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Time to target RBS culture, not its staff

There is a sickening familiarity to the news that the Royal Bank of Scotland is preparing to cut thousands of jobs.

We have been here before, many times, and it is likely that we will be here again in the future. Under the relatively new leadership of Ross McEwan, the bank has made it clear that it is on a mission to cut costs hard and it is ordinary members of staff, many of whom are on low wages, who are making the sacrifice.

The job cuts will be a personal blow for the bank staff concerned but what will make the cuts even harder to stomach is the fact that, despite protestations to the contrary, RBS has still not properly transformed its bonus structure.

Under Stephen Hester, Mr McEwan's predecessor, the total amount paid in bonuses was reduced by half in three years and Mr McEwan has said he will not take a bonus for 2013 and 2014. However, bonuses are still an everyday expectation at the bank and Mr McEwan's restraint on his own bonuses is voluntary - he is still entitled to them. The recent award of £1.5 million in shares to the chief executive will also be a bitter contrast to the job losses.

All along, the bank's argument on the job cuts has been that they will improve its performance - and it certainly needs to be improved - but there is a limit to the number of jobs that can be taken out of an organisation such as RBS without damaging staff morale and the quality of service to customers. With tens of thousands of job cuts since the bank was rescued by the taxpayer in 2008, it may already have passed that point. Whether the job losses will, in the end, deliver better performance remains to be seen, but on almost every other front Mr McEwan remains unproven.

His predecessor did much of the heavy lifting needed to change RBS and, although Mr Hester also did his fair share of job cutting, he succeeded not only in introducing a more restrained tone at the bank, he also showed prudence in increasing the bank's capital levels and ridding it of around £900 billion of assets it acquired by its bloated height.

Mr McEwan has yet to make any significant progress in improving the bank's performance and its relationship with the public and customers, and the list of unsolved problems remains long. The understandable anger of investors who suffered heavy losses on shares bought in the rights issue in 2008 is still simmering, but the bank refuses to budge. The under-investment which led to the IT fiasco last year is still an issue. In addition, there have been allegations that RBS forced companies into default to seize their properties remains, and an investigation is ongoing.

Of course, these problems can all be traced back to the bad old days of Fred Goodwin and his reckless risk-taking, but it is Mr McEwan's job to tackle the legacy while also moving RBS back into full private ownership and improving the standing of the bank with customers. These aims can only be achieved by a profound cultural change at the bank and a continued switch of focus from bonus and profit to customers. That cannot be achieved by job cuts alone.

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Finance

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