At the Royal Bank of Scotland, the business of rescuing the world's worst bank - The Wa... - 0 views
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Rory Cullinan runs the world’s worst bank from a fifth-floor office overlooking Liverpool Street station in London. His 400-person outfit doesn’t lend money or trade securities. Instead, it sells blown-out mortgages, busted loans and entire companies amassed by Royal Bank of Scotland Group before it collapsed in the global financial crash of 2008. On a Friday afternoon, Cullinan is savoring a new feeling in his life as a toxic-asset disposal specialist: hope that the worst is finally over. After four years of marathon dealmaking, Cullinan’s Non-Core Division has whacked a 258-billion-pound ($390 billion) financial junk pile down to 57 billion pounds and eased pressure on RBS’s balance sheet. That has been chief executive Stephen Hester’s top priority since the government saved RBS from insolvency beginning in late 2008 with a 45-billion-pound lifeline — the biggest bank bailout in history.
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The RBS mess has pitted Chancellor of the Exchequer George Osborne, who continues to stand behind Hester’s turnaround plan, against Bank of England Governor Mervyn King, who says it is not working. King told the Parliamentary Commission on Banking Standards that the government should fully nationalize RBS, then split it up and re-privatize the “good” pieces of the bank to recoup what it can of the bailout.“We should simply accept the reality today that it is worth less than we thought and should find a way to get an RBS that can be useful to the U.K. economy,” said King, 65, who will retire June 30.
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Hester has told investors and analysts that getting a grip on RBS has proven a far tougher task than he expected because the euro zone’s sovereign-debt crisis and two recessions in Britain have undermined the bank’s bedrock lending business. Hester has also been hit with misdeeds that took root before he arrived at the bank.In February, RBS agreed to pay a $612 million penalty to regulators and law enforcement officials in the United States and Britain to settle allegations that 21 of its traders had manipulated the London interbank offered rate, or Libor, from 2006 to 2010. Barclays paid a $453 million penalty in July to settle its Libor case, and UBS was fined $1.5 billion in December.