotment since nationalized industries were liquidated in the 1980s by former Prime Minister Margaret Thatcher.