RBS nightmare continues

Hester’s position becoming untenable

It now seems scarcely credible that as recently as 10 days ago, the outgoing head of retail banking at Royal Bank of Scotland (RBS), Brian Hartzer, told the Financial Times:

“I have rebuilt nearly everything about the place……from call centres, to branch systems…”

As Hartzer departed to return to Australia to take up an appointment at Westpac, he summarised his work at RBS as “job done”.

Hartzer’s upbeat assessment of his own performance at RBS echoed a glowing tribute from RBS chairman, Philip Hampton.

On 30 May, Hampton told RBS shareholders:

“Brian is leaving a behind a division with a much sharper customer focus. 

“The latest independent audit of UK Retail's Customer Charter shows Brian has made real progress on the things customers most wanted changed.”

Within two days of Hartzer’s FT interview being published, RBS endured a nightmare “technical failure” which has affected a large number of its 17 million customers.

A week after the IT problem surfaced, RBS remains unable to confirm when all customer accounts will return to normal.

The cost to RBS in respect of the extra cost of staff overtime, branch openings and fees refunds is likely to cost the bank tens of millions of pounds. Once you factor in the cost of customer compensation, the final cost could easily exceed £100m.

PR disaster

Above all, the episode has been yet another PR disaster for RBS in general and CEO Stephen Hester in particular.

In February, Hester did himself no favours by giving the impression of only waiving a proposed £1m bonus as a result of a public outcry and pressure from politicians that no such bonus was merited.

Hester’s neck is now on the block as a result of this latest embarrassment, one of the biggest customer-service disasters in living memory.

He did not exactly cut an impressive figure on TV news with the inadequate explanation that the service failures related to a “software change that didn’t go right.”

It would be a surprise if he remains in his current role beyond the end of the year.

It has been claimed that RBS’ technical issues have been exacerbated by an over-enthusiasm on its part to outsource key parts of its banking technology.

If anything, RBS has outsourced less of its IT functions than rival banks.

RBS continues to run the majority of its banking technology in-house via so called IT legacy systems.

There is no evidence that the current problem relates to failures within RBS’ core banking IT platform.

It is however fair comment for analysts to point out that RBS has failed in the boom years to replaced ageing legacy systems with modern platforms.

By contrast, RBS rivals such as Nationwide Building Society and Cooperative Bank are investing heavily in latest generation core banking platforms.

Power vacuum

The impression of a power vacuum at the top of RBS’ retail unit also does not help.

Hartzer left RBS earlier this month. His successor, Ross McEwan, another Australian – does not take up his position until early August.

Meantime, the head of retail banking role is being shared by Satyendra Chelvendra, managing director consumer distributions, and Les Matheson, managing director, products and marketing.

Ross McEwan has run the retail banking unit of Australia’s largest retail bank, Commonwealth Bank (CBA), since 2007.

Under McEwan’s leadership, CBA has adopted a very different IT strategy to RBS.

In April 2008, CBA announced plans to its core banking operations to the SAP for Banking platform under a four year, $600m programme to overhaul its legacy systems.

At the time, McEwan said that the investment would deliver a better customer service platform and simplify IT systems, infrastructure and business services, as well as provide significant operational benefits and cost savings. 

The current RBS IT and customer service nightmare should make McEwan feel quite at home, straight away.

Lowlights of CBA’s IT and service issues include during McEwan’s time as head of retail banking include:

  • November 2008 - CBA had to issue a groveling apology to customers as problems with its NetBank online banking system and other payment channels affected around 200,000 customers;
  • June 2009  - CBA had to shut down its online banking platform under the weight of unprecedented levels of traffic;
  • August 2009 - CBA announced that it added $150m million to its original $580m core banking overhaul budget;
  • December 2010 -CBA was hit by another glitch that left some customers unable to access their account information;
  • February 2011 – CBA extended its core banking tech modernisation programme by one year, and upped spending on the project to $1.1bn almost double its original estimates of $580m, and
  • December 2011- CBA customers are left fuming by more ATM and online outages.

