Asleep at the wheel

A damning article by Luke Johnson in this morning’s FT, Bank leaders are a disgrace to capitalism. Johnson reserves his special contempt for RBS,

“Bank directors are not under-rewarded. The six executive directors at Royal Bank of Scotland, for example, took home £16m in cash last year – on top of their accumulated pension entitlements of £26m. These are not entrepreneurs who risk their own capital in life – they are just bank employees. That sort of cash should buy geniuses who never fail. It should pay for leaders who understand the larger role RBS plays in the system, and the vital contribution it makes in financing the private sector, since it claims it has the number one brand in corporate banking.

Yet in undertaking the “largest banking acquisition ever” by buying ABN Amro after the market had begun to turn, RBS has destroyed value and its management credibility on a breathtaking scale. How can they dare to withdraw facilities and berate borrowers when no one has been sacked for such gargantuan incompetence? How do the bosses retain the confidence of their staff, clients and stockholders? RBS was forced into a rescue £12bn rights issue in spite of saying it did not need one. The arrogance of certain of our top bankers is a disgrace to capitalism, while many of the board members of the Big Five appear to have been asleep at the wheel in the past couple of years.”

Yet only a few weeks ago, one of the senior local managers of the bank was telling everyone that the “success” of the rights issue meant that they now had plenty of money to lend. Quite unbelievable.

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