RBS - Inside The Bank That Ran Out Of Money

we out Luke always a difficult subject predicting the future is a hazardous occupation the best of things and it's something fair to say these and these are not the best of times so Fred Goodwin knight of the realm for services to banking was the chief executive of the Royal Bank of Scotland when it ran up the biggest corporate loss in British history a loss of twenty four point 1 billion pounds in the good times the Royal Bank of Scotland grew faster than any other British bank it pulled off record-breaking deals made billions of pounds in investment banking it's top executives droves the bank forward to become at one point the world's biggest bank and collected fabulous bonuses along the way right in October 2008 RVs came within hours of running out of money any news on the banking bailout Larry vedera and had to be bailed out by the British taxpayer this isn't time governor RBS wasn't the only bag to be rescued but by the time of the financial crash it was the most toxic bank and are you sorry you're giving and that's something that didn't need to happen and Andrew Johnson from B Daily Express so Fred I was just when you give us some idea why you're the right man to lead the Bank you know out of the situation it now finds itself in given the fact that I suppose what's happened has been some sort of failure of risk management which is one of the core competencies the bank is supposed to have [Music] it's not me solar that runs the bank that a team of people here who run the bank and whereas of one mind of the need to go forward from the position but end we're in the middle of a financial markets crisis where there seems to be some debates where is the worst for a generation for in 70 years or some other longer period but it's certainly the case that it's enough that the industry is in a tight place and as a major participant in that industry we're in a tight place we also have to see anything being in the job too long for instance there have been studies which show chief executives start losing their effectiveness after you know around seven years in the job and well I'm sure that our studies and divid always find things to do with individuals that they have to pin down at seven years I don't know long reporters have to report for before they lose their effectiveness and revert to long I'd be reluctant to sign into any of those particular things I won't do this job forever but right now you find me extremely galvanized to the task at hand we've got a big task at hand and my colleagues and I are of one mind of one focus to get through this this is a film about Scotland's largest bank up to date and looking after every aspect of your business life it's a friendly bank - it's the Royal it was certainly seen as a Scottish bank with the Scottish identity but one that was looking to do things somewhat differently and was not the same as the run of the mill and slightly larger banks that dominated the seal across the UK at the time the Royal Bank of Scotland was a Scottish institution prudent effective and ambitious in 1998 it's dynamic and successful chief executive george Mathewson was looking for new blood to lead the bank forward was actually looking for a finance director but we would like one word potential possibly to become chief executive because obviously replacing me was on my mind as well as other people's lives and I thought well wait a minute we do have Fred Goodwin right here in Scotland he did strike me as someone who could lead I just felt that he had a lot ofin fred was the rising star of Scottish banking a chartered accountant in charge of the Clydesdale Bank before he was 40 there he had earned a reputation for cost-cutting and acquired his enduring nickname the fred the shred reputation was there that this was a tough hard man and no one doubted his intelligence and his determination but he did have that that reputation for being quite difficult as a boss and quite quite hard on stuff my first hearing that Fred Goodwin was coming on board was a call from the Clydesdale Bank where they had been celebrating his departure for three days now and they wished us all the very best of luck and that was my first introduction to the name of Goodwin I will not forget it with George and Fred of the helm Scotland was no longer big enough to contain our BSS ambitions they aimed to grow RBS into an international banking floors but they want the only ambitious Scottish Bank their ember arrival the Bank of Scotland was also hungry for growth and both banks faced the same obstacle both Bank of Scotland Royal Bank had the same problem didn't they end of the day were anchored in a quite small economy in the home market both until the view that they had to actually make a jump to something bigger to actually avoid their over dependence on the Scottish economy the quickest and the boldest way to achieve this was by carrying her to take over traditionally in banking takeover the symbol bigger banks buying up smaller ones but that's not what RBS had in mind first RBS audaciously sniffed around Barclays but they were warned off by the city then they both began to look at another venerable city institution not waste a bank more than twice their size they say that when a company builds a new head office gets a corporate jet and has a fountain and a flagpole it's time to sell the shares NatWest built the NatWest town that west bank was huge but ailee its share price was low and it was Bank of Scotland that moved first what we see with NatWest is a hugely undervalued opportunity it's under managed with underperforming is a great franchise and we believe that we can help turn it around I wish that the Ryder Cup and my phone went illegally because you're not supposed to have a phone at the Ryder Cup and they said you have to come back Bank of Scotland have just bid for that where we had a meeting in London