In the boom years, there is a strong argument that RBS failed lamentably to invest in its IT architecture and systems – it has hundreds of millions of pent-up IT investment ahead in the short to medium term.

As the experience of CBA shows, investing in the latest banking technology is no guarantee that major customer service problems will not occur.

One thing is for sure: it will be some time before a head of retail banking at RBS cheerefully signs off with a “job done.”

UK retail banking customers are notoriously reluctant to switch their main banking provider.

Less than 1 in-10 of us switched our main bank last year.

The customer service meltdown at RBS NatWest of the past week will stretch that customer loyalty to the limit.

It is now for the FSA to ask some pertinent questions of RBS as to why its back-up systems or lack of back-up systems have failed so miserably in the past week.

It is highly unlikely that RBS or Hester will emerge from that enquiry with their reputations enhanced.

Meantime, if you happen to note that RBS’ share price seems to have moved in the right direction  - it has limped along at around 20p-30p for the past year, don’t be kidded, don’t be conned.

Earlier this month, RBS shares were consolidated with shareholders handed one new share for every 10 they own, meaning the bank's share price will soared artificially to around 200p.

So RBS shares will now have to exceed 500p before getting close to a level at which the UK government can start to sell off its 82 per cent stake and break-even.

RBS shares currently trade at 229p (or 22.9p under the old shares arrangement). The day when the UK government can dispose of its RBS shares cannot come too soon but seems further away than ever.

Douglas Blakey is the editor of Retail Banker International

Hester, Photograph: Getty Images

Douglas Blakey is the editor of Retail Banker International

Photo: Getty Images
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British mental health is in crisis

The headlines about "parity of esteem" between mental and physical health remain just that, warns Benedict Cooper. 

I don’t need to look very far to find the little black marks on this government’s mental health record. Just down the road, in fact. A short bus journey away from my flat in Nottingham is the Queens Medical Centre, once the largest hospital in Europe, now an embattled giant.

Not only has the QMC’s formerly world-renowned dermatology service been reduced to a nub since private provider Circle took over – but that’s for another day – it has lost two whole mental health wards in the past year. Add this to the closure of two more wards on the other side of town at the City Hospital, the closure of the Enright Close rehabilitation centre in Newark, plus two more centres proposed for closure in the imminent future, and you’re left with a city already with half as many inpatient mental health beds as it had a year ago and some very concerned citizens.

Not that Nottingham is alone - anything but. Over 2,100 mental health beds had been closed in England between April 2011 and last summer. Everywhere you go there are wards being shuttered; patients are being forced to travel hundreds of miles to get treatment in wards often well over-capacity, incidents of violence against mental health workers is increasing, police officers are becoming de facto frontline mental health crisis teams, and cuts to community services’ budgets are piling the pressure on sufferers and staff alike.

It’s particularly twisted when you think back to solemn promises from on high to work towards “parity of esteem” for mental health – i.e. that it should be held in equal regard as, say, cancer in terms of seriousness and resources. But that’s becoming one of those useful hollow axioms somehow totally disconnected from reality.

NHS England boss Simon Stevens hails the plan of “injecting purchasing power into mental health services to support the move to parity of esteem”; Jeremy Hunt believes “nothing less than true parity of esteem must be our goal”; and in the House of Commons nearly 18 months ago David Cameron went as far as to say “In terms of whether mental health should have parity of esteem with other forms of health care, yes it should, and we have legislated to make that the case”. 

Odd then, that the president of the British Association of Counselling & Psychotherapy (BACP), Dr Michael Shooter, unveiling a major report, “Psychological therapies and parity of esteem: from commitment to reality” nine months later, should say that the gulf between mental and physical health treatment “must be urgently addressed”.  Could there be some disparity at work, between medical reality and government healthtalk?

One of the rhetorical justifications for closures is the fact that surveys show patients preferring to be treated at home, and that with proper early intervention pressure can be reduced on hospital beds. But with overall bed occupancy rates at their highest ever level and the average occupancy in acute admissions wards at 104 per cent - the RCP’s recommended rate is 85 per cent - somehow these ideas don’t seem as important as straight funding and capacity arguments.

