As the future of the United Kingdom in its current form teeters on the brink of obscurity, Royal Bank of Scotland (RBS), one of the largest FX dealers in the world, considers relocation from its celtic homeland to London should Scotland become an independent nation state.
The bank today made a statement to BBC News that it understood clearly the “necessity to redomicile the bank’s holdings company, further underlining fears by capital markets participants that Scotland may head for a financial precipice should it break away from the security of the United Kingdom.
This rather draconian stance by RBS followed Japanese bank Nomura’s instruction to its customers, advising them to withdraw funds from the United Kingdom until the votes are cast, in case of affectation of values of the pound due to the uncertainty of the future of Scotland.
Among Britain’s politically astute, a widely held view is that London waved goodbye to socialism in 1979, building its financial markets sector throughout the 1980s, culminating in London securing its longstanding position as the world’s largest financial center. Conversely, Scotland continued to tread the socialist path, relying on subsidies and payments from Westminster.
This, in turn, has contributed to concern as to whether the nation will be able to sustain itself without financial assistance from the United Kingdom as a whole.
Official figures from the previous year suggest Scotland spent £62 billion but raised just £45 billion, resulting in an annual subsidy from the English taxpayer of at least £17 billion.
Scottish First Minister Alex Salmond told BBC Scotland he had been given a letter which was sent to RBS staff this morning by the bank’s chief executive Ross McEwan.
“This is a technical procedure regarding the rotation of our registered head office based on our current strategy and business plan. It is not an intention to move operations or jobs” stated Mr. McEwan.
Mr Salmond said the letter from Mr. McEwan had stated: “It is my view as chief executive that any decision to move our registered headquarters would have no impact on our everyday banking services used by our customers in Scotland.”
London-based Lloyds Banking Group has also indicated that it may shift its business from Scotland. The company owns Bank of Scotland and Halifax, and had a longstanding presence in Scotland with some of its non-banking sub-divisions such as the now-defunct Lloyds Bowmaker leasing company being based in Edinburgh throughout the 1980s and early 1990s, at a time when corporate vehicle leasing was at its peak.
For Lloyds, however, such a relocation would only represent certain business units, however should RBS decide to move its operations to London, this would represent an actual Scottish firm transferring its operations to what would be considered abroad under the proposed Scottish plan to exist independently from England.
Defiant Mr. Salmond has described reports of banks moving out of Scotland as “nonsense” and “scaremongering”.
RBS is no stranger to controversy, most of which has not harmed its fortunes. During the financial crisis at the end of the last decade, incumbent CEO Fred Goodwin gained tremendous public attention by presiding over the bank at a time when his strategy of aggressive expansion primarily through acquisition, including the takeover of ABN Amro, eventually proved disastrous and led to the near-collapse of RBS in the October 2008 liquidity crisis. The €71 billion (£55 billion) ABN Amro deal (of which RBS’s share was £10 billion) in particular stretched the bank’s capital position. £16.8 billion of RBS’s record £24.1 billion loss is attributed to writedowns relating to the takeover of ABN Amro.
Despite this, and the subsequent cost to the British taxpayer at a time of extreme recession, Mr. Goodwin retired from his position, garnering extensive media and government criticism due to the disclosure in February 2009 of the size of Mr. Goodwin’s pension. The treasury minister Lord Myners had indicated to RBS that there should be “no reward for failure”, but Mr. Goodwin’s pension entitlement, represented by a notional fund of £8 million, was doubled, to a notional fund of £16 million or more, because under the terms of the scheme he was entitled to receive, at age 50, benefits which would otherwise have been available to him only if he had worked until age 60.
Sir Philip Hampton, RBS’s new chairman, stated that as a result Goodwin is drawing £693,000 a year which was later revised to £703,000 due to Mr. Goodwin working an extra month in the new financial year, and disclosed that under the RBS pension scheme Mr. Goodwin is entitled to draw the pension already, at age 50, because he had been asked to leave employment early, rather than having been dismissed. Although Mr. Goodwin kept his pension rights, and continued to prosper, attempts were made to have his professional status as a banker revoked, and his knighthood was annuled.