I remember with our investment banks they were all saying they must you must bid you must bid nicer no we will bed when we know as much as it's possible to know a few weeks later RVs didn't join the take of the battle promising bigger savings George did the strategy Fred mastered the detail and set about convincing the city that RBS could pull it off the bulk of the cost savings related to back office processing the head office areas and so on they don't relate to customer faces now I think there was incredulity but two small banks could actually have the nerve and I use the word the nerve to actually go for this bastion of the British banking industry and I know that some of the management actually felt quite let down by the city that city could actually take seriously a bit of this nature yes the word DOTA but the general feeling at the time in the city was that anything other than the not waste management [Music] after a hard-fought takeover battle NatWest shareholders had to decide whether banks future lay there was a close-run thing in fact at lunchtime on the last day I thought we'd won and the tide swung against us in the afternoon that's monumentally pissed off but at the end of the day that was the shareholders decision most elation for about ten minutes not a solution for near coober that's it at that stage I step back become deputy chairman and there was never any questioning of whether Fred Goodman was not the right man to take over the new RBS [Music] Fred and George had arrived on the big stage as the savings including 18,000 job cuts and integrations were made it became clear that not only had they done the biggest hostile takeover in UK history but they have done brilliantly Fred got a bonus of 800,000 pounds and George one of 750 thousand which he insisted would barely give him bragging rights in solo wine bar the NatWest deal was an extraordinary exercising putting together two banks and the management team of RBS with a very strong following in the city I've got strong following in the city it means on the whole that your share price looks better because investors want to buy your shares it means that people believe in your story so they encourage you in many ways to do more deals because that's what's working the bank's share price dipped a little then jumped up rbs now had access to the huge vault of NatWest savings and deposits the question was what to do with them the answer was spend them they bought another insurance company a credit-card operation in Germany and the second-hand car franchise acquisitions what can I say - of acquisitions that hasn't been said before along the way Fred Goodwin picked up a knighthood but we don't do acquisitions for fun and was acclaimed by Forbes Global magazine as its businessman of the year they're like puppies we don't buy them just for Christmas those new acquisitions that make sense will not look to do any [Music] the place that made most sense for RBS to do acquisitions was the USA the biggest market in the world [Music] where thousands of little banks sat waiting to be gobbled up oh yes already had an American arm called citizens [Music] citizens was run prudently by laddie fish we're very proud of our credit record over a long period of time so we've avoided unsecured lending both to the consumer and to the corporate sector Larry Fischer was 7:00 in the mornings I take deposits and later in the morning I take some water process after lunch you know takes multi-process I'm feeling very brave I may lend a little bit of money [Music] citizens was a community bank it was third largest bank in Rhode Island something which is not a major claim to fame but it was very community-based for a customer based and it was big in its small areas but RBS wanted citizens to be big in big of alias and Larry embarked on an acquisition spree of his own a prudent acquisition speed buying up other small banks dotted right new Ingraham then stripping out costs and selling new financial products to the customers in 2001 Larry fish raised the stakes and expanded citizens west into the huge Philadelphia market spending two billion dollars on a bank called melon financial this deal made citizens big in a much bigger area and earned at a starring role in RBS is next corporate video alongside its many other impressive purchases and interests [Music] just three years on from the NatWest deal RBS was by some measures the fifth biggest bank in the world and Elmer was the headquarters of an international banking group but there was a price to all this growth the culture inside the bank had changed we lost a lot of the collegiate atmosphere and when it was under Georgia very much she wanted to hear what people had to say and he wanted to discuss he wanted to bring people in and that was lost to consider extent George was very charismatic he was extremely well-liked and respected by many who worked for him Fred I think was more efficient probably the best description he can be a little to acerbic he's not very good at suffering fools gladly in fact he he can be quite forbidding Fred had a very impressive intellect but he used that to bully those around him people were intimidated from speaking their own mind because they feared Fred's reaction and this created a an atmosphere around him which inhibited even the most senior people in the bank from expressing the views this atmosphere was apparent at the highest level in the bank the morning meeting was a particular RBS innovation they brought into NatWest and the top management team of seven or eight people would get together every day on anything up to four video conference screens and essentially in half an hour or two hours or however long was necessary we thrash out the problems of the day the morning meetings were quickly became known somewhat whimsically as the morning beatings and Fred seemed to just at random the side of which senior executive