Executives at Royal Bank of Scotland can’t catch a break. Despite posting its first profit for a decade in its 2017 annual report last week, the bad press keeps coming for the bank, which has been under majority public ownership since 2008. A major fine by the US Department of Justice for mortgage mis-selling is expected this year.

Separately, RBS executives are currently embroiled in a Treasury Select Committee inquiry into mistreatment of small and medium-sized enterprises (SMEs) by the bank’s Global Restructuring Group (GRG) between 2008 and 2014.

This week, the inquiry revealed that three-quarters of the staff at a new restructuring department were formerly employed at GRG. Chairman Howard Davies delicately calls these enduring problems ‘legacy issues’.

Full-scale privatisation 

So one might forgive a dash of blue sky thinking and a fixation on distant goals. In a cautiously optimistic foreword to the annual report, reflecting on a share price that climbed 20 per cent over the year, Davies welcomed government plans to relaunch the privatisation process in March 2019.

But privatisation would be no triumph. Instead, selling the public stake in RBS would be a wasted opportunity for meaningful change. 

Full-scale privatisation is the stated endgame of a process of reform first announced, by the then chancellor George Osborne, in 2013. It is implausible that a hasty return to private shareholders’ hands will align with Osborne’s other two stated objectives: to support the British economy and secure the maximum value for money for the public.

When the March 2019 plans were announced in Philip Hammond’s Autumn Budget, they looked set to land taxpayers with a £26 billion loss.

And the current chancellor and Treasury owe the British public more than a return to the same defective banking system we had before the 2008 crisis. 

Government bailout

When the financial tidal wave hit London in 2008 following the Lehman Brothers collapse, RBS was in hot water. Its chief executive at the time, Fred Goodwin, repeatedly denied that the bank was insolvent. His deception came unstuck. RBS received a bailout from the Treasury to the tune of more than £45 billion and the government wound up with an 81 per cent stake in the bank. 

Some might have expected the bailout to call time on years of recklessness. In 2011 the Financial Conduct Authority published a report examining the reasons for the failure. Among them were ‘concerns and uncertainties over RBS’ underlying asset quality’, a botched takeover of ABN Amro; overly risky short-term funding and credit trading; and ‘an inadequate global regulatory capital framework’.

To cap things off, and in an attempt to explain so many counts of imprudence, the report also probed ‘underlying deficiencies in RBS management, governance and culture.’

Yet these concerns skate over the basic defect inherent in the banking sector. Commercial banks, for which profit is the raison d’être, lend primarily to unproductive activities like mortgages on existing homes and speculation on financial derivatives, on which they can generate the highest return.

Much less goes to the real economy, and in particular to SMEs. This incentive problem distorts the economy, produces financial instability, and perpetuates inequality. 

Banking casualties

The real economy is not the only casualty. Our present banking system is endemically destructive for the environment.

Bank lending is also influential in shifting funds towards fossil fuel and energy-intensive industries. Admittedly, RBS is less culpable here than other UK banks, especially Barclays and HSBC.

The 2017 Fossil Fuel Finance Report Card, published by a coalition including Banktrack and Rainforest Action Network, found a dramatic fall in its lending to ‘extreme fossil fuel’ activities since 2014. 

But on climate more broadly, RBS is a laggard. A 2016 report by Christian Aid found that RBS, like all other major banks in the UK, had no timeline for a transition to a low-carbon economy.

Neither did it engage with client firms on their own transition strategies. More recently, a survey of 15 European banks conducted by ShareAction placed RBS only 11th in the list. Lloyds, the other UK bank to come partly under public ownership in 2008, before being privatised early last year, is ranked last.

Instead of bringing needed change to a sclerotic banking sector, the bailout process has simply reset a broken model.

Introducing diversity 

There are alternatives. Britain has an unusually high proportion of its banking services provided by a very small number of privately owned organisations, as opposed to public savings or co-operative models.

Moreover, these giant firms operate at the national level, while other countries have far more regional or local banks.

The New Economics Foundation used international data to show that banks organised on a ‘stakeholder’ model, rather than seeking to maximise shareholder value as commercial banks do, contribute more to financial stability and local prosperity. They also lend more to businesses and promote financial inclusion. 

