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

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A glossary of football’s most hackneyed phrases – and what they mean

This is the time of the season when we all get tired. Time to break out the cliches.

This is the time of the season when we all get tired. The players, poor petals, are exhausted. The refs have had enough of being shouted at. The hot-dog sellers are running out of hot dogs. And the TV commentators, bless ’em, are running out of clichés. So, between now and the end, look out for the following tired old phrases, well-worn adjectives and hackneyed descriptions, and do feel sorry for them. They know not what they are doing.

It will go right to the wire. In the case of the Prem, this isn’t even true. Leicester are as good as there. It is only true of the Championship, where three teams – Burnley, Middlesbrough and Brighton – are on 87 points each, with the fourth team miles away. Now that will go to the wire. The phrase comes from those pre-war reporters in the US who telegraphed their copy. When it didn’t get through, or they’d never filed it, being too lazy or too drunk, they would blame the technology and say, “It’s down to the wire.”

Dead men walking. This is when the pundits decide to hold a seance in the studio, taking advantage of Alan Shearer having sent us all to sleep. It also refers to Pellegrini of Man City and Hiddink of Chelsea. They have known for ages they’re dead parrots, not long for this life, with their successors lined up even while their bodies are still warm. I think a moment of silence is called for. “Dead men walking” refers only to football. Must not be used in connection with other activities, such as media. When someone is sacked on a newspaper, they immediately get sent home on gardening leave, just in case they manage to introduce a spot of subversion into the classified ads, such as: “Five underpants carefully kept; make up; red dungarees; offers considered, Kent.” (The first letters of each word give it away, tee hee.)

World class. The number-one phrase when they can’t think of any other synonyms for what was quite good. As well as goals, you now hear of world-class throw-ins, world-class goal kicks, world-class haircuts
and world-class pies in the press room at half-time, yum yum.

He’s got a hell of a left peg. That’s because he borrowed it from his mam when she was hanging out the washing.

He’s got it in his locker. The fool. Why did he leave his left peg there? No wonder he keeps falling over.

And the sub is stripped off, ready to come on. So it’s naked football now, is it?

Old-fashioned defending. There’s a whole lexicon to describe brutal tackles in which the defender kicks someone up in the air, straight to A&E.

Doing the dirty work/putting himself about/an agricultural tackle/left his calling card. Alternative clichés that every commentator has in his locker for when yet another world-class, manic, nasty, desperate physical assault is committed by a player at Sunderland, Newcastle and Norwich, currently scared shitless about going down and losing their three Bentleys.

Opened up his body. This is when an operation takes place on the field, such as open-heart surgery, to work out whether any Aston Villa player has got one. OK – it is, in fact, one of the weary commentator’s nicer compliments. He can’t actually describe what the striker did, as it was so quick, so clever, and he totally missed it, but he must have done something with his body, surely. Which isn’t even correct, either. You shoot with your feet.

Very much so. This is a period phrase, as popularised by Sir Alf Ramsey. He got it into his head he must talk proper, sound solemn, or at least like a trade union leader of the times, so instead of saying “yes” he would say “very much so”. It’s having a comeback. Listen to Glen Hoddle – I guarantee that between now and the end of the season he’ll say it ten times, whenever someone has interrupted and he wants to get back to the aperçu he was about to share with us.

Most unpredictable Premier season ever. Or so Sky is telling us, on the hour, meaning “since last season”, which was the most unpredictable one since, er, the season before that.

Hunter Davies is a journalist, broadcaster and profilic author perhaps best known for writing about the Beatles. He is an ardent Tottenham fan and writes a regular column on football for the New Statesman.

This article first appeared in the 28 April 2016 issue of the New Statesman, The new fascism