THE CHIEF executive of Royal Bank of Scotland has claimed that many of his banking rivals are still “playing the old game” and putting profits ahead of customers.
Ross McEwan told The Yorkshire Post the state-owned lender has “stayed out of a lot of things this industry is still doing”.
Bailed-out RBS is starting to become the challenger bank, he added, referring to the market entrants that politicians and regulators hope will shake up a sector dominated by a handful of big lenders.
Mr McEwan said RBS has banned incentives from front-line staff.
He said: “They are paid a salary to do a great job and fulfill customer needs. They are not paid on how much they sell. I don’t think any other bank has done that.”
Mr McEwan also raised concerns about the £64.6bn in credit card debt in the UK ahead of an interest rate rise and said RBS has avoided zero balance transfers on credit cards.
He added: “We have stayed away from this shunting people into another zero balance into another zero balance because it is a frightening call for them.
“I think it is over 60 per cent have no idea what the rate is when they come off and it is usually 20-plus per cent.
“Our view has been getting them onto debt repayment.”
RBS has stayed away from so-called hero ratings as well, said Mr McEwan, “where you get it for three months and then it gets whipped off you and you give a better rate to somebody who is brand new than somebody who has ben with you 30 years”.
He said the lender also keeps prices the same across different channels, whether in branch, online or telephone, and has vastly simplified terms and conditions for products.
Mr McEwan said: “We have just decided not to be in certain parts where it is not good for customers. Some areas like credit cards, it does hurt your profitability, but when you think about some of the things this industry did for a decade or two, I bet you they would look back in time and wish they hadn’t done it and there are just some areas we have to have the courage to stay out of if we just don’t think it is right for our customers.
“RBS and NatWest are the ones that are actually challenging what this industry should start to look like... all these things make up for quite a different bank and quite a different environment our people operate in and I think we are starting to become the challenger bank in the UK.”
Briefly the world’s biggest bank under Fred Goodwin, RBS was hours away from running out of money at the height of the financial crisis, forcing the UK taxpayer to pump in £46bn to keep it afloat.
Mr McEwan, who took over from Stephen Hester in 2013, said: “The disaster of the financial crisis will live around for a long period of time.
“We as banks, including RBS because we did create some difficulties, have to rebuild that trust.”
His turnaround plan includes the simplifying of the bank into three business lines, the sale of international assets to raise capital and a focus on customers in the UK and Ireland.
Mr McEwan said he has seen no evidence to support the central allegations contained in entrepreneur Lawrence Tomlinson’s scathing report on lending practices.
Acting as the coalition Government’s entrepreneur in residence, the Yorkshire businessman said he found evidence that RBS artificially distressed otherwise viable businesses to generate revenue.
Mr McEwan, who was weeks into his job as chief executive when the report was published in late 2013, said the number of cases handled by the lender’s Global Restructuring Group increased eight-fold during a period of three months as a result of the economic downturn, which badly hit commercial property.
Mr McEwan said: “There were some areas of how did you hand customers over that customers got very confused about, there were some areas of charged you looked at and said, ‘that was complicated, how did that work?’
“There were some areas where our complaints just didn’t work for that group of customers because of the volumes coming through.
“But had I seen anything in there that said to me we purposely tipped customers over to get the capital out? I have never seen it. But had I seen or found anything in the organisation that said we put them into West Register (the property portfolio) to grab them for us? I had never seen that.”
He said the subsequent report by law firm Clifford Chance found no evidence to support the main allegations made by Mr Tomlinson but did identify issues in the transfer of customers into GRG, the clarity of the fees charged and the complaints process. He said RBS has improved the way it treats customers during business failures.
The Financial Conduct Authority will publish its own report soon.
Mr McEwan said the UK economy has seen a shift but still feels reasonably good on growth.
The head of Britain’s biggest business bank said: “It is slowing a wee bit but if you are around 2 per cent in a globe that is slowing down I think that is reasonably good and there is next to no inflation.”
He added: “I think we are in good shape at this time. Corporates carry a lot less debt than they did. Many of them have a lot of cash on their balance sheet as do mid-sized companies as well.
“Individuals have deleveraged since 2007, not to the extent we would all like them to be, but there certainly has been a deleveraging of both corporate and individual balance sheet and that puts us in a much better position should the economy slow down again.”
Mr McEwan, a 58-year-old from New Zealand, visited the bank’s ‘hatchery’ in Leeds this week, one of eight regional business development hubs delivered by NatWest in partnership with Entrepreneurial Spark.
The hubs offer free workspace, hands-on mentoring, a start-up bootcamp and a free programme of up to 18-months of advice, support and funding clinics.
As of yesterday, there were 80 small businesses, dubbed ‘chiclets’ in the Leeds hub. The bank is opening another three across the UK in the coming weeks.
Mr McEwan was very positive about Leeds “powerhouse” economy, saying it created 30,000 new jobs last year and is much stronger than it was before the financial crisis in 2007.