Ross McEwan in Focus: Former RBS CEO Heads to Australia

RBS has taken up a large amount of space here in Financial Regulation Matters since the blog began, and also column inch after column inch in the business media. Financial Crisis-era transgressions, headline-catching financial penalties (whether large enough or not), a return to profitability, sell-offs that represent losses for the taxpayer, and also running businesses into the wall are all aspects that plague the recent and current era of the massive bank. However, now that Ross McEwan has made his move back to Australia after resigning in April, it is worth taking a closer look at the man that led the bank through one of the most difficult periods in its nearly 300-year history.

The post-Crisis era for RBS has been, and arguably continues to be turbulent (despite returning to profitability). Going through those post-Crisis era developments is worthwhile, but we shall do that through the prism of understanding Ross McEwan more. Born in 1957 in New Zealand and educated at Hastings Boys’ High School – a leading sporting High School in New Zealand – McEwan went on to study Business Studies and Human Resources at Massey University, despite failing an accounting module twice. After this, McEwan went to the US, where he read for his M.B.A. in Harvard Business School. After starting his career as a Human Resources manager at Unilever in New Zealand, McEwan became one of the youngest CEOs in New Zealand when he ran the local operations of French Insurer Axa. After holding a leading role in a New Zealand stockbroking firm (First NZ Capital Securities), McEwan moved into banking with Commonwealth Bank in Australia as CEO of the retail banking arm. It would be in the same sector of banking that McEwan would make his move to the UK, as the boss of the retail arm. In 2013, with Stephen Hester stepping down, RBS were rebuffed in their approaches to external candidates like BlackRock’s Mark McCombe, leaving the internal favourite Ross McEwan free to take the reins of the bank. When McEwan started as CEO, he began with a ‘gesture’ of refusing to take his bonus for the first two years, as he wanted to avoid ‘the drama’ of taking bonus payments whilst the bank was performing so poorly. Whilst the bank did hand out more than £2.5 million in bonuses to its executive team in 2015, McEwan continued to waive his cut, although he did receive the final tranche of the £3 million in shares he was given when joining the firm.

Whilst executive pay continued to dominate the headlines in 2015, McEwan was busier dealing with fines for the bank. In 2014 the bank began setting aside hundreds of millions of pounds for Forex Rigging and PPI-related issues, and in 2018 the big news came that the bank had settled with the US Department of Justice for a total of $4.9 billion, in order to end an investigation into its sales of financial products in the lead-up to the Crisis. This news was met with cheer by the British Government, as the sale of tranches of shares that the government owned was eagerly planned. McEwan declared that it was a milestone movement and a ‘stark reminder of past behaviours of this bank that we should never forget’. Yet, whilst the bank returned to profitability in late 2018/early 2019 and McEwan felt comfortable enough to take his bonuses of £3.8 million in 2016 (despite recording a £2 billion loss), £3.5 million in 2017, and £3.58 million in 2018, there was a looming issue that would cast a long shadow over McEwan’s legacy.

In 2013 McEwan stated that the allegation that RBS were running small and medium-sized enterprises into the wall to collect the debris were not true, declaring that ‘no evidence has been provided for that allegation to the bank’. RBS Chairman, Sir Philip Hampton, called the allegations ‘unsubstantiated’ and ‘anecdotal’. Nevertheless, with a small number of politicians maintaining pressure on the bank, the bank set up a £3-400 million compensation fund for SMEs affected by the practices of the now-infamous Global Restructuring Group (GRG) – the unit within RBS that was tasked with helping SMEs. With politicians demanding that a bigger compensation fund was put together, McEwan was criticised not for his involvement (as the issues within RBS had happened before his arrival), but for having the ‘wrong attitude’ in stating that he was ‘tired of small businesses “badmouthing” the bank’. The result was an all-enveloping drama that may still bring the Financial Conduct Authority to its knees, with the supposed publication of a report into the GRG. Though the FCA originally stated that the report would be made public, it eventually released the report with major sections removed. After pressure from the public and the Treasury Select Committee in particular, the FCA released the report that confirmed that the Unit had indeed been running the firms into the wall for profit, although it did not go as far to attribute absolute criminality. Later revelations have included the remarkable fact that the UK Treasury department was in fact imparting significant pressure and influence to perform such awful practices, which means this saga is nowhere near concluding.

Yet, in April 2019 McEwan announced that he would be leaving the bank, and has this week been announced as the head of National Australia Bank, the country’s fourth-largest bank by assets. McEwan has stated that ‘it is a privilege to return to Australia and lead NAB at a crucial time for the bank, its customers, employees, shareholders and the broader community’. Clearly, he has been brought in to repeat his performance at RBS. However, the question is, looking back, how will McEwan be remembered? The likelihood is that he will be remembered in a number of polarised ways. He was the person at the helm when the bank returned to profitability and the British Government began selling their shares in the once-stricken bank (albeit at a loss on every occasion). Yet, he was also the person at the helm when the truth came to light regarding the despicable practices of the GRG, along with the influence of the Treasury, and his performance during that period was less-than-stellar. Acting negatively towards genuine victims of the bank he represented will not be forgotten, and nor should it be. It is important that a bank is not controlled just as a financial institution because it is not, it is much more than that – in this sense, there is a stain on McEwan’s legacy in that the victims of the GRG need not have been treated, retrospectively, as they were. Getting to know McEwan more has been very much worthwhile, but the larger story of RBS is much more important to understand. We have covered the topic on a number of occasions here in Financial Regulation Matters (here, here, and here) and will no doubt continue to do so. Also, if you would like a massively insightful examination of the bank, you need not look further than Shredded: Inside RBS, The Bank That Broke Britain by Ian Fraser, who can be found on Twitter @Ian_Fraser – which has only recently been updated.

Keywords – RBS, Ross McEwan, Banking, Britain, Business, @finregmatters