was going to be rooster to that day it was nice to be part of but never hand you can have somewhere in the back of your mind he was saying well at least does not me suck it up I think was a phrase that was used that's life in the big city I sleep of the wheel he was quite clear asleep of the wheel I always believed that there are many ways of skinning a cat as far as leadership is concerned and don't go along with people who say that one way of doing this and some so threaded his way and for long enough it was very effective fred proved to be particularly effective for rbs shareholders despite all perhaps because of his robust management style fred got results in other words he delivered profits year after year as the bank grew in May 2004 the moment RBS had been waiting for finally arrived a deal that will transform citizens from a big regional bank into one of the biggest banks in America the target was a bank called Charter One charter one was hooked to us a Lhari fish citizens has done this kind of thing before you've heard me say before all the acquisitions we've done the 24 25 acquisitions we've done previously we had a very successful acquisition and integration record you heard a mantra of low-risk charter one would expand Larry fish's Empire and RBS into the huge Chicago market with its millions of households and potential customers there's a very logical geographical extension to our business in the United States it is a significant increase in scale isn't that about that and overall we think that there is a low risk acquisition to to execute and implement benefits Fred and the board backed larry's deal and RPS made a huge offer of ten point five billion dollars rbs became the seventh biggest bank in the USA but they didn't stop there shortly afterwards RBS bought a near billion pound stake in the Bank of China which came with a place on the board for Fred RBS was now a global Colossus and in need of a new home the 14th of September 2005 was a big day in our vs s history a new purpose-built headquarters in Denver was being opened by the Queen just as she had opened the NatWest tower 24 years earlier the new headquarters was a work of wonder it certainly add a fountain it was built right next to ember airport where the bank's private jet with risk senior executives across the world while RVs bosses mingled with royalty city analysts were less impressed and wondering if the time had come to sell RBS shares the bank's share price wasn't performing as well as expected the problem was Charter One RBS was struggling to make its usual savings and grew its usual profits and the city thought Fred and his Bank had paid far too much suppose I could do well in retrospect I certainly wasn't a good deal I would say that it was over sold to the city bought into the deal but I think they were skeptical and personally my own view is that they never really accepted that it had been a success and there was a degree of skepticism introduced into the RBS story really for the first time in our history [Music] the city's skepticism at the bank's buying spree came out at an analyst conference around this time well I think there's a perception among some investors that recommends a maker maniac who pursues size over shareholder value so I saw the first time I've heard that that I'm sure there's wheezing I'm sure there are people who think that if only because you wrote it so the hospital is one person who thinks it I really don't think it stands a lot of scrutiny on terms what we've actually done and I think the results you seem today demonstrate delivery against a choir clear coherent strategy in one which we've executed with any considerable internal discipline up until Charter one Fred Goodwin had had pretty much a free rein on any acquisition he'd wanted to do him and his team had pulled off something like 20 deals since NatWest in 2000 that's just a four year period what charter one did was make the city step back and think about the price RBS was paying the way it was paying for deals and crucially people started to look at the underlying business and look for the actual growth that was taking place within the existing businesses by 2005 Fred's RBS had acquired 25 assorted businesses it had spent nearly 30 billion pounds but its shareholders now demanded an end to deals and takeovers RVs could still expand by making money out of money which was another way of saying corporate and especially Investment Banking in 2005 our DS's investment bank was run by Johnny Cameron the son of one of the bank's former vice chairman and a financial wizard in his own right eye my management team make a huge effort to walk the talk we talk about being insurgent we talk about restless success we may be successful but we're still Restless we talk about keeping the magic is another phrase there is some magic about what got and CB FL about our culture we need to retain that even while growing into this international business [Music] Jonnie Cameron's investment bank took savers money from that list and RBS accounts and invested it in a whole range of highly lucrative ways sitting within the investment bank was a small specialist outfit called RBS Greenwich Capital tucked away in a quiet corner of Connecticut we didn't hear it at Greenwich with NatWest and I went there and it was full very clever very right people it also had some of the best rest man assurance that I've seen anywhere at the time you got kind of instance you know instant results next day of what grades have been doing what risks have been taking how they be managed amongst all the rest on I thought what was a reasonable chance of that we could actually grow our business Greenwich Capital made money out of mortgages not as a lender to house buyers but as a traitor it bought huge bundles of thousands of ordinary domestic mortgages save prime loans from banks and other lenders across the USA then it packaged