As I See It
Davies can influence government; now he needs to win friends
Sir Howard Davies today becomes chairman of Royal Bank of Scotland. To some it’s a poisoned chalice, perhaps not so potent as when his predecessor Sir Philip Hampton took the job in the immediate aftermath of the bank’s near-collapse, but a cup which nonetheless still overflows with some nasty ingredients.
There are further regulatory and legal hurdles to leap and he will need to have his excuses ready when the bank receives its next slap down for past misbehaviour.
But his main task will be ensuring the restructuring job is completed and that the bank is made fit for the purpose of getting it back in private hands.
Sir Howard was a controversial choice for the job. As a former chairman of the disbanded Financial Services Authority his appointment raised a few eyebrows.
He is an establishment man with a pedigree of top level appointments. As a former director-general of the CBI, and a deputy governor of the Bank of England he has worked at the coalface of the City and has been a pivotal figure in the business and financial community. His roles have made him a participant in the shaping of government policy on the economy.
His supporters say he has a broad strategic mind and is very quick to see the bigger picture. He will certainly need to deploy these attributes at RBS. One almost certain reason he got the job was because of his experience in dealing with the government. RBS will remain in public hands for some time and a good working relationship with the Treasury is vital, more so an ability to see eye to eye with Chancellor George Osborne who does not suffer fools gladly. Mr Osborne despatched RBS chief executive Stephen Hester when he disagreed with the government’s strategy for the bank, and recently tipped the Financial Conduct Authority’s chief executive Martin Wheatley out of his job.
Much has been said about Sir Howard’s need to get a grip on the regulatory and legal issues that remain outstanding. In truth, much of the groundwork on this has been done by his predecessor. Sir Howard’s role is twofold: to soak up the punches yet to be delivered by the regulators and courts, and to handle public criticism as it emerges. It is how he handles the public response that will mark him out as either an apologist passing the blame to others, or a leader with an understanding of the wider outrage that continues to conflict the bank’s image.
The process of leading RBS back into private ownership has begun but it will take years to move RBS fully into private hands and this requires growing confidence in the bank. If he can rebuild trust and faith in RBS he will deserve the fat salary he is receiving.
His predecessor’s reign was tainted not only by its past behaviour but by the unexpected setbacks and frustration that slowed down progress in getting the bank back in shape. As he said himself, none of those who set about restructuring the bank foresaw the billions of pounds of fines it would face over irregularities. Further reputational damage came over its alleged treatment of small business owners and the IT meltdowns that undermined attempts to win over its retail customers.
Sir Howard begins his tenure believing his experience of financial services will give him a head start. He will also be hoping that there are no more surprises lurking in the RBS cupboards.