Public ownership of RBS is an opportunity for major, structural reform. Its assets still represent a significant chunk of the UK total.

The rewards of introducing diversity into the banking ecosystem, by dissolving RBS into a series of public, regional banks, would be substantial. The costs of returning to the old model are potentially greater still. 

This Author

Rob Macquarie is an economist for  Positive Money.

Executives at Royal Bank of Scotland can’t catch a break. Despite posting its first profit for a decade in its 2017 annual report last week, the bad press keeps coming for the bank, which has been under majority public ownership since 2008. A major fine by the US Department of Justice for mortgage mis-selling is expected this year.

Separately, RBS executives are currently embroiled in a Treasury Select Committee inquiry into mistreatment of small and medium-sized enterprises (SMEs) by the bank’s Global Restructuring Group (GRG) between 2008 and 2014.

This week, the inquiry revealed that three-quarters of the staff at a new restructuring department were formerly employed at GRG. Chairman Howard Davies delicately calls these enduring problems ‘legacy issues’.

Full-scale privatisation 

So one might forgive a dash of blue sky thinking and a fixation on distant goals. In a cautiously optimistic foreword to the annual report, reflecting on a share price that climbed 20 per cent over the year, Davies welcomed government plans to relaunch the privatisation process in March 2019.

But privatisation would be no triumph. Instead, selling the public stake in RBS would be a wasted opportunity for meaningful change. 

Full-scale privatisation is the stated endgame of a process of reform first announced, by the then chancellor George Osborne, in 2013. It is implausible that a hasty return to private shareholders’ hands will align with Osborne’s other two stated objectives: to support the British economy and secure the maximum value for money for the public.

When the March 2019 plans were announced in Philip Hammond’s Autumn Budget, they looked set to land taxpayers with a £26 billion loss.

And the current chancellor and Treasury owe the British public more than a return to the same defective banking system we had before the 2008 crisis. 

Government bailout

When the financial tidal wave hit London in 2008 following the Lehman Brothers collapse, RBS was in hot water. Its chief executive at the time, Fred Goodwin, repeatedly denied that the bank was insolvent. His deception came unstuck. RBS received a bailout from the Treasury to the tune of more than £45 billion and the government wound up with an 81 per cent stake in the bank. 

Some might have expected the bailout to call time on years of recklessness. In 2011 the Financial Conduct Authority published a report examining the reasons for the failure. Among them were ‘concerns and uncertainties over RBS’ underlying asset quality’, a botched takeover of ABN Amro; overly risky short-term funding and credit trading; and ‘an inadequate global regulatory capital framework’.

To cap things off, and in an attempt to explain so many counts of imprudence, the report also probed ‘underlying deficiencies in RBS management, governance and culture.’

Yet these concerns skate over the basic defect inherent in the banking sector. Commercial banks, for which profit is the raison d’être, lend primarily to unproductive activities like mortgages on existing homes and speculation on financial derivatives, on which they can generate the highest return.

Much less goes to the real economy, and in particular to SMEs. This incentive problem distorts the economy, produces financial instability, and perpetuates inequality. 

Banking casualties

The real economy is not the only casualty. Our present banking system is endemically destructive for the environment.

Bank lending is also influential in shifting funds towards fossil fuel and energy-intensive industries. Admittedly, RBS is less culpable here than other UK banks, especially Barclays and HSBC.

The 2017 Fossil Fuel Finance Report Card, published by a coalition including Banktrack and Rainforest Action Network, found a dramatic fall in its lending to ‘extreme fossil fuel’ activities since 2014. 

But on climate more broadly, RBS is a laggard. A 2016 report by Christian Aid found that RBS, like all other major banks in the UK, had no timeline for a transition to a low-carbon economy.

Neither did it engage with client firms on their own transition strategies. More recently, a survey of 15 European banks conducted by ShareAction placed RBS only 11th in the list. Lloyds, the other UK bank to come partly under public ownership in 2008, before being privatised early last year, is ranked last.

Instead of bringing needed change to a sclerotic banking sector, the bailout process has simply reset a broken model.

