Edinburgh-based Royal Bank of Scotland (RBS) infuriated unions on Tuesday night by announcing plans to cut 2,300 jobs only hours after its former chief executive Sir Fred Goodwin publicly apologized for the bank’s downfall.
At a packed meeting of the Treasury select committee of members of parliament (MPs), Goodwin had been joined by three other bank executives who were ousted after the £37 billion (US$53.6 billion) bail-out to offer apologies for the banking crisis that has left the taxpayer owning 70 percent of RBS and 43 percent of the new Lloyds Banking Group.
Goodwin’s successor, Stephen Hester, was scheduled to face the committee yesterday and face questions about the job cuts in the retail banking operation as the bank plans to pay £1 billion in bonuses to its investment bankers.
Hester has already admitted that the retail bank is profitable but that profits will be wiped out by £28 billion in losses caused by the investment bank and ill-timed acquisitions.
In one of the more hostile exchanges between the MPs and the bankers, Conservative MP Michael Fallon told Goodwin: “You’ve destroyed a great British bank.”
Goodwin, who has become the public face of the banking crisis, was quick to say he “could not be more sorry” for what happened.
“If you want to blame it all on me and close the book, that will get the job done very quickly, but it’s not going anywhere near [finding a solution],” he told the committee.
Sir Tom McKillop, the former RBS chairman, also insisted he was sorry, while Lord Stevenson, the former HBOS (Halifax Bank of Scotland) chairman, thanked the committee for being allowed to use the “s word.”
Former HBOS chief executive Andy Hornby, who is receiving £60,000 a month as a consultant to the Lloyds Banking Group, issued a “full apology.” He will give up the consultancy after three months, he said, as he tried to demonstrate that he had personally lost out from the collapse of HBOS.
“In the two years that I have been chief executive, I have lost simply more money in my shares than I have been paid,” Hornby said.
Goodwin, who was paid more than £4 million in 2007, also stressed that his pocket was also hurting after he bought £5 million of RBS shares shortly after the ABN deal was completed.
Goodwin and McKillop also gave MPs the starkest admission yet that the decision to pay nearly £50 billion for Dutch bank ABN Amro two years ago was a “bad mistake.” The deal, one of more than 20 conducted during Goodwin’s eight years at the top, was now worthless, they said.
“With retrospect, we bought ABN Amro at the top of the market. In fact, we are sorry we bought ABN Amro. The bulk of what we paid for ABN Amro will be written off as good will,” McKillop said.
McKillop defended his own tenure and said Goodwin had not been overbearing and that the ABN deal was agreed by the entire board.
But shortly after Goodwin spoke, RBS said that 2 percent of its 106,000 UK workforce would be cut.
“On the day that ‘sorry’ appears to be the easiest word for the bosses, 2,300 employees are left paying the price for management mistakes. The announcement by Royal Bank of Scotland that they plan to cut thousands of jobs marks a disastrous day for staff at the bank and represents a further blow to workers across the financial services sector,” said Derek Simpson, Unite trade union joint general secretary.
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