these up sliced diced and sold them on to investors who profited from the interest it really did seem as if the bank has a stumbled on a new form of alchemy they were taking straw and turning it into gold by virtually slicing dicing because as they kept slicing and dicing these loans the banks kept giving off prophets and garnish capital was absolutely at the forefront of taking those mortgages and trying to find new innovative ways of actually essentially making money for the bank in the early years of Johnny's reign the American housing market was booming and mortgage trading was where the big money could be made sewers were certainly interested in housing and it became a bubble it's time went on banks began to run out of people to lend to a lot of people own houses already maybe they were refinancing but there are only so many times you could do that and of course most people with a lot of income and good credit already owned a house so if you're looking for new customers where did you go you went to people who didn't have credit people who didn't have a house people in many instances who didn't have money these people were known as subprime borrowers and were encouraged to take on huge mortgages which although slightly riskier were also sliced diced and traded [Music] as long as they kept paying their mortgages traders and investors would keep getting rich well this was a business that was built on debt it was debt layered on debt leavened with debt sprinkled with that debt was built into this at every layer rbs Greenwich Capital moved up the league table of mortgage traders competing all the way with the biggest Wall Street firms some of its trading was prime some subprime and some exotic cocktails of both prime and subprime all mixed up together ever more complex packages and all of it highly lucrative single most important impression I want to leave you with is this is a great business you have to remember some of the smartest people who are working in this you know top top top mathematicians top physicists they were they weren't working in universities anymore they weren't working in nuclear establishment they were running complex financial models to see how they could model risk and how they could predict the future that was where the income was you packed it all up into big numbers and you could make tens of millions of pounds and these deals answer them oh yeah yes absolutely in 2004 the profits of Johnny Cameron's part of the bank grew by nearly 18 percent on the previous year in 2005 its profits were up another 22% and it accounted for almost two-thirds of the entire RBS profit it grew like Topsy [Music] good morning ladies and gentlemen and welcome to a 2006 interim results presentation it's a special pleasure for me to welcome you today as this is a first set of results since my taking over as chairman in 2006 the success story continued and with Sir Georges Mathewson retired as chairman it was down to new boy Sir Tom mckillop to deliver the good news total income for the first half rose by 10 percent to 13 point 6 4 2 billion pounds this resulted in group operating profit rising by 15% to over 4.6 billion I believe today's results-based as they are purely on organic growth amply demonstrate these fundamental strengths of the group and the sustainability of our operations over half of the profit that year came directly from Johnny's banks I'm very very comfortable happy with the platform we built in GBM it's paying off very well I think our results in GBM are absolutely first-class for the businesses we're in but there are things we can do more on we will do more that that's part of the excitement we have further things to that we can go and do do more in the spread indicated following on from these results the city began to believe once more in the RBS story and the bank share price inched back up RBS allowed itself another glitzy pat on the back [Music] if we were wanting to build what we have today from today it really couldn't be done the bank senior managers targeted more growth we've a good start in terms of what's happening at the moment and equally I remain extremely excited by what's in front of us everyone seemed to be benefiting from this magical new form of banking and nobody likes to admit they don't really understand things and better sense a pride involved about it and so as a result the bankers were allowed to carry on dinner they doing largely unscrutinized and they didn't understand the risk that their own banks were running just as everything was looking rosy for RBS the engine driving the growth of the entire banking industry ran out of steam in late 2006 the American housing bubble well and truly burst as American interest rates went up many of the lists with subprime mortgages could no longer afford their loans so they stopped paying [Music] anxiety spread throughout the markets and across continents so a big wake up call for the UK for the analysts and the investors in the UK as far as subprime was concerned was was this profit warning from HSBC at the beginning of 2007 we're revealed that it had suffered heavy losses much heavier than expected on its portfolio of subprime mortgage loans in the US and at that point people started looking around saying well who else has got these kind of loans RBS reassured the city that they weren't in subprime lending we have prime quality portfolios both its citizens well we do not do subprime lending if I couldn't come and hope and stop playing lending the other line mainly kept away from it has not even seen evidence in the market that I was in a good place not to eat but all that slicing and dicing mortgage debt meant there was no escape what happened in the system was that subprime became such a big part of what banks did not just originating it but buying it lending to the people who did it packages them selling them structuring them training them it