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Osborne let the value in RBS slip through his fingers

When UK Chancellor George Osborne fired the starting gun on the re-privatisation of Royal Bank of Scotland on Wednesday, he signalled willingness to book a large loss on the deal.

While Osborne is right to note that he didn’t choose the bail-out, or the price paid for RBS, under his guidance the UK government has been an appalling custodian of the bank.

Again and again, for the last five years, the management and staff of RBS have been betrayed by their political masters.

The management team of Stephen Hester, as chief executive, and John Hourican, as investment bank boss, were both ousted to satisfy the media’s thirst for blood.

The goals of the RBS recovery plan were changed for political reasons, over and over again. RBS was always going to need to shrink and had a seriously nasty back book of troubled assets to deal with.

But what started as a simple clean-up of troubled assets turning into lopping off whole businesses. Some of them needed lopping of course — equities and M&A, for example — but those that remained, many of which were perfectly useful and profitable, have been left to wither on the vine.

All banks are now cutting businesses that they aren’t good at. But plenty of businesses where RBS has historically been top tier have been haemorrhaging people, while the repeated downgrades of the firm’s ambitions have left morale on the floor.

Staff had bonuses capped, then shrunk, then capped some more, when the Treasury declined to vote for a 200% variable to fixed comp ratio. Lloyds, the UK’s other state-owned bank was given no such restriction, and was allowed, or even encouraged, to hire staff overseas where it saw a business opportunity, rather than shutter as many offices as possible as quickly as possible.

It’s as though a doctor with a patient in convalescence had started out treating them with antibiotics, moved on to amputations, and then finished off with a course of leeches. Not surprisingly, the patient isn’t looking too well anymore.

The UK government, in response to Fred Goodwin’s tenure at RBS, has just introduced a criminal offence called “reckless misconduct in the management of a bank”.

What about reckless mismanagement of a bank shareholding?

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