RBS Chairman eases on investment banks
(18 January 2016 – United Kingdom) In an interview with Bloomberg TV, Royal Bank of Scotland’s (RBS) Chairman, Howard Davies said investment banks in the UK must “rethink” their services as new regulations look to implement 'ring-fencing', where-by lenders are required to separate riskier operations from consumer-banking units.
“The future for European investment banking is not so great,” Davies said on Friday. “All of the U.K. banks, including RBS, have to rethink what kind of investment bank we can offer.”
Taking over the Chairman’s position in August 2015, Davies is tasked with helping complete one of the biggest turnarounds in global finance after RBS required a £45.5 billion (A$94.6 billion) bailout in the banking crisis.
The bank is withdrawing from commercial and investment banking operations in 25 countries as it seeks to focus on consumer lending in the U.K. and Ireland. CEO Ross McEwan is eliminating thousands of jobs and seeking to cut risk-weighted assets at the unit to about £30 billion by 2019 from £107 billion in 2014.
“We’re downsizing the investment bank rapidly and that’s going well, but it’s still quite a lot to go,” Davies said. “The early cost-cutting is the easier bit than the later cost-cutting, so that’s still a challenge.”
UK Prime Minister David Cameron is “not going to change” the rules to help investment banks, according to Davies. “They’ve decided on that legislation, it’s gone through parliament. We’re done with that, that’s what’s going to happen.”
He said the regulations “inevitably have an implication for the cost of capital in your investment bank because that can’t be supported by the parent bank and won’t be supported by the central bank.”
“It’s difficult for us now to be all things to all men. I suspect I’m a little bit pessimistic about UK investment banking at the moment.”
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