NatWest, formerly trading as the Royal Bank of Scotland (RBS), has had its fair share of scandals. Indeed, the bank achieved such notoriety that a documentary was made about RBS called “The Bank That Almost Broke Britain”. The actions of previous Chief Executives have caused many investors and consumers to lose trust in the bank. Former CEO Fred Goodwin lost his knighthood and was named as one of the “25 people to blame for the financial crisis in 2008” by Time Magazine. This was because of his overzealous expenditures, which culminated in a £45.5bn government rescue deal by the Government, and the taxpayer taking up a 62% stake. Goodwin’s successor Ross McEwan resigned in 2019 after £365 million of laundered money was found to be going through the bank, and he was accused of lying to MPs.
Clearing all this up is an unenviable task. Yet, watching all the scandals from the sideline and working her way up the ranks, was Alison Rose. She became CEO in November 2019, having been named by The Times as the strongest candidate to replace McEwan and reform the bank’s reputation. Rose’s loyalty to the bank, which she joined on a graduate scheme in 1992, is evident through her working up the ranks in multiple roles: Deputy CEO of NatWest Holdings; Chief Executive of Commercial & Private Banking; Head of Europe, Middle East and Africa, Markets & International Banking; and Global Head of International Banking Capital and Balance Sheet.
This experience suggested to NatWest’s board that she was capable of reestablishing one of the oldest banks in the country and turning its fortunes around.
After becoming the first woman CEO of a major British lender, Rose was shortlisted for the “most influential woman in investment banking” award by Financial News. She was also included in the Women in FinTech Powerlist and named in Vogue’s Top 25 Most Influential Women in 2019. In addition, she personally launched The Rose Review, which uncovered that closing the gender gap would contribute £250 billion to the UK economy.
For many, Rose’s approach appears to be working so far. The government’s stake in the bank has dropped to under 50% this year after it sold £1.5 billion worth of shares back to the bank. John Glen, Economic Secretary to the Treasury, described this as a landmark moment for NatWest. Rose said in response: “Reducing government ownership below 50% is an important milestone for NatWest Group and a further demonstration of the progress we are making as we continue to deliver for our customers and shareholders.”
This means taxpayers’ shares are being reduced in the company and NatWest is returning to a fully private bank. But will this mean the government will have less say in protecting jobs and avoiding the same old problems from reoccurring?
The renaming from RBS to NatWest Group in 2020 showed the market that Rose was about to make big changes and meant business. Rose declared: “the bank has changed fundamentally over the last decade and now is the right time to align our group name with the brand under which the majority of our business is delivered.”
That said, in April this year, there was a risk shareholders would protest against plans to overhaul executive pay, following advisory firm Glass Lewis’s criticisms of the measures. However, despite this, 93% of shareholders voted for the bank’s new policy, the first executive pay overhaul since the bank returned to a majority private. This new plan will see the CEO’s net pay increase to £5.2 million a year, as Rose can earn up to 150% of her £1.1 million salary. The new bonus plan could also eventually double her base pay.
A combination of the changes will allow Rose to earn 25% more in bonuses than under the current policy, and raise her potential pay prospects by 19% in a bid to bring executive pay closer to levels offered by other UK banks. In their 2021 Annual Report, NatWest said: “we recognise that the move to a more normal construct which involves an increase to total compensation represents a material change and intend to make the transition to the new policy over two years.”
The change in name is clearly to distance the bank from its past scandals as RBS. However, some may argue this may work only for as long as other hidden dealings remain out of the public eye. Although the change could be deemed as aesthetic it could also be more fundamental in a bid to hide previous dealings for example private bank Coutts and Co is part of the NatWest Group and was revealed in the Panama Papers to facilitate the possession of offshore accounts, and tax evasion. Rose also sits on the Coutts Charitable Foundation.
The UK’s Financial Conduct Authority sent a letter to RBS asking for “information about any relationship RBS has with the Panama-based law firm Mossack Fonseca or any individuals named in recent media coverage in connection with the same.” Although there was a degree of media coverage from The Herald which described NatWest’s “succession of scandals – the Panama Papers, the Paradise Papers, PPI, endowment mortgages, private pensions – as fatally undermining capitalism’s moral claim to be the fairest and most efficient economic system.”
Due to the vast amount of other names produced, NatWest and its links with Coutts and Co have been somewhat overlooked. Although there was no media coverage of shareholders’ uproar, shares in NatWest did drop dramatically by almost half after the Panama papers were released in April 2016.
