RBS: What would a perfect bank do? These 6 things, for starters

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We only ask because we all (us included) moan about them, but what do we actually WANT from them?

As MPs prepare to debate the future of the Royal Bank of Scotland this Thursday, we’ve been pondering what perfection would look like in the banking world.

We aren’t saying RBS doesn’t do SOME good stuff already, but it needs to be part of its core purpose, no longer just little peripheral sneezes of Corporate Social Responsibility.

Whether it remains public or goes private (but if the latter, a good price please) all the politicians and executives need to do is tick off this handy list:

  1. Become B corps. The B corporation certification is a new thing in the UK – it creates a new type of company that uses the power of business to solve social and environmental problems, as well as make a profit. B corporations have to meet rigorous standards of social and environmental performance, accountability, and transparency before they can make the grade. They have to deliver positive returns to all STAKEholders – including society and the planet, and not just their SHAREholders, thereby enshrining a new type of accountability that is less greedy and more sensible. If the banks met the B corps standard, we could all breathe a sigh of relief that they were finally acting in everyone’s best interests.
  2. Keep salary ratios within organisations within 2.5:1. This means that the highest paid employee receives no more than 2.5 times the salary of the lowest paid, and ensures that salaries cannot get totally crazy an inequitable. We first heard about this ratio idea through Ethex, the social investing platform and reckon it should become a nationwide thing. Also, bonus bans. Or and agreed % bonus, again administered according to a highest: lowest ratio, according to performance, for which all staff are eligible.
  3. Ring-fence retail banking divisions from investment banking divisions. This has been on the cards since the banking crisis and is finally due to be complete in 2019. It means that retail banking arms will not be funded by investment banking divisions and would operate as separate entities, meaning more protection for customers if there was another major crisis. Perfect. Sense. But of course RBS is annoyed about this change – it’s an awful lot of work and money for the banks – and the taxpayer-owned bailout recipient is saying ring fencing will make it “uncompetitive”. We say – put customers (in this case, also your taxpayer shareholders) first – we want protection from crazy investing decisions that have nothing to do with us. And maybe, just maybe, it will be good for business.
  4. Do everything that John Kay says. John Kay is a very wise economist who could make money better single-handedly if he was in charge. Invest for the long-term, is one of his major themes, but there are many recommendations in the Government-commissioned (and largely Government-ignored) Kay review of equity markets and long-term decision-making, published in 2012 but still yet to be taken to heart: “Short-termism is a problem in UK equity markets…the principal causes are the decline of trust and the misalignment of incentives throughout the equity investment chain.” It’s one reason you get traders placing silly bets on oil prices rising, causing oil prices to rise, then promptly fall again, for example. Every investment manager and stock broker should also be forced to read his latest book – Other People’s Money, before being allowed to keep their jobs.
  5. Invest in home-grown, sustainable industries, like British renewable energy development, SMEs in the north, fintech in Silicon roundabout. Stop placing bets on resource extracting and community destroying in the euphemistically entitled “emerging markets”.
  6. We’re borrowing this one from the excellent Moveyourmoney campaign – re-open branches in isolated, rural locations. Where the older and more vulnerable members of a community are stranded without a local branch. RBS has been closing these all over the place. They are a lifeline for many people – re-open them please.

 

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Rebecca O'Connor

Rebecca O'Connor, a financial journalist, is co-founder and director of Good With Money. Formerly a staff writer at The Times, she covered personal finance and business for eight years before going on to spend three years as communications director at Trillion Fund, a renewable energy crowdfunding platform. Rebecca writes about personal finance regularly for The Times and The Spectator and has written articles for The Observer, The Guardian, Huffington Post, The Ecologist, Moneysupermarket.com, Energydesk, Moneywise, BusinessGreen and Ethical Consumer.