Blog 2 - The Enlightenment of RBS to Chinese banks——due to the 2008 financial crisis
This week I watched the BBC Documentary named "RBS: Inside the Bank That Ran Out of Money". As a multinational financial institution with a long history and wide attention in recent years, Royal Bank of Scotland has experienced a roller coaster like transformation from leap to collapse and then restructuring in just over ten years. Its business restructuring and strategic transformation since 2008 have important reference significance for banking financial institutions, which is worthy of in-depth study and discussion.
During the 10 years of RBS's merger and acquisition expansion from 1998 to 2008, which is also the 10 years of its chief executive, Fred Goodwin, many mergers and acquisitions have a strong color of personal heroism. Previous successful cases have won over trust and absolute authority of investors and management and directors followed the radical strategy of Goodwin instead of effective restriction. Therefore, an important lesson and Enlightenment of RBS case is that we should improve the scientificity of strategic decision-making, strengthen democracy, and avoid excessive worship of individual behavior with past performance.
Second, the strategic expansion of bank operation should meet the requirements of prudence and sustainable development.
Based on the importance of big banks in the economic and financial system, the development of banks should always adhere to the principle of prudent operation, and always adhere to capital constraints, risk control and long-term sustainable development.
Third, international development should always focus on customers rather than simply pursuing scale growth.
In the past few years, RBS has been involved in cases such as LIBOR manipulation scandal, improper sales of payment protection insurance and improper sales of interest rate swap contract to small enterprises due to excessive pursuit of its own profit growth. RBS has been criticized by public opinion and the public, its reputation has been greatly damaged, and more importantly, it has lost the trust of customers. Obviously, fraud and manipulation will be abandoned by customers and the market.
Fourth, focus on improving cost efficiency and providing professional and high-quality financial services.
RBS's new strategic transformation began to emphasize cost cutting and simplified business model, focusing on providing customers with the core products of their most concerned advantages. To provide the most efficient services and the most popular products, and lay a solid foundation for the sustainable development of the bank.
Refrence：
RBS (2009), Progress versus Strategic plan. Avaliable at: https://www.investors.rbs.com/2013-at-a-glance/progress-versus-strategic-plan.aspx
RBS's prosperity and decline
From the year of 2000, RBS has jumped from a little-known regional bank to a world-renowned financial giant. In this seemingly short process, the scale and radical “M&A” is seen as a powerful weapon for its prosperity. Goodwin's approach in the acquisition of NatWest made RBS once famous and quickly expanded its market share in the UK after the completion of the largest hostile acquisition in British history. The acquisition of ABN AMRO Bank in 2007 made RBS achieve the final madness. The “Century M&A” created by the skyrocket purchase of 71 billion euros once made RBS reach the global financial market, but it also became The financial building collapsed directly into the fuse. In order to maintain national financial stability, the British government was forced to assume responsibility for the rescue of RBS and quickly embarked on a series of actions. In November 2008, the British government injected 20 billion pounds into RBS to form the UK Financial Investments Ltd..Measures
In 2009, Royal Bank of Scotland developed a five-year strategic plan to restore the independence of Royal Bank of Scotland.
The Enlightenment of RBS to Chinese banks:
First, establish a good corporate governance mechanism to improve the scientific strategic decision-making.During the 10 years of RBS's merger and acquisition expansion from 1998 to 2008, which is also the 10 years of its chief executive, Fred Goodwin, many mergers and acquisitions have a strong color of personal heroism. Previous successful cases have won over trust and absolute authority of investors and management and directors followed the radical strategy of Goodwin instead of effective restriction. Therefore, an important lesson and Enlightenment of RBS case is that we should improve the scientificity of strategic decision-making, strengthen democracy, and avoid excessive worship of individual behavior with past performance.
Second, the strategic expansion of bank operation should meet the requirements of prudence and sustainable development.
Based on the importance of big banks in the economic and financial system, the development of banks should always adhere to the principle of prudent operation, and always adhere to capital constraints, risk control and long-term sustainable development.
Third, international development should always focus on customers rather than simply pursuing scale growth.
In the past few years, RBS has been involved in cases such as LIBOR manipulation scandal, improper sales of payment protection insurance and improper sales of interest rate swap contract to small enterprises due to excessive pursuit of its own profit growth. RBS has been criticized by public opinion and the public, its reputation has been greatly damaged, and more importantly, it has lost the trust of customers. Obviously, fraud and manipulation will be abandoned by customers and the market.
Fourth, focus on improving cost efficiency and providing professional and high-quality financial services.
RBS's new strategic transformation began to emphasize cost cutting and simplified business model, focusing on providing customers with the core products of their most concerned advantages. To provide the most efficient services and the most popular products, and lay a solid foundation for the sustainable development of the bank.
Refrence：
RBS (2009), Progress versus Strategic plan. Avaliable at: https://www.investors.rbs.com/2013-at-a-glance/progress-versus-strategic-plan.aspx
This article introduces the prosperity and decline of RBS, and gives a lot of inspiration in the end, which has author's own understanding, and I think it is a very useful article.
ReplyDeleteThe author explain the enlighten very specific, and also describe the RBS into prosperity, decline and measure, help the reader easily to understand.
ReplyDeleteThe author has explained the influence of RBS to China banks very clearly, and detailed information was provided.
ReplyDeleteThis blog is very interested. It elaborated the RBS's prosperity and decline , also gave the measures. Because of this situation, the author gives the suggestion to Chinese banks according to RBS.
ReplyDeleteThis blog is great! Under the premise of introducing the background, the author had her own understanding and analysis of the event measures. I think you should write a little more description of the Bank of China in this blog. What do you think about it?
ReplyDelete