(1) Fred the Shred was not the sole villain of popular mythology.
In one sense he was the dupe ...
RBS's semi-comatose board of directors, especially chairman Sir Tom McKillop and audit boss Archie Hunter, rubber-stamped Fred Goodwin's every disastrous decision as chief executive. Corporate governance, investors, auditors and regulators could have blocked him - or even fired him - at every turn. My book reveals for the first time that Goodwin sought to pull out of his bid for Dutch bank ABN Amro after he realised the exclusion of Chicago-based subsidiary LaSalle Bank would almost certainly be disastrous for RBS. But his desperate attempts to call the whole thing off were thwarted by legal threats from greedy hedge funds that had piled into ABN shares in the hope of a fast buck, and also by entreaties and threats from consortium partner Emilio Botin, chairman of Spanish bank Banco Santander, who was determined to press on.
(2) ... but he was nastier than I thought
I learned that when he was chief executive of the Clydesdale Bank from 1996-97, Goodwin took delight in humiliating colleagues in front of their peers. Former colleagues told me that even David Thorburn, his own best man, now head of the Clydesdale and Yorkshire Banks, was the object of "Fred going mental" in public. "It was astonishing considering they were supposed to be personal friends," he said. Goodwin famously continued in the same vein at RBS, where he regularly lambasted and lampooned colleagues in so-called "morning beatings" and credit committees using a rapier-like intellect to dismantle colleagues who crossed his path or let him down. Sometimes he just singled out people for dressing-downs "pour encourager les autres".
(3) .... and also weirder
To let off steam he went to RAF Leuchars, where he had been given special permission to joyride in the navigator's seat of the 111 Squadron's Tornado F3 fighter jets. He would take great delight in doing loop-the-loops at speeds of up to Mach 2.2. The then Sir Fred had forged such a close relationship with the RAF that, just as he was plotting the disastrous ABN takeover in April 2008, he was appointed an honorary air commodore in No 602 (City of Glasgow) Squadron of the Royal Auxiliary Air Force. He was effectively stripped of this honour in June 2009.
(4) Scottish banking was never prudent and boring ...
Royal Bank of Scotland has gone off the rails before. It came close to collapse in 1793 and only survived thanks to a bailout from the government of Pitt the Younger. The cause was cavalier and reckless lending to merchants and manufacturers - in spite of a severe economic downturn - by its Glasgow branch, which had only be founded 10 years earlier. Alongside the collapses of Ayr Bank in 1772, Western Bank in 1857 and City of Glasgow Bank 1878, and the allegedly "piratical" corporate lending of Bank of Scotland in England and Wales during the 1980s and 1990s, these incidents suggest Scottish banking's reputation for prudence and probity in the period prior to the 2000s is thoroughly ill-deserved.
(5) ... and it never had a golden age
You know the Captain Mainwaring type with his customers' best interests at heart, whose deep knowledge and understanding of the local community ensured the bank lent responsibly and minimised bad debts? What I learned from retired NatWest, Royal Bank of Scotland and National Commercial Bank of Scotland managers was that in the 1950s and 1960s the banking sector was a protected and highly profitable oligopoly. The Bank of England favoured muted competition, as it made supervision easier. There was a gentlemen's agreement between English and Scottish banks not to encroach on each other's territories. British banks liked these cosy arrangements, as they enabled them to overcharge for what was, at times, lousy service.
(6) Emilio Botin is The Daddy
At critical meetings of the ABN Amro takeover consortium in April 2007, Santander's Spanish chairman Botin effectively ran rings around his consortium partners Jean-Paul Votron of Fortis and Fred Goodwin. The "godfather of European banking" seemed willing to trample over his two consortium partners in pursuit of his prey, eventually picking up the plums of ABN Amro - Banco Real in Brazil and Banca Antonveneta in Italy - for a song while the others paid fortunes for ABN's dross. One well-placed source told me that in the build-up to the €71.1 billion deal in April 2007, Botin "would put his arm around Fred and say, 'Fred, you're the best bank CEO in the world - you're amazing!' But at the same time, he'd be picking his back pocket."