infected the whole system so every bank did subprime what's the war housing exposure you've got in there and the mortgage by analysts wanted to know how much subprime RVs held in its investment banks the amount of subprime sub investment-grade exposure we have across both the warehouses and collateralized lending and residual interest whichever way you look at it is really very very very small miniscule amount of that of minimal amount of that those titles [Music] morning everyone and I'd like to within your Excuse subprime problem the investment banks were in great shape and fred was optimistic about the future in short we face 2007 worth some confidence thank you very much but if the American housing market was in decline how would RBS grow now as long as I've been writing about RBS people have been speculating about RBS making another big acquisition and so there was a sense really that you know when possible when the conditions allowed it that the Fred Goodwin was really keen to do another big deal I'm just wondering if you could give us some sense of how you feel at the moment or in the coming year about the possibility of acquisitions and whether you think that you're kind of out of the sin bin as far as your investors are concerned when it comes to to the future Till's I think whatever the sin bin but I don't think that equates to you know going out to make acquisitions we've been pretty clear all along in terms of our guidance about acquisitions and there's no change being signaled at at this point as much as anything else Peter the outlook is conditioned by availability I can't think there's anything out there at the moment that seems to us desirable doable or affordable I and everybody else interpreted as a as a song that really there were no big acquisitions on the horizon at the moment and in retrospect obviously that turned out to be not the case [Music] five weeks later Fred Goodwin announced the biggest banking takeover in history the target was a Dutch Bank one of Europe's largest called ABN AMRO ABN AMRO contained an American Bank a Brazilian bank banks in Italy in Holland in India an investment bank which sprawled across the globe it was big unwieldy and badly wrong for the second time in less than a decade RBS entered a huge hostile takeover battle after a competitor moved first this time it was Barclays Bank that announced a friendly merger with ABN AMRO [Music] so Fred and his advisors put together a consortium of three banks to launch and not-so-friendly take over well the most important thing of course is that Barclays was going to buy the whole of ABN AMRO and they talked at the time of a merger of equals whereas the consortium the minitor concession is not friendly it was aggressive RBS some time there and Fortis they all wanted separate parts of the bank and they were going to tear it up in three maybe four parts it was not something which was wanted by the management of Haven mo clearly RBS is share of the Spoils would include the Investment Bank and the American operation a large bank based in Chicago called LaSalle which would give RBS access to the lucrative American corporate market but ABN AMRO x' management was fighting for survival to thwart Fred and scupper the consortium they sold off LaSalle quite a few people were convinced that RBS would sort of throw in the towel after the announcement that Lesar was going to be sold because we all knew that the investment bank was not that successful so why would RBS want to spend so much money on something which is not very successful ABN AMRO has many good businesses many attractive franchises and operates in many attractive markets that again is something that perhaps got a little bit lost in all of the the rhetoric that has been around the subject RBS pressed ahead regardless in a conference call to analysts Fred announced that there would be no major scrutiny of the ABN AMRO books a process called due diligence thank you but every year that a public company I come from is regulated many different countries come to a company which is already had against another for the to result imbalance between office other thing we need to conduct a major due diligence exercising the base of due diligence right maybe what we will be one due diligence you need to do in order to make sure that you that you know what you're buying to check what you're buying if it's really true but the bank promises to be you want to check it therefore it surprised me that a due diligence light could do the trick it's unbelievable it's your diligence light is good enough for me come on you're spending so much money you take a big risk here I mean I don't think they had any idea what they were buying I think almost every question that you asked on that respect that the answer came back was well when we did NatWest we did it like this and that's what we're going to do again I mean I think it's worth comparing it to our experience with that West certainly we've only had a very limited due diligence but that interview when I went over there fill me with enormous competence particular about the cost synergies RBS was filled with such confidence that they offered 27 billion euros for their share of the massive deal however while Dutch regulators were delaying the ABN AMRO deal being signed off it became clear that the subprime problem wasn't going away in fact it was getting worse the crisis was spreading from lenders up the fruit Ching and penetrating investment banks there was no new equipment and by the time that RBS of buying ABN AMRO there were definitely people saying that this deal is completely mad I think there was definitely a some pressure put on rvs from a banana investors from its partners in the consortium particularly sent out there I think it was a quite a lot of pressure put on them to to kind of see the deal through and I think there was probably also Janelle immense pride on Fred