Introducing diversity 

There are alternatives. Britain has an unusually high proportion of its banking services provided by a very small number of privately owned organisations, as opposed to public savings or co-operative models.

Moreover, these giant firms operate at the national level, while other countries have far more regional or local banks.

The New Economics Foundation used international data to show that banks organised on a ‘stakeholder’ model, rather than seeking to maximise shareholder value as commercial banks do, contribute more to financial stability and local prosperity. They also lend more to businesses and promote financial inclusion. 

Public ownership of RBS is an opportunity for major, structural reform. Its assets still represent a significant chunk of the UK total.

The rewards of introducing diversity into the banking ecosystem, by dissolving RBS into a series of public, regional banks, would be substantial. The costs of returning to the old model are potentially greater still. 

This Author

Rob Macquarie is an economist for  Positive Money.

Executives at Royal Bank of Scotland can’t catch a break. Despite posting its first profit for a decade in its 2017 annual report last week, the bad press keeps coming for the bank, which has been under majority public ownership since 2008. A major fine by the US Department of Justice for mortgage mis-selling is expected this year.

Separately, RBS executives are currently embroiled in a Treasury Select Committee inquiry into mistreatment of small and medium-sized enterprises (SMEs) by the bank’s Global Restructuring Group (GRG) between 2008 and 2014.

This week, the inquiry revealed that three-quarters of the staff at a new restructuring department were formerly employed at GRG. Chairman Howard Davies delicately calls these enduring problems ‘legacy issues’.

Full-scale privatisation 

So one might forgive a dash of blue sky thinking and a fixation on distant goals. In a cautiously optimistic foreword to the annual report, reflecting on a share price that climbed 20 per cent over the year, Davies welcomed government plans to relaunch the privatisation process in March 2019.

But privatisation would be no triumph. Instead, selling the public stake in RBS would be a wasted opportunity for meaningful change. 

Full-scale privatisation is the stated endgame of a process of reform first announced, by the then chancellor George Osborne, in 2013. It is implausible that a hasty return to private shareholders’ hands will align with Osborne’s other two stated objectives: to support the British economy and secure the maximum value for money for the public.

When the March 2019 plans were announced in Philip Hammond’s Autumn Budget, they looked set to land taxpayers with a £26 billion loss.

And the current chancellor and Treasury owe the British public more than a return to the same defective banking system we had before the 2008 crisis. 

Government bailout

When the financial tidal wave hit London in 2008 following the Lehman Brothers collapse, RBS was in hot water. Its chief executive at the time, Fred Goodwin, repeatedly denied that the bank was insolvent. His deception came unstuck. RBS received a bailout from the Treasury to the tune of more than £45 billion and the government wound up with an 81 per cent stake in the bank. 

Some might have expected the bailout to call time on years of recklessness. In 2011 the Financial Conduct Authority published a report examining the reasons for the failure. Among them were ‘concerns and uncertainties over RBS’ underlying asset quality’, a botched takeover of ABN Amro; overly risky short-term funding and credit trading; and ‘an inadequate global regulatory capital framework’.

To cap things off, and in an attempt to explain so many counts of imprudence, the report also probed ‘underlying deficiencies in RBS management, governance and culture.’

Yet these concerns skate over the basic defect inherent in the banking sector. Commercial banks, for which profit is the raison d’être, lend primarily to unproductive activities like mortgages on existing homes and speculation on financial derivatives, on which they can generate the highest return.

Much less goes to the real economy, and in particular to SMEs. This incentive problem distorts the economy, produces financial instability, and perpetuates inequality. 

Banking casualties

The real economy is not the only casualty. Our present banking system is endemically destructive for the environment.

Bank lending is also influential in shifting funds towards fossil fuel and energy-intensive industries. Admittedly, RBS is less culpable here than other UK banks, especially Barclays and HSBC.

The 2017 Fossil Fuel Finance Report Card, published by a coalition including Banktrack and Rainforest Action Network, found a dramatic fall in its lending to ‘extreme fossil fuel’ activities since 2014. 

