You are your leadership team have now been in place for four years. What would you say are the key things you are doing to make RBS more sustainable?
The key thing for me is that the bank is increasingly aware of how our activities impact on our customers and wider stakeholders. I describe it as ‘thinking outside the bank’, which is really a reference to the fact that our long term success will be determined by how well we understand our customers and communities, and how well we can service their needs in a responsible way.
There is a continuing focus on the amount banks are lending, especially to small business. Is RBS doing as much as it can here?
Ongoing economic uncertainty has unsurprisingly driven down demand from businesses. SME loan applications were down 19% from 2011. Nonetheless we continue to provide significant support: RBS advanced more than £74bn to UK businesses and homeowners in 2012. We’re approving a higher proportion of loan applications than ever - 93% in the last quarter of 2012. Where there is an opportunity to lend we’ve proved we’ll try harder than any other bank to support growth - as is evident in how we have used the various government lending schemes.
The LIBOR rate-fixing scandal has caused widespread outrage. How was RBS involved and what is being done to improve controls?
We utterly condemn the behaviour of the small number of individuals who sought to influence some LIBOR rate settings at our bank and other banks. There is no place at RBS for such behaviour. That’s why we’re determined to correct the control and risk management failures that originated in RBS during the financial boom years of which LIBOR manipulation is an example. This is a painstaking task that’s been undertaken over several years, and we can’t detect and solve every problem as fast as we would like. The aim is to create a safe and secure RBS that serves customers well and that, in the right way, creates value for those who rely on us.
Customers across the UK and Ireland were badly affected by the technical failure last summer. How would you reassure them it won’t happen again?
The failure of part of our IT systems in June had unacceptable consequences for many of our customers. Since then we have conducted rigorous and independent reviews of what went wrong, and we have sought to ensure that customers who were affected are appropriately compensated. Meanwhile, steps have been taken which mean we can now better recover data and can do so independent of each brand. This means, for example, that Ulster Bank would not be so dependent on NatWest being fixed in similar circumstances. We have also strengthened our testing and monitoring procedures.
The problems in 2012 raise fresh questions about remuneration. Are you doing enough to reform pay and bonuses at RBS?
This year the board has used all the tools available to it to ensure the severity of the Libor failings are taken into account. The investment banking bonus pool has gone down by 20% on last year, despite operating profits in the markets division being up by nearly 70%. Since 2009, our investment banking bonus pool has shrunk by more than 70%. We’ve also increased transparency around pay. But there’s a balance - we need high quality people if we are to achieve the goals we set out in 2008. We must deliver reform, while not making the business unmanageable.
Do you think 2012 has undermined RBS’s efforts to become a more sustainable bank?
I think what the last year has shown is that the RBS of the past was too focused on the short term and looking after its own priorities. Things like payment protection insurance (PPI) and LIBOR were a symptom of that. We’re much more focused now on a longer term view which is centred around our customers and the communities they live in. So I would argue that 2012 actually underlined why sustainability is so important in the first place.