34.Following the 2008 banking crisis the UK Government became the majority shareholder in RBS. Through the Bank Recapitalisation Fund, the UK Government bought almost £45.4 billion of shares in RBS. Following a sale of some shares back to the private sector in 2015, HM Treasury currently owns a 70.85% stake in RBS.
35.The Government’s shareholding is held by UK Financial Investments (UKFI), which the Government created to manage its shareholdings in Lloyds, RBS and other institutions on behalf of HM Treasury. According to its website the overarching objective of UKFI is:
to manage these shareholdings commercially to create and protect value for the taxpayer as shareholder and to devise and execute a strategy for realising value for the Government’s ownership stakes in an orderly and active way over time within the context of protecting and creating value for the taxpayer as shareholder, paying due regard to the maintenance of financial stability and acting in a way that promotes competition.
The National Audit Office has described UKFI’s role as follows: “UKFI manages the investments on a commercial basis and does not intervene in day-to-day management decisions of investee companies.”
36.There have been calls from numerous groups for the Government to use its majority shareholdings in RBS to intervene and prevent the closures. Unite Scotland told us that the UK Government should demand that RBS leaders produce alternative closure plans” and Scottish Rural Action called on the Government “to halt these closures” until a review had been carried out. The Federation of Small Businesses made a similar recommendation saying that the Government should “pause the current programme of RBS branch closures, with a view to ensuring that no area is left without a bank branch.” A number of members of the public who contacted us, or submitted their view via Scottish Rural Action’s survey, also argued in favour of direct Government intervention to prevent the closures.
37.We repeatedly invited the UK Government to send a Minister to appear before us to give evidence on the Government’s stake in RBS and its implications for the closure programme. Steve Barclay MP, then Economic Minister to the Treasury declined to attend; instead writing to us to set out the Government’s position:
[…] each bank’s branch strategy, including whether to open or close individual branches, is for the management team of each bank to determine. The Government does not intervene in these commercial decisions. As you will be aware, RBS Group retains its own board, which is responsible for strategic and management decisions. They have decided to announce the closures, in line with their strategy.
[…] The Government cannot reverse the changes in the market and in customer behaviour; nor can it determine firms’ commercial strategy in response to those changes. However, the Government will continue to take positive action to maintain access to vital banking services and ensure banks support communities across the UK when their local branches close.
38.We asked RBS, on several occasions, what their reaction would be if the UK Government demanded that RBS look again at the closure programme. In response to this question Les Matheson, Chief Executive of Personal & Business Banking, RBS; said:
I think we will always talk to MPs and Ministers, but we have to take account of customer behaviour and the changes that are happening in the world with digital.
After repeated questioning on this subject, he replied:
We are a commercial enterprise and we have to act and behave as a commercial enterprise.
39.We explored this issue further with Ross McEwan when he appeared before the Committee. He said that he did listen to the views of the UK Government but that “at the end of the day, I am running a commercial operation and we have to make commercial decisions.” He also said that RBS had received no representations from the UK Government on the subject of branch closures. In their written evidence RBS told us that:
We regularly meet with Officials from across HM Government and Scottish Government. We provided information about the detail of our announcement to Officials in both HMT and the Scottish Government on 29 November 2017.
40.Mr McEwan also argued that he has an obligation to “all shareholders, which includes the UK and all of the taxpayers” to make sure the bank is “in good shape” so that the Government can get as much of its investment in the bank back as possible. This seems to contradict previous assurances we were given by Les Matheson that the closures were not about saving money, or preparing the bank for re-privatisation.
41.We were disappointed that no UK Government Minister appeared to respond to our questions about the closure programme and that we did not have the opportunity to test the policy that the Government “does not intervene in commercial decisions” with a Minister. Notwithstanding the Government’s position that it does not interfere with commercial decisions, we are disappointed that the UK Government has not sought to make stronger representations to RBS about the impact these closures will have on communities across Scotland. If RBS does not act on our recommendation to halt the closures we recommend that the Government use any influence that its majority shareholding provides to apply pressure on RBS to reconsider the closure programme.
54 NAO, , HC 244, July 2017
55 NAO, , HC 418, September 2015
56 Unite Scotland ()
57 Scottish Rural Action ()
58 Federation of Small Businesses ()
59 Mr Martin Sutcliffe (), Scottish Rural Action (), Mr William Gunn ()
65 RBS ()
67 See paragraph 11
Published: 27 May 2018