But on climate more broadly, RBS is a laggard. A 2016 report by Christian Aid found that RBS, like all other major banks in the UK, had no timeline for a transition to a low-carbon economy.

Neither did it engage with client firms on their own transition strategies. More recently, a survey of 15 European banks conducted by ShareAction placed RBS only 11th in the list. Lloyds, the other UK bank to come partly under public ownership in 2008, before being privatised early last year, is ranked last.

Instead of bringing needed change to a sclerotic banking sector, the bailout process has simply reset a broken model.

Introducing diversity 

There are alternatives. Britain has an unusually high proportion of its banking services provided by a very small number of privately owned organisations, as opposed to public savings or co-operative models.

Moreover, these giant firms operate at the national level, while other countries have far more regional or local banks.

The New Economics Foundation used international data to show that banks organised on a ‘stakeholder’ model, rather than seeking to maximise shareholder value as commercial banks do, contribute more to financial stability and local prosperity. They also lend more to businesses and promote financial inclusion. 

Public ownership of RBS is an opportunity for major, structural reform. Its assets still represent a significant chunk of the UK total.

The rewards of introducing diversity into the banking ecosystem, by dissolving RBS into a series of public, regional banks, would be substantial. The costs of returning to the old model are potentially greater still. 

This Author

Rob Macquarie is an economist for  Positive Money.

Executives at Royal Bank of Scotland can’t catch a break. Despite posting its first profit for a decade in its 2017 annual report last week, the bad press keeps coming for the bank, which has been under majority public ownership since 2008. A major fine by the US Department of Justice for mortgage mis-selling is expected this year.

Separately, RBS executives are currently embroiled in a Treasury Select Committee inquiry into mistreatment of small and medium-sized enterprises (SMEs) by the bank’s Global Restructuring Group (GRG) between 2008 and 2014.

This week, the inquiry revealed that three-quarters of the staff at a new restructuring department were formerly employed at GRG. Chairman Howard Davies delicately calls these enduring problems ‘legacy issues’.

Full-scale privatisation 

So one might forgive a dash of blue sky thinking and a fixation on distant goals. In a cautiously optimistic foreword to the annual report, reflecting on a share price that climbed 20 per cent over the year, Davies welcomed government plans to relaunch the privatisation process in March 2019.

But privatisation would be no triumph. Instead, selling the public stake in RBS would be a wasted opportunity for meaningful change. 

Full-scale privatisation is the stated endgame of a process of reform first announced, by the then chancellor George Osborne, in 2013. It is implausible that a hasty return to private shareholders’ hands will align with Osborne’s other two stated objectives: to support the British economy and secure the maximum value for money for the public.

When the March 2019 plans were announced in Philip Hammond’s Autumn Budget, they looked set to land taxpayers with a £26 billion loss.

And the current chancellor and Treasury owe the British public more than a return to the same defective banking system we had before the 2008 crisis. 

Government bailout

When the financial tidal wave hit London in 2008 following the Lehman Brothers collapse, RBS was in hot water. Its chief executive at the time, Fred Goodwin, repeatedly denied that the bank was insolvent. His deception came unstuck. RBS received a bailout from the Treasury to the tune of more than £45 billion and the government wound up with an 81 per cent stake in the bank. 

Some might have expected the bailout to call time on years of recklessness. In 2011 the Financial Conduct Authority published a report examining the reasons for the failure. Among them were ‘concerns and uncertainties over RBS’ underlying asset quality’, a botched takeover of ABN Amro; overly risky short-term funding and credit trading; and ‘an inadequate global regulatory capital framework’.

To cap things off, and in an attempt to explain so many counts of imprudence, the report also probed ‘underlying deficiencies in RBS management, governance and culture.’

Yet these concerns skate over the basic defect inherent in the banking sector. Commercial banks, for which profit is the raison d’être, lend primarily to unproductive activities like mortgages on existing homes and speculation on financial derivatives, on which they can generate the highest return.

Much less goes to the real economy, and in particular to SMEs. This incentive problem distorts the economy, produces financial instability, and perpetuates inequality. 

Banking casualties

The real economy is not the only casualty. Our present banking system is endemically destructive for the environment.