Neil Wilson, the chief market analyst at Markets.com also said: “the cautious outlook, with management expecting ‘challenges’ to income ahead, and weaker NIM (net interest margin) is part of the problem. Equally, RBS is forecasting up to £1bn in restructuring costs this year from the refocusing of NatWest Markets and the ongoing shrinking of the group’s cost base. There will also be a £200m hits from regulatory changes affecting the personal business.”
There is also concern that many questions remain unanswered. Dharshini David, following the plan for the change of name, commented that Rose did not mention press reports of potential job cuts. Two years on, these reports continue, with recent headlines reading that 160 bank call centre jobs are at risk as redundancy processes start. A surprising result given Rose’s salary increase. Although Rose warned on her first day in 2021 that she would need to “reduce the bad costs across the bank,” but has not commented personally since.
However, in March 2022 headlines about Natwest job losses read: “160 bank call centre jobs under NatWest at risk as redundancy processes started.” Rose herself did not comment but a NatWest spokesperson stated: “we have taken the difficult decision to reduce the number of operational roles in our customer support business and colleagues are currently considering if they wish to apply for voluntary redundancy. We will support those colleagues who apply with a comprehensive support package. We aim to complete this process without compulsory redundancies.”
Following an increase in bonuses and profits this year 2022 Rose commented: “we are acutely aware of the challenges that many people, families and businesses continue to face up and down the country and are working alongside our customers to provide the support they need – whether that is managing their money better, saving for a house or retirement or starting or growing a new business – as well as playing a leading role in the transition to net zero”
It is undeniable Rose has had to face a lot of challenges as well as holding the title of first woman CEO of one of the big four. Ongoing complaints of a sexist culture and harassment within Natwest, which in 2019 saw the bank pay a female banker, £150,000 after she sought legal action when she found out a male counterpart doing the exact same job was being paid £31,610 more than her per year.
In addition, Coutts was criticised in 2018 after former staff accused it of having a sexist culture and failure to handle complaints. Before becoming CEO Rose consistently supported women in business: in March 2019 The Rose Review of Female Entrepreneurship commissioned by the government showed barriers faced by women starting and growing businesses. Furthermore, since becoming CEO, she continues to share her experiences of being a woman in a male-dominated sector. Speaking at the Telegraph’s “Women Mean Business Summit,” Rose said: “we cannot allow [the pandemic] to let things go backwards for women.”
Furthermore, Rose has been consistently vocal on taking on climate change. She was named Green Leader of The Year, by BusinessGreen 2021. Following the award ,Rose commented: “I am particularly proud of the partnerships we are building, as we collaborate with peers and governments on initiatives such as the Net Zero Banking Alliance, of which we are a founding member, and our support of COP26, of which we are the banking sponsor.” In a new ESG climate, Rose has acted early and linked it to Natwest’s “core purpose.” At The Hutton Series on Climate Change, Rose shared Natwest’s goals “to achieve net-zero carbon this year and to become climate-positive by 2025 and use renewable electricity across the global business.”
Rose has had to tackle the economic impact of Brexit, crypto-scams and establishing herself as a CEO during the pandemic. In an interview with Bloomberg about crypto scams, Rose said a “high proportion” of investment fraud cases are crypto-related, adding Natwest “stopped over £355 million ($438 million) of fraud against our customers.”
One of the ways Natwest is tackling crypto-scams is by refusing to serve business customers who accept cryptocurrencies as payment as they were deemed high risk. In 2021 Natwest cut payment channels to Binance and restricted the amount customers could send in cryptos like Bitcoin. Morten Friis, a NatWest board member and head of its risk committee said: “we think of cryptocurrencies as high risk and we’re taking, for that reason, a cautious approach to this. It’s an area where regulation is very much in evolution and we’ll obviously respond to that as things change.”
It is undeniable that Rose has had a multitude of challenges to face, whilst consistently proving herself as a CEO and being an example for women. Despite Rose’s early successes in reforming NatWest’s reputation, there continues to be speculation as questions remain unanswered about jobs being cut, despite profits and bonuses, and whether reformation is possible after such volume of scandals. The question remains whether Alison Rose will be able to build customers’ and shareholders’ trust in NatWest back up, and if she can do so without any other scandals being exposed.
Author: Bronwen Latham
#Natwest #RBS #AlisonRose #ESG