Not to say the home-treatment, early-intervention arguments aren’t valid. Integrated community and hospital care has long been the goal, not least in mental health with its multifarious fragments. Indeed, former senior policy advisor at the Department of Health and founder of the Centre for Applied Research and Evaluation International Foundation (Careif) Dr Albert Persaud tells me as early as 2000 there were policies in place for bringing together the various crisis, home, hospital and community services, but much of that work is now unravelling.

“We were on the right path,” he says. “These are people with complex problems who need complex treatment and there were policies for what this should look like. We were creating a movement in mental health which was going to become as powerful as in cancer. We should be building on that now, not looking at what’s been cut”.

But looking at cuts is an unavoidable fact of life in 2015. After a peak of funding for Child and Adolescent Mental Health Service (CAMHS) in 2010, spending fell in real terms by £50 million in the first three years of the Coalition. And in July this year ITV News and children’s mental health charity YoungMinds revealed a total funding cut of £85 million from trusts’ and local authorities’ mental health budgets for children and teenagers since 2010 - a drop of £35 million last year alone. Is it just me, or given all this, and with 75 per cent of the trusts surveyed revealing they had frozen or cut their mental health budgets between 2013-14 and 2014-15, does Stevens’ talk of purchasing “power” sound like a bit of a sick joke?

Not least when you look at figures uncovered by Labour over the weekend, which show the trend is continuing in all areas of mental health. Responses from 130 CCGs revealed a fall in the average proportion of total budgets allocated to mental health, from 11 per cent last year to 10 per cent in 2015/16. Which might not sound a lot in austerity era Britain, but Dr Persaud says this is a major blow after five years of squeezed budgets. “A change of 1 per cent in mental health is big money,” he says. “We’re into the realms of having less staff and having whole services removed. The more you cut and the longer you cut for, the impact is that it will cost more to reinstate these services”.

Mohsin Khan, trainee psychiatrist and founding member of pressure group NHS Survival, says the disparity in funding is now of critical importance. He says: “As a psychiatrist, I've seen the pressures we face, for instance bed pressures or longer waits for children to be seen in clinic. 92 per cent of people with physical health problems receive the care they need - compared to only 36 per cent of those with mental health problems. Yet there are more people with mental health problems than with heart problems”.

The funding picture in NHS trusts is alarming enough. But it sits in yet a wider context: the drastic belt-tightening local authorities and by extension, community mental health services have endured and will continue to endure. And this certainly cannot be ignored: in its interim report this July, the Commission on acute adult psychiatric care in England cited cuts to community services and discharge delays as the number one debilitating factor in finding beds for mental health patients.

And last but not least, there’s the role of the DWP. First there’s what the Wellcome Trust describes as “humiliating and pointless” - and I’ll add, draconian - psychological conditioning on jobseekers, championed by Iain Duncan Smith, which Wellcome Trusts says far from helping people back to work in fact perpetuate “notions of psychological failure”. Not only have vulnerable people been humiliated into proving their mental health conditions in order to draw benefits, figures released earlier in the year, featured in a Radio 4 File on Four special, show that in the first quarter of 2014 out of 15,955 people sanctioned by the DWP, 9,851 had mental health problems – more than 100 a day. And the mental distress attached to the latest proposals - for a woman who has been raped to then potentially have to prove it at a Jobcentre - is almost too sinister to contemplate.

Precarious times to be mentally ill. I found a post on care feedback site Patient Opinion when I was researching this article, by the daughter of a man being moved on from a Mental Health Services for Older People (MHSOP) centre set for closure, who had no idea what was happening next. Under the ‘Initial feelings’ section she had clicked ‘angry, anxious, disappointed, isolated, let down and worried’. The usual reasons were given for the confusion. “Patients and carers tell us that they would prefer to stay at home rather than come into hospital”, the responder said at one point. After four months of this it fizzled out and the daughter, presumably, gave up. But her final post said it all.

“There is no future for my dad just a slow decline before our eyes. We are without doubt powerless – there is no closure just grief”.

Benedict Cooper is a freelance journalist who covers medical politics and the NHS. He tweets @Ben_JS_Cooper.