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 43.

    7. rajagra
    The public are hypocrites. We gladly make use of free current accounts then whine when *our* choices lead to us paying charges.
    Free ? Would this the the bank's definition of "free" then ? i.e. we put our money in their bank, they pay us nothing in interest but then lend it out to others a huge rates of interest ?

    Because that sure is not my definition of "free".

  • Comment number 42.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • 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 40.

    It's not just banks is it, but also most MPs and big business men who live abroad for 6 months to avoid paying tax.

  • rate this

    Comment number 39.

    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]".

    We havent even started to consider lifting the rock our politicians are delaying that day as long as possible, because, we all know what will be found dont we Mr Hester........Your whole business is based on fraud

  • rate this

    Comment number 38.

    Banks have always been detached from society. Politicians are puppets to bankers and the rich don't pay taxes so how we can expect them to be in touch with society? Let banks fail, put new laws in place to start plugging the numerous tax escapes, throw out ridiculous compensation packages & stop this silly concept of continuous growth at a rate that no-one can relate to.Do that & its a good start.

  • rate this

    Comment number 37.

    9 Minutes ago

    Banks lost touch in the 1980's when they stopped being trusted advisors and started being spivvy salesmen

    Banks were financing BOTH sides of a war long before the 1980s and I doubt even that was the point at which banks had lost touch with basic human decency. I'm no christian, but the story of Jesus turning over the bankers tables took me decades to understand

  • rate this

    Comment number 36.

    The moment people want to do a job so they can become millionaires and drive fast cars is when you attract people who don't care for the job or the public. Football in this country suffers the same fate.

  • rate this

    Comment number 35.

    No 7. Remind me what free banking is? Where you leave reasonable and regular credit in an account and allow the bank to use it for its purposes paying you little or no interest to do so but charging you an overdraft fee if you reciprocate? Does anyone really still believe banks would ever have provided 'free' accounts if they were not making money out of them somehow?

  • rate this

    Comment number 34.

    The problem is those wealthy bankers (and other very rich people) are divorced from society - private streets, private schooles, private healthcare. They don't have to confront those at the bottom and in the middle struggling to survive.

    If one lived in a (hypothetical) village with a closed economy, one would very quickly see the impact of taking 90% of the wealth from everyone else.

  • rate this

    Comment number 33.

    Heh as if we need to be told all this. Anyone with a bank account not on a great wage could have come up with this one.

  • rate this

    Comment number 32.

    The banks & bankers are detached from society as a whole and have made sure they have no responsibility for the actions of their employees. Barclays have been fined almost £300m for fraud of the LIBOR, but although convicted - no one is sacked, no one loses their bonuses and the customer pays the fine. Banking is a criminal organization and protected by government. You or i would go to prison

  • rate this

    Comment number 31.

    Perhaps Mr Hester could start by sorting out the still rude 'bonuses' and excessive salaries being paid? Then turn his attention to the way the bank skips out of paying tax in the UK? Frankly if I were the government I'd have let them all fail - after all Thatcher let all our industries go to the wall so the same should go for these monsters.

  • rate this

    Comment number 30.

    As they are so much in the mire, why are they still sponsoring some major sporting events?
    82% public owned - who has given approval for this money to be frittered away?

  • rate this

    Comment number 29.

    8 It's not Osbourne's fault is it, Brown ruin the country long before he came in. Brown threw open the markets and destroyed pensions, let the banks run riot and used the money to buy public sector votes with pay hikes and massive pension pots.

  • rate this

    Comment number 28.

    Out of touch with reality you say? If I was allowed to print money out of thin air then I would have this issue also....

  • rate this

    Comment number 27.

    And what exactly has this got to do with the Olympics?

  • rate this

    Comment number 26.

    Has anybody else noticed that the comments we're writing on Have Your Say don't seem to be kept for long any more. Is it worth bothering adding anything to this or any other debate?

  • rate this

    Comment number 25.

    " pays huge amounts of taxes and so on."

    No they don't, banks try and get out of paying for anything if they can. Bankers with a moral decency to pay what taxes they are due to pay...don't make me laugh!

  • 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.


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