Tuesday, 27 June 2017

RBS and Its Bailout: Does The Bank Owe Loyalty to Britain?

On many occasions here in Financial Regulation Matters we have looked at the troubled bank RBS, whether in relation to its continued malaise since it was bailed out by the British taxpayer, or whether in relation to the potential court cases that were threatened with regard to the Financial Crisis. With all this in mind, it is not hard to see why the recent news that the Bank is to cut 443 jobs and move the respective teams to India instead is causing quite a stir. So, in this post the focus will be on this outsourcing and the subsequent debate, but also whether bailing out a troubled bank should be the foundation to enforcing loyalty to the given country, as a number of people are suggesting in the wake of RBS’s recent declaration.

The particulars of the RBS bailout in 2008 will not be repeated here, but the headlines of a £45 billion bailout and combined losses of £58 billion since tell the story clearly enough. It is against this background that the recent news emanating from RBS is causing such consternation; it was announced towards the end of last week that, as part of its restructuring, the bank would be moving 443 jobs in the division that arranges loans to small business to India, where it has a growing presence which now stands at around 12,500 people. The bank claims that the redeployment is due to it now being a ‘simpler, smaller, bank’, whilst it would offer assistance to affected staff by moving them into other divisions where possible. However, the Unite Union has been quick to lambast this move, making its position quite clear when it stated that ‘RBS will be getting that work done more cheaply at the cost of jobs and livelihoods here in the U.K.’, with the Chairman of the Federal of Small Businesses adding that the move was the ‘wrong way to rebuild trust’; considering this news comes on the back of news in May that the bank would be moving 250 I.T. jobs in the same direction, the issue of trust is clearly an important one to consider. However, should it really be the case that being in receipt of taxpayer funds binds you to that country?

Putting the extremely important issue of the Bank’s strained relationship with small and medium businesses aside for one moment, the issue of the effect of a bailout is just as important. The national officer for finance at Unite stated that the move to outsource is ‘interesting for an organisation that owes its existence to the British taxpayer. We feel RBS has a moral responsibility to try wherever possible to keep work here in the U.K.’, a sentiment which moves the debate into much more ideological, and murkier waters. This notion of morality raises important questions about what the purpose of a bailout is: on the one hand, the aim is to prevent crisis but have the taxpayer’s money returned as soon as practicably possible; on the other hand, that assistance comes with the expectation that the private institution will be more sympathetic to the plight of the host country. In reality, well in 2017 at least, the former holds true – the neo-liberal sentiment is to break out the champagne whenever an entity is returned to private hands, like the situation with Lloyds Bank recently. Yet, this viewpoint does not consider the losses suffered by the taxpayer during the period of public ownership – the savage cuts that seriously affect most people’s way of life – which ties into the viewpoint of the Unite officer. So, it seems we are stuck in an ideological dichotomy whereby the faster return to private hands puts money back into the public fisc, whilst the methods used to achieve that goal actively affect the citizens who have had their way of life affected to provide the assistance in the first place. This ideological dichotomy is academic, really, because neo-liberalism is alive and well and the notion of a private institution doing anything to promote the social advancement of any nation is almost alien in this day and age, so they question then is why is the move by RBS even surprising? If, and that is a gigantic ‘if’ RBS ever return to the private ownership, there will be declarations by the Right that the marketplace has triumphed, but this in itself is an interesting notion. For some reason, the pro-market stance is getting stronger despite the obvious evidence in front of us every day that the market cannot be trusted to maintain itself – we live in a world where the market is cherished, and state intervention is ridiculed, even though the market continuously flirts with obliteration until the state intervenes (the recent news from Italy testifies to this) – this abhorrent attack on the public cannot continue at this pace. Irrespective of the health of RBS, experiencing cuts to welfare, public services, and other key components of the national health, just to see the very people responsible inflict further misery in the name of their own advancement, represents the nature of the neo-liberal approach. Although the recent elections in the U.S. and the U.K. do not support this following notion, it is surely the case that history will judge this era in a particularly damning light; RBS represents the pinnacle of what must be changed if society is to advance in any decent and humanist way.

No comments:

Post a comment