Braveheart banking: the fall of RBS

When Fred Goodwin was looking for a marketing slogan in the boom years, he alighted on a simple phrase which encapsulated the ‘can-do’ philosophy of the bank he ran. RBS would, promised the adverts, ‘Make It Happen’. Goodwin and his colleagues made it happen, though not quite in the way they intended.

They turned RBS into a financial monster, the world’s biggest bank, with assets of £1.9 trillion. By 2008 it had become so large and so exposed that if boom ever turned to bust the bank (and the rest of us) would be buggered. And so it proved.

Five years ago this week, Lehman Brothers went out of business. That earthquake triggered a financial tsunami which went on to flatten RBS, which had to be rescued by taxpayers at the cost of £45.2 billion.

So what happened? I have spent two and half years investigating the story of RBS, interviewing many of the actors in this spectacular drama and asking what on earth they thought they were doing. Many of their answers involve the extraordinary behaviour of Goodwin. He was neither lazy nor inattentive. Such was his love of detail that he insisted that the company’s fleet of Mercedes be spray-painted the precise shade of RBS blue. He insisted on masterminding the production of the RBS Christmas card, hated the use of Sellotape and mandated filing cabinets with rounded tops to eliminate clutter.

Obsessed with takeovers and trivia, he paid too little attention to the old-fashioned fundamentals of banking: credit, risk, capital and liquidity. The fancy new products inside the investment banking division (which helped to destroy RBS) were a mystery to him. A preoccupied Goodwin did not want to know what he did not already know.

While examples of egregious hubris can be found in Wall Street and the City, the RBS story has a distinctly Scottish component.