RBS boss admits banks became 'detached from society'

Stephen Hester Mr Hester wants banks to return to putting their customers first

Banks became "detached from society" and still need to reconnect with their customers, the chief executive of Royal Bank of Scotland (RBS) has admitted.

In an interview with the BBC's Today programme, Stephen Hester said the industry was "coming down to earth with a bump" following recent scandals.

He added that the UK could not afford "blasting it to smithereens" because of the vital role banks played.

However, he also said further problems at the banks may be discovered.

Mr Hester was speaking after RBS reported a half-year loss of £1.5bn.

The bank also confirmed on Friday that it would put aside £125m to pay compensation to customers affected by the recent breakdown in its computer systems.

Account holders at RBS and its NatWest and Ulster Bank subsidiaries faced disruption for up to two weeks in June after a software upgrade at the bank.

'Vital industry'

RBS has been caught up in three recent scandals affecting the banking sector.

Start Quote

A successful business must be built off the back of serving customers well, and until we as an industry can say we are doing that, we won't have finished the changes we need to make”

End Quote Stephen Hester RBS chief executive

Firstly, it is being investigated over the Libor interest rate-fixing scandal that saw fellow bank Barclays fined £290m in June.

Mr Hester told the BBC that as RBS was "still being investigated" it did not yet know what fines or settlements it may face.

RBS has already sacked a number of staff connected to the matter.

Separately, RBS is having to pay compensation for two mis-selling scandals: mis-selling payment protection insurance, and mis-selling specialist insurance called interest rate swaps to small businesses.

Mr Hester said: "We can't afford the luxury of giving up on the banking industry, of blasting it to smithereens, as much as that might be enjoyable, or get out our frustrations.

"This is an industry that the world needs, that the country needs, it needs it to oil, if you like, the economic wheels, and we need it because it employs in its own right millions of people, and pays huge amounts of taxes and so on."

Regarding the possibility of banks discovering additional problems, he said: "of course there is still a risk that you turn over rocks and find new things [that you have to clean up]".

Mr Hester added that while the banks had now largely fixed all their structural faults, they still had to return to putting customers first.

"It is very clear to me," he said. "A successful business must be built off the back of serving customers well, and until we as an industry can say we are doing that, we won't have finished the changes we need to make."

Mr Hester was appointed RBS chief executive in 2008, with the job of turning it around after the government bailed it out with billions of pounds of taxpayers' money.

The government currently owns an 82% stake in the bank.


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  • rate this

    Comment number 163.

    It’s not just the banks though, is it? The whole global financial system needs to be changed. We need to start from the standpoint of what we think a good society needs. That does not include a few individuals having enormous amounts of wealth for doing very little, or having little value for society. Get away from the idea that money is more important than people, then we might get somewhere.

  • rate this

    Comment number 144.

    Its easy to pick on the banks. Most people don't even know what an investment banker actually does and just blindly follow as the media gives us a witch to burn.

    You can't blame organisations for seeking profit. What you can blame however, is a broken regulatory state that didn't check how that profit was being gained.

    The FSA should be the ones taking the flack, they're the ones who failed.

  • rate this

    Comment number 41.

    A lack of corporate governance has bred this culture. Without responsibility and accountability this will continue. Its hard to sway investors to voice their concerns in an AGM as a lot of them are institutional and are up to the same activities.

  • rate this

    Comment number 24.

    A nice contrast in approach from Mr Hester compared to many of his former peers - Banks are important to society only so long as they serve it, the rest of us are not here to work and live at the banks behest as some other CEOs appeared to believe. We are one society - we need them but most of all they need us, they do not exist in a vaccuum.

  • rate this

    Comment number 15.

    I so wanted to post a comment on this article as follows: At last, a Bank CE has admitted what many of us already knew “that the banks were detached from society and that we (the society) have brought them back to earth. Need we say or state more? Hope others still in the state of denial "get it" as well.


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