Goodwin's part I have no idea if I roll banked and walk away yeah they could've walked away life obviously was getting tougher and yet they still continued to pay top dollar that we'd undoubtedly been a penalty for walking away from it but it would have been a very very cheap penalty the board of RBS unanimously approved the deal and RBS went ahead with the biggest banking takeover in history and took the unusual step of paying mostly in cash from the bank's reserves welcome to a interim results presentation that the next RBS results meeting optimism prevailed and here at at RBS business is very good indeed well the short answer is we are going to one step removed for me we've never lent directly to people who are in over here the customers and subprime so we stand back from that we have a business in the United States that's involved in the packaging of those those those debts through and ferrán mudsill to investors so we see what's happening it's affecting a market in which we operate it is not impacting us in the direct way in which is impacting and some others I don't know Johnny Roselli you wanted to add I think the complexity of some of the products that were involved in we're part of the problem and perhaps the kindest interpretation it could be put in some afraid statements about not being you know not doing subprime and not really you know having ownership of those assets just being agents the Kansas interpretation would be the perhaps you didn't really understand that fully and self but there certainly were very complicated products and they I think perhaps only one or two of the directors may really wonder stood that properly I remember six months ago there was a lot of speculation ahead of a annual results presentation that we were going to be very adversely affected by the subprime situation it just didn't happen we said it wouldn't happen and you've seen it again today you know we are not operating in nineteen eight space the directors reassured the city that RBS is investment bank was still in good health we cut back a lot since the year end of who six in our exposure to these sorts of markets and I told you then that they were very modest we take no credit losses anywhere in portfolio generally you know while volatility has made for some difficulties it's made for some opportunities as well [Music] in September the subprime crisis finally spread to Britain's High Street Northern Rock experienced the first run on a bank in the UK for nearly 150 years the markets went into turmoil shortly afterwards and to its dismay RBS was finally able to discover just what ABN AMRO had on its books it was not good news it contained exposure to hundreds of millions of pounds of subprime related investments which were turning toxic rbs could reassure the city no longer and Johnny's own investment bank was also on the slide in December the bank disclosed that it had suffered deep subprime related losses red announced that RBS was writing off 1.5 billion pounds they obviously saw in 2006/2007 was clearly the creation to a much greater extent than other banks all Fred Goodwin as its chief executive one of the big mysteries for me one of the things that what still really has got quite become clear is why this this man you had this tremendous attention to detail knew so little about what was going on in this giant investment bank I think what people saw was this huge global bank sitting on the doorstep which had had ruin a short space of time from humble beginnings to to become a powerhouse globally and it was difficult to equate that with some obeying their relative problems the losses didn't stop there in January and February billions were wiped off the value of RBS as investments they had been sliced diced and finally trashed its cash reserves drained by the purchase of ABN AMRO were struggling to take the strain one vital measure of its financial health its so-called core equity tier 1 ratio was getting dangerously low analysts wanted to know I just have loathe me I will know as I've trying to answer any questions you might have Thanks can you tell us what is the core equity tier 1 ratio on a kind of a look through basis so excluding the pieces of ABN that you don't only are you saying it's a number that you know and you don't share with us or is not knowable that's it it's a number that you can work out it's not a number that we can ever realize because we will never get to the point where we can split it up to do that it does begin with the fall it does be able to 7b as much as we would like to say at this point so we can work out or you can work I'm just confused one well can you just tell us what number is then you make some assumptions but it's not a meaningful number in terms of how we we operate right now I mean because the group is the group City analysts grew increasingly convinced that RBS would be forced to ask shareholders for more cash in financial jargon and in organic capital raising accurately described what my buddy there are no plans for any inorganic capital ratings or or anything of the sort I remember February 2 2010 Fred Goodwin being asked about it repeatedly insisting that there were no plans for any kind of record in organic capital raising exercise which was proved not to be the case over several weeks later as the losses mounted RBS did ask shareholders for help people stopped believing what he said and I think when you run a bank which is which depends essentially on confidence to survive when people stop believing what you say that's fatal do I worry RBS was running out of money do I worry more heavy losses came in the spring by April there were six billion pounds of the do I give a beggar the bank pleaded for double that for 12 billion Palmas to stay afloat and when evening shadows dream do while shareholders were reassured this would secure the bank's future for at least a year it's different as you all