(7) Investors are more blameworthy than I thought
Institutional investors and asset management firms have got off far too lightly in this mess. They earn fabulous sums to invest on behalf of end-investors, and effectively owned and therefore controlled the bank. Uniquely, they had the ability to fire its board or enforce a change of strategy. In the 1990s and early to mid-2000s, an addiction to short-term returns meant investors were urging banks to run themselves with "efficient balance sheets" - which meant with virtually zero capital and very high leverage. Yes, Goodwin and colleagues pulled the wool over their eyes, but the 94.5% of investors who voted through the disastrous ABN Amro deal didn't need to act like sheep, or lemmings.
(8) The reign of terror at RBS is not over yet
Many of the 120 current and former RBS, NatWest, Ulster Bank and Citizens Financial insiders that I interviewed for Shredded were terrified of talking to me. Some feared that they would lose their jobs or their pensions if they were found out. Almost all of them only agreed to speak on conditions of the utmost secrecy, with contracts sometimes drawn up in advance. One source would only contact me by throwaway mobile phone, with meeting venues arranged no more than half an hour in advance. Once, the presence of a man reading a newspaper at a nearby table necessitated a change of venue.
(9) Bankers don't do "colour"
Most bankers think in numbers as well as in a horrible alphabet soup of acronyms like P&L, MBS, ABS, CDO, CBS and CPDO. Getting them to recall the atmospheric "colour" surrounding critical incidents - details like how they travelled somewhere, who else was in the room, what the weather was like, the decor of the room, the view from the windows, how their counterparts were dressed, the mood in the room - was sometimes difficult. Thankfully, there were one or two bankers who were good at this sort of thing. Without them, Shredded would have ended up as dry as a bowl of milkless high-fibre cereal.
(10) RBS sought to save its skin at the expense of its own business customers
My book describes how, soon after arriving at RBS, Goodwin sought to bankrupt one of Edinburgh's largest private companies on a whim. He was only prevented from doing so after representations were made to the then CEO George Mathewson. Arbitrarily pulling the rug on business customers - even ones that were trading successfully and had never missed a loan repayment - became more prevalent after an internal decision was made at RBS as it desperately sought to prevent collapse in August 2008. From that moment on, as reports to the UK Government have suggested, there is evidence to suggest that the bank was effectively seeking to put viable, asset-rich business customers out of business in order to prosper at their expense. After alluding to this behaviour in television interviews including one on BBC news in July 2012, I was deluged with correspondence from owners and managers of affected firms, some of whom cried down the phone as they alleged that RBS had snuffed out their life's work.
(11) Press coverage of Goodwin and RBS was pathetic
A bubble of hyperbole surrounded Goodwin and RBS in the wake of the NatWest takeover in 2000. The accolades reached a crescendo when Forbes magazine named him "global businessman of the year" in December 2002. Scotland on Sunday named him Scotland's top man for four consecutive years in 2003 and 2006. He also won numerous corporate and business awards from Trinity Mirror's Scottish Business Insider and was called a "master of integration" by Harvard Business School. A more critical press might have helped avert disaster.
(12) The retail banking revolution of 1985-1995 was deeply flawed
When banks including RBS refocused on shareholder value in 1985-95, they changed their whole approach. They segmented their customers and took a more mechanistic approach to service. In particular, they centralised decision-making, through the introduction of much more sophisticated IT, and hollowed out the branches with decision-makers removed from the frontline. They brought in non-bankers to oversee large parts of their business, with many banks installing sales people in business-critical roles. The holy grail became cross-selling, which often turned into misselling, or the exploitation of their large bases of current account holders by flogging additional products that were often useless or that didn't work. Sales, sales, sales became the goal and staff were incentivised accordingly. As part of this process, RBS introduced a US-style "rank and yank" [promote or sack] way of assessing staff performance according to the value of the products they had sold.
(13) You can't trust politicians
Politicians might talk about reform or retribution of errant bankers when they are in opposition but once they are in power they invariably become pawns of the banking sector. This was true of Tony Blair and Gordon Brown - who frequently intervened on behalf of the bankers, for example, by heading off rules that would have impeded profit-making, kicking necessary reforms into the long grass and generally lowering the regulatory bar. In November and December 2008, both David Cameron and George Osborne expressed a determination to jail criminal bankers, but have singularly softened their stance since entering Downing Street. I conclude that, however badly high-level bankers behave, they have engineered a situation in which supposedly democratic governments will turn a largely blind eye, including management structures and record-keeping that make incrimination difficult. Our wonderful politicians have not just allowed banks to become too big to fail, they have also allowed them to become too big to prosecute. And too big to jail.