At Lennoxlove Book Festival I was asked if I was working on a follow-up book on the Royal Bank. I would like to but Ian Fraser, financial journalist, blogger and tireless tweeter has beaten me to it. What promises to be the definitive account of Scotland’s other great banking disaster will be published by Birlinn in 2013.
Strong competition between Scotland’s two major institutions helped to bring about the seismic and ultimately fatal changes in the way banking was done.
Twenty-five years ago Bank of Scotland was outperforming its St Andrew Square rival in efficiency, innovation, customer service and profits. Change was needed at the Royal Bank of Scotland and it came with Dr George Mathewson.
HUBRIS gives a chapter to the rapid changes Mathewson engineered. Compared to the gradual evolution which Bruce Pattullo had encouraged at the Bank, the upheaval at the Royal was more like Mao’s Cultural Revolution. Hundreds of bank managers found themselves facing early retirement or having to reapply for their own jobs. This chapter of history is adrenalin-fuelled but produced a few jokes.
Q: What is the definition of an optimist?
A: A Royal Bank manager whose wife irons five white shirts on a Sunday evening.
The medicine worked. Royal Bank profits zoomed from negligible to over £1 billion. Less visible, there were changes in management style, which replaced traditional values with competitive drive. Common values and problems discussed over coffee or lunch gave way to analysis, feasibility reports and business plans. The old concept of the well-rounded banker who had studied all aspects of the craft was disappearing.
From its lofty perch on The Mound, Bank of Scotland contemplated these changes by its upstart rival. The older guard thought the Royal changes flashy, dangerous and bound to end in tears. Younger managers looked on in envy and felt their revolution had not gone far enough.
But the sales culture in banking had been growing long before HBOS came on the scene. An email from my brother, David, last week brought a fascinating observation about Lloyds TSB – the fourth main player in the HBOS banking tragedy.
In the early eighties, he toured the country with Brian Pitman, chief executive of Lloyds TSB, acting as his facilitator as he told branch staff to stop just serving customers and start selling. “We called these tours ‘The Life of Brian’. Lloyds had just bought Abbey Life and a bank selling life insurance seemed to be the bright, remunerative future.”