Bank lending is also influential in shifting funds towards fossil fuel and energy-intensive industries. Admittedly, RBS is less culpable here than other UK banks, especially Barclays and HSBC.

The 2017 Fossil Fuel Finance Report Card, published by a coalition including Banktrack and Rainforest Action Network, found a dramatic fall in its lending to ‘extreme fossil fuel’ activities since 2014. 

But on climate more broadly, RBS is a laggard. A 2016 report by Christian Aid found that RBS, like all other major banks in the UK, had no timeline for a transition to a low-carbon economy.

Neither did it engage with client firms on their own transition strategies. More recently, a survey of 15 European banks conducted by ShareAction placed RBS only 11th in the list. Lloyds, the other UK bank to come partly under public ownership in 2008, before being privatised early last year, is ranked last.

Instead of bringing needed change to a sclerotic banking sector, the bailout process has simply reset a broken model.

Introducing diversity 

There are alternatives. Britain has an unusually high proportion of its banking services provided by a very small number of privately owned organisations, as opposed to public savings or co-operative models.

Moreover, these giant firms operate at the national level, while other countries have far more regional or local banks.

The New Economics Foundation used international data to show that banks organised on a ‘stakeholder’ model, rather than seeking to maximise shareholder value as commercial banks do, contribute more to financial stability and local prosperity. They also lend more to businesses and promote financial inclusion. 

Public ownership of RBS is an opportunity for major, structural reform. Its assets still represent a significant chunk of the UK total.

The rewards of introducing diversity into the banking ecosystem, by dissolving RBS into a series of public, regional banks, would be substantial. The costs of returning to the old model are potentially greater still. 

This Author

Rob Macquarie is an economist for  Positive Money.

Executives at Royal Bank of Scotland can’t catch a break. Despite posting its first profit for a decade in its 2017 annual report last week, the bad press keeps coming for the bank, which has been under majority public ownership since 2008. A major fine by the US Department of Justice for mortgage mis-selling is expected this year.

Separately, RBS executives are currently embroiled in a Treasury Select Committee inquiry into mistreatment of small and medium-sized enterprises (SMEs) by the bank’s Global Restructuring Group (GRG) between 2008 and 2014.

This week, the inquiry revealed that three-quarters of the staff at a new restructuring department were formerly employed at GRG. Chairman Howard Davies delicately calls these enduring problems ‘legacy issues’.

Full-scale privatisation 

So one might forgive a dash of blue sky thinking and a fixation on distant goals. In a cautiously optimistic foreword to the annual report, reflecting on a share price that climbed 20 per cent over the year, Davies welcomed government plans to relaunch the privatisation process in March 2019.

But privatisation would be no triumph. Instead, selling the public stake in RBS would be a wasted opportunity for meaningful change. 

Full-scale privatisation is the stated endgame of a process of reform first announced, by the then chancellor George Osborne, in 2013. It is implausible that a hasty return to private shareholders’ hands will align with Osborne’s other two stated objectives: to support the British economy and secure the maximum value for money for the public.

When the March 2019 plans were announced in Philip Hammond’s Autumn Budget, they looked set to land taxpayers with a £26 billion loss.

And the current chancellor and Treasury owe the British public more than a return to the same defective banking system we had before the 2008 crisis. 

Government bailout

When the financial tidal wave hit London in 2008 following the Lehman Brothers collapse, RBS was in hot water. Its chief executive at the time, Fred Goodwin, repeatedly denied that the bank was insolvent. His deception came unstuck. RBS received a bailout from the Treasury to the tune of more than £45 billion and the government wound up with an 81 per cent stake in the bank. 

Some might have expected the bailout to call time on years of recklessness. In 2011 the Financial Conduct Authority published a report examining the reasons for the failure. Among them were ‘concerns and uncertainties over RBS’ underlying asset quality’, a botched takeover of ABN Amro; overly risky short-term funding and credit trading; and ‘an inadequate global regulatory capital framework’.

To cap things off, and in an attempt to explain so many counts of imprudence, the report also probed ‘underlying deficiencies in RBS management, governance and culture.’

