The boss of the Royal Bank of Scotland is warning the bank faces a further hit to its reputation – and a huge fine – from the Libor scandal, which has engulfed Barclays and caused a fresh wave of anger against bankers.
While the £290m fine slapped on Barclays has helped to distract from the computer meltdown at RBS, which prevented up to 13m customers accessing their accounts for up to a month, Stephen Hester, RBS's chief executive, said the rate-rigging scandal was bad for the entire industry.
'RBS is one of the banks tied up in Libor. We'll have our day in that particular spotlight as well', Hester said in an interview with the Guardian. He did not know the size of the RBS fine but said that the investigation by the Financial Services Authority was 'in process'.
Hester is preparing to represent first-half figures – showing another loss – on Friday, when the bank's exposure to interest rate swap mis-selling will also be a focus. RBS is said to have paid £25m to just one businessman who was mis-sold products intended to protect against interest rate rises.
Hester said: 'Even though when all the Libor (fines) are out most of it is going to be around the wrongdoings of a handful of people at a number of banks. Those wrongdoings taint a whole industry beyond the handful of people and that makes it a huge problem'.
The chief executive has already waived his bonus for 2012 following the furore surrounding the £1m he was to be handed for 2011 before the political outcry forced him to hand it back. The reaction to the bonus in January 'caught everyone on the hop', he said.
'Let's set aside if it was fair or not, in this case I thought we ... had fallen down on the job'.
He declined to express any sympathy for Bob Diamond, the boss of Barclays who was forced out by regulators in the wake of the Libor scandal. 'Everyone has to live with the prospect of professional mortality. Chief executive jobs bring with them job insecurity ... I've always accepted that part of it is that I will not exit in a way and timing of my choice'.
Hester admitted the bailed-out bank might have been able to avoid its computer crisis if more had been spent on upgrading existing systems rather than on developing new systems.
He wants the bank to focus on 'putting customers first', which is hard to accept perhaps for those at RBS, NatWest and Ulster caught up in the computer meltdown, some of whom incurred problems again last week.
'An element of banks became detached from society around it, an element was for traders making money for themselves or the banks, and customers (were) the means of making money. We have to be sure that banks do it the other way around'.
He added: 'RBS has seen a big mushrooming in spending on technology. With hindsight maybe a bit more of that increase in spend should have been in the core taken-for-granted systems that work every day. Some of our focus was on the new things people want', Hester said.
He is reluctant to pre-judge an ongoing investigation, but stresses that any warnings about impending computer disaster had not reached board level.
Hester has 18 months left to go of his "clean up" operation of a bank that made record £24bn losses in 2008, after which many banking sources believe he will leave RBS.
The clean up will move a step closer to completion later this year when he expects the bank to exit the asset protection scheme, set up to insure some £300bn of the bank's most toxic assets.
But, even then, any attempts to sell off some 90bn shares will take time. 'The process of the taxpayer getting its money is going to be longer and slower than we hoped in the past because the economy is recovering slower and the regulatory picture has changed. But I believe it will happen ... even if it is a lot more slower than we thought'.
Despite all the talk earlier in the year that Qatar was being lined up to step in to invest in RBS, Hester said the bank was inextricably linked to the economy, which will need to grow before the shares start to rise.
Taxpayers are currently losing more than half the £45bn invested in the shares during the bailout although Hester has indicated that the first sale of the shares could take place at a loss.
guardian.co.uk © Guardian News and Media Limited 2010