know this morning we announced the lost the fourth thanks of 691 million pounds well I hope you got a sense today that you know I have a range of emotions about all of this and I am very disappointed I'm numbed by it but I'm also galvanized by I do feel that the credit market writedowns have overshadowed the the strengths of this business in this in this half year and I hope you get a sense from the slide not just of my determination to get out of this place but all of my colleagues sitting around the room today we don't enjoy being in this place but we do have a business here which is strong and resilient and as a business that we are taking forward to get ourselves out of this situation maybe you need to be a bit of a masochist but you know it's when when things are tough that you really really do see organizations perform and you know in the midst of this that is there are still lots of opportunities out there you know if we can drive the businesses properly forward this this can be differentiating ultimately so yeah I'm a great believer in adversity actually sorting out who who's a long term when I was going to be rbs had grown until it could grow no more to become briefly the biggest bank in the world by assets and now its bloated size left the bank vulnerable the one golden rule of banking is that every night banks must be able to cover their balance sheet either from their own cash or through loans from other banks the ABN AMRO take over doubled the size of our BSS balance sheet took it to nearly 2 trillion times in over 50 countries at precisely the wrong time [Music] the credit crunch turned into a financial crisis and the markets seized up RBS had run out of options its cash reserves drained on ABN AMRO its share price dropped like a stone but other banks would be plenty eight the Bank of England was keeping it afloat confidence evaporated and for a few days the entire banking system teetered on the brink RBS came within two hours of running out of money and bringing down the British financial system with it yes I'm angry at the Royal Bank of Scotland on what happened almost all the losses are in the subprime market in America and related to the acquisition of the banker EMB Handel RBS was forced to accept a twenty billion pound bailout from the UK government paid for by the British taxpayer one condition of the bank being bailed out was that Fred Goodwin leave the company are you sorry you hear later before he left he had to face RBS as shareholders one last time shareholders who had seen over 90% of the value of their shares vanished during his reign a lot of people be waiting for this I know you said you're speaking on behalf of the board but he's had ample opportunity over the last few months and lot unhappy people out here are like to hear him say sorry well I could only ask sir Fred to say whatever he chooses to say almost the black Evan wanted to be any doubt in anyone's mind at all other than I'm extremely sorry this has come about I echo entirely the sentiments that the Chairman expressed on behalf of all of the board earlier on this is a something about which I am extremely sorry and and extremely sad to be leaving the company at these extremely difficult times can be no question other than that I am extremely sorry Thank You Fred [Music] okay so at least there are probably I don't know 20,000 people in Scotland we built up a little nest egg that nest egg was blown over water there's lots and lots and lots of people who have actually been affected and that that Hawks me actually because I don't think that needed to happen I didn't have to happen this way we didn't have to try and become the biggest bank in in the globe and if we'd have been a little bit more prudent and a little bit more careful of course we could have avoided the storm and should have avoided the storm credibly sad incredibly sad the mused as to how it could possibly happen and when my father died I discovered all his shares when the robbing of Scotland as a glossary Jinhae that's where he felt the comfortable place to be was and so many other people must have had their capital there and I just felt this is not just a tragedy for the bank and for the employers but for Scotland [Music] as a human bein did you feel disappointed angry upset I was obviously disappointed and I was obviously upset angry um not really [Music] when it all played out Fred wasn't alone leaving the bank Johnny Collins banks incurred operating losses of nearly 11 billion pounds he resigned forgoing a payoff and eventually agreed not to hold the full-time high financial office again Tom MacKillop follow denied the door a few months later also without a payoff Larry fish retired he hadn't done subprime mortgages he had built up a portfolio of other investments worth around 10 billion dollars which later turned toxic he left RBS with a pension pot of 27 million u.s. dollars [Music] and Fred well everyone knows about Fred's pension Fred's pension entitlement has been widely reported at 650,000 our remuneration report won't go out for another ten days or so but the the actual number is 693 the media speculation is slightly slightly lower than the than the actual amount Fred eventually agreed to reduce his pension to three hundred and forty thousand pounds per year a fine reward for running up total losses of twenty four point 1 billion pounds and there in a nutshell is what happened inside the bank that ran out of money is that all a is that all if that's all a and let's get down [Music] let's break out the boob I'm if that's all their ears [Music]

Channel: MsMacSee

Views: 302,943

Rating: 4.7869158 out of 5

Keywords: RBS, Inside RBS, RBS Documentary, Royal Bank Of Scotland, Fred Goodwin, Sir Fred Goodwin, Royal Bank Of Scotland Group

Id: st40Gps08KI

Length: 58min 58sec (3538 seconds)

Published: Sat Nov 26 2011

Reddit Comments

[u/misbegotten_]

"Blocked in your country" -.-