Yet these concerns skate over the basic defect inherent in the banking sector. Commercial banks, for which profit is the raison d’être, lend primarily to unproductive activities like mortgages on existing homes and speculation on financial derivatives, on which they can generate the highest return.

Much less goes to the real economy, and in particular to SMEs. This incentive problem distorts the economy, produces financial instability, and perpetuates inequality. 

Banking casualties

The real economy is not the only casualty. Our present banking system is endemically destructive for the environment.

Bank lending is also influential in shifting funds towards fossil fuel and energy-intensive industries. Admittedly, RBS is less culpable here than other UK banks, especially Barclays and HSBC.

The 2017 Fossil Fuel Finance Report Card, published by a coalition including Banktrack and Rainforest Action Network, found a dramatic fall in its lending to ‘extreme fossil fuel’ activities since 2014. 

But on climate more broadly, RBS is a laggard. A 2016 report by Christian Aid found that RBS, like all other major banks in the UK, had no timeline for a transition to a low-carbon economy.

Neither did it engage with client firms on their own transition strategies. More recently, a survey of 15 European banks conducted by ShareAction placed RBS only 11th in the list. Lloyds, the other UK bank to come partly under public ownership in 2008, before being privatised early last year, is ranked last.

Instead of bringing needed change to a sclerotic banking sector, the bailout process has simply reset a broken model.

Introducing diversity 

There are alternatives. Britain has an unusually high proportion of its banking services provided by a very small number of privately owned organisations, as opposed to public savings or co-operative models.

Moreover, these giant firms operate at the national level, while other countries have far more regional or local banks.

The New Economics Foundation used international data to show that banks organised on a ‘stakeholder’ model, rather than seeking to maximise shareholder value as commercial banks do, contribute more to financial stability and local prosperity. They also lend more to businesses and promote financial inclusion. 

Public ownership of RBS is an opportunity for major, structural reform. Its assets still represent a significant chunk of the UK total.

The rewards of introducing diversity into the banking ecosystem, by dissolving RBS into a series of public, regional banks, would be substantial. The costs of returning to the old model are potentially greater still. 

This Author

Rob Macquarie is an economist for  Positive Money.

Executives at Royal Bank of Scotland can’t catch a break. Despite posting its first profit for a decade in its 2017 annual report last week, the bad press keeps coming for the bank, which has been under majority public ownership since 2008. A major fine by the US Department of Justice for mortgage mis-selling is expected this year.

Separately, RBS executives are currently embroiled in a Treasury Select Committee inquiry into mistreatment of small and medium-sized enterprises (SMEs) by the bank’s Global Restructuring Group (GRG) between 2008 and 2014.

This week, the inquiry revealed that three-quarters of the staff at a new restructuring department were formerly employed at GRG. Chairman Howard Davies delicately calls these enduring problems ‘legacy issues’.

Full-scale privatisation 

So one might forgive a dash of blue sky thinking and a fixation on distant goals. In a cautiously optimistic foreword to the annual report, reflecting on a share price that climbed 20 per cent over the year, Davies welcomed government plans to relaunch the privatisation process in March 2019.

But privatisation would be no triumph. Instead, selling the public stake in RBS would be a wasted opportunity for meaningful change. 

Full-scale privatisation is the stated endgame of a process of reform first announced, by the then chancellor George Osborne, in 2013. It is implausible that a hasty return to private shareholders’ hands will align with Osborne’s other two stated objectives: to support the British economy and secure the maximum value for money for the public.

When the March 2019 plans were announced in Philip Hammond’s Autumn Budget, they looked set to land taxpayers with a £26 billion loss.

And the current chancellor and Treasury owe the British public more than a return to the same defective banking system we had before the 2008 crisis. 

Government bailout

When the financial tidal wave hit London in 2008 following the Lehman Brothers collapse, RBS was in hot water. Its chief executive at the time, Fred Goodwin, repeatedly denied that the bank was insolvent. His deception came unstuck. RBS received a bailout from the Treasury to the tune of more than £45 billion and the government wound up with an 81 per cent stake in the bank. 

Some might have expected the bailout to call time on years of recklessness. In 2011 the Financial Conduct Authority published a report examining the reasons for the failure. Among them were ‘concerns and uncertainties over RBS’ underlying asset quality’, a botched takeover of ABN Amro; overly risky short-term funding and credit trading; and ‘an inadequate global regulatory capital framework’.

To cap things off, and in an attempt to explain so many counts of imprudence, the report also probed ‘underlying deficiencies in RBS management, governance and culture.’

Yet these concerns skate over the basic defect inherent in the banking sector. Commercial banks, for which profit is the raison d’être, lend primarily to unproductive activities like mortgages on existing homes and speculation on financial derivatives, on which they can generate the highest return.

Much less goes to the real economy, and in particular to SMEs. This incentive problem distorts the economy, produces financial instability, and perpetuates inequality. 

Banking casualties

The real economy is not the only casualty. Our present banking system is endemically destructive for the environment.

Bank lending is also influential in shifting funds towards fossil fuel and energy-intensive industries. Admittedly, RBS is less culpable here than other UK banks, especially Barclays and HSBC.

The 2017 Fossil Fuel Finance Report Card, published by a coalition including Banktrack and Rainforest Action Network, found a dramatic fall in its lending to ‘extreme fossil fuel’ activities since 2014. 

But on climate more broadly, RBS is a laggard. A 2016 report by Christian Aid found that RBS, like all other major banks in the UK, had no timeline for a transition to a low-carbon economy.

Neither did it engage with client firms on their own transition strategies. More recently, a survey of 15 European banks conducted by ShareAction placed RBS only 11th in the list. Lloyds, the other UK bank to come partly under public ownership in 2008, before being privatised early last year, is ranked last.

Instead of bringing needed change to a sclerotic banking sector, the bailout process has simply reset a broken model.

Introducing diversity 

There are alternatives. Britain has an unusually high proportion of its banking services provided by a very small number of privately owned organisations, as opposed to public savings or co-operative models.

Moreover, these giant firms operate at the national level, while other countries have far more regional or local banks.

The New Economics Foundation used international data to show that banks organised on a ‘stakeholder’ model, rather than seeking to maximise shareholder value as commercial banks do, contribute more to financial stability and local prosperity. They also lend more to businesses and promote financial inclusion. 

Public ownership of RBS is an opportunity for major, structural reform. Its assets still represent a significant chunk of the UK total.

The rewards of introducing diversity into the banking ecosystem, by dissolving RBS into a series of public, regional banks, would be substantial. The costs of returning to the old model are potentially greater still. 

This Author

Rob Macquarie is an economist for  Positive Money.

Executives at Royal Bank of Scotland can’t catch a break. Despite posting its first profit for a decade in its 2017 annual report last week, the bad press keeps coming for the bank, which has been under majority public ownership since 2008. A major fine by the US Department of Justice for mortgage mis-selling is expected this year.

Separately, RBS executives are currently embroiled in a Treasury Select Committee inquiry into mistreatment of small and medium-sized enterprises (SMEs) by the bank’s Global Restructuring Group (GRG) between 2008 and 2014.

This week, the inquiry revealed that three-quarters of the staff at a new restructuring department were formerly employed at GRG. Chairman Howard Davies delicately calls these enduring problems ‘legacy issues’.

Full-scale privatisation 

So one might forgive a dash of blue sky thinking and a fixation on distant goals. In a cautiously optimistic foreword to the annual report, reflecting on a share price that climbed 20 per cent over the year, Davies welcomed government plans to relaunch the privatisation process in March 2019.

But privatisation would be no triumph. Instead, selling the public stake in RBS would be a wasted opportunity for meaningful change. 

Full-scale privatisation is the stated endgame of a process of reform first announced, by the then chancellor George Osborne, in 2013. It is implausible that a hasty return to private shareholders’ hands will align with Osborne’s other two stated objectives: to support the British economy and secure the maximum value for money for the public.

When the March 2019 plans were announced in Philip Hammond’s Autumn Budget, they looked set to land taxpayers with a £26 billion loss.

And the current chancellor and Treasury owe the British public more than a return to the same defective banking system we had before the 2008 crisis. 

Government bailout

When the financial tidal wave hit London in 2008 following the Lehman Brothers collapse, RBS was in hot water. Its chief executive at the time, Fred Goodwin, repeatedly denied that the bank was insolvent. His deception came unstuck. RBS received a bailout from the Treasury to the tune of more than £45 billion and the government wound up with an 81 per cent stake in the bank. 

Some might have expected the bailout to call time on years of recklessness. In 2011 the Financial Conduct Authority published a report examining the reasons for the failure. Among them were ‘concerns and uncertainties over RBS’ underlying asset quality’, a botched takeover of ABN Amro; overly risky short-term funding and credit trading; and ‘an inadequate global regulatory capital framework’.

To cap things off, and in an attempt to explain so many counts of imprudence, the report also probed ‘underlying deficiencies in RBS management, governance and culture.’

Yet these concerns skate over the basic defect inherent in the banking sector. Commercial banks, for which profit is the raison d’être, lend primarily to unproductive activities like mortgages on existing homes and speculation on financial derivatives, on which they can generate the highest return.

Much less goes to the real economy, and in particular to SMEs. This incentive problem distorts the economy, produces financial instability, and perpetuates inequality. 

Banking casualties

The real economy is not the only casualty. Our present banking system is endemically destructive for the environment.

Bank lending is also influential in shifting funds towards fossil fuel and energy-intensive industries. Admittedly, RBS is less culpable here than other UK banks, especially Barclays and HSBC.

The 2017 Fossil Fuel Finance Report Card, published by a coalition including Banktrack and Rainforest Action Network, found a dramatic fall in its lending to ‘extreme fossil fuel’ activities since 2014. 

But on climate more broadly, RBS is a laggard. A 2016 report by Christian Aid found that RBS, like all other major banks in the UK, had no timeline for a transition to a low-carbon economy.

Neither did it engage with client firms on their own transition strategies. More recently, a survey of 15 European banks conducted by ShareAction placed RBS only 11th in the list. Lloyds, the other UK bank to come partly under public ownership in 2008, before being privatised early last year, is ranked last.

Instead of bringing needed change to a sclerotic banking sector, the bailout process has simply reset a broken model.

Introducing diversity 

There are alternatives. Britain has an unusually high proportion of its banking services provided by a very small number of privately owned organisations, as opposed to public savings or co-operative models.

Moreover, these giant firms operate at the national level, while other countries have far more regional or local banks.

The New Economics Foundation used international data to show that banks organised on a ‘stakeholder’ model, rather than seeking to maximise shareholder value as commercial banks do, contribute more to financial stability and local prosperity. They also lend more to businesses and promote financial inclusion. 

Public ownership of RBS is an opportunity for major, structural reform. Its assets still represent a significant chunk of the UK total.

The rewards of introducing diversity into the banking ecosystem, by dissolving RBS into a series of public, regional banks, would be substantial. The costs of returning to the old model are potentially greater still. 

This Author

Rob Macquarie is an economist for  Positive Money.

Executives at Royal Bank of Scotland can’t catch a break. Despite posting its first profit for a decade in its 2017 annual report last week, the bad press keeps coming for the bank, which has been under majority public ownership since 2008. A major fine by the US Department of Justice for mortgage mis-selling is expected this year.

Separately, RBS executives are currently embroiled in a Treasury Select Committee inquiry into mistreatment of small and medium-sized enterprises (SMEs) by the bank’s Global Restructuring Group (GRG) between 2008 and 2014.

This week, the inquiry revealed that three-quarters of the staff at a new restructuring department were formerly employed at GRG. Chairman Howard Davies delicately calls these enduring problems ‘legacy issues’.

Full-scale privatisation 

So one might forgive a dash of blue sky thinking and a fixation on distant goals. In a cautiously optimistic foreword to the annual report, reflecting on a share price that climbed 20 per cent over the year, Davies welcomed government plans to relaunch the privatisation process in March 2019.

But privatisation would be no triumph. Instead, selling the public stake in RBS would be a wasted opportunity for meaningful change. 

Full-scale privatisation is the stated endgame of a process of reform first announced, by the then chancellor George Osborne, in 2013. It is implausible that a