Melvyn King’s idea of breaking up RBS should be undertaken differently.
RBS Business and Corporate teams include some talented bankers with years of experience of SME lending. When ‘Humpty fell off the wall’ their best deal-doers were redeployed to handle problem cases and ‘manage out’ situations and with that part of the portfolio being ‘cleaned up’ they now face an uncertain personal future. So the bank managers with the right experience and attitude are there – but not in lending roles and not feeling very ‘fulfilled’. In fact, there is probably a small army of them!
The Government could use it’s ownership of RBS to dust off an old dormant subsidiary (there will be some in the basement), squirt some QE money into a separate, ring-fenced, balance sheet and then deploy the right people to get out there and lend it to businesses.
This wouldn’t have to be reckless lending – just a slight shift in an underwriters mandate and with capable people submitting well presented and argued cases based on carefully designed incentive schemes. This would be enough to tip the balance of decisions from ‘really not sure about this one’ to ‘it’s worth a go’.
It wouldn’t need a new bank (with branches and new IT systems etc) to be built. It could be in place by the end of 2013.
The brief then is to build that business into something that can be sold off. A business with an SME portfolio, a growing loan book, a strong team of experienced and motivated bankers, a positive image built on good PR and a fresh culture developed by some strong leadership working in isolation from the main bank. Much more likely to sell in the market than a portfolio of tired branches filled with disaffected staff and customers, a declining loan & savings book and a poor image. Whoever thought that would attract a keen buyer? A pre-arranged exit could even be set up subject to certain objectives being met with the likely buyers being those ‘challenger’ banks, a floatation or private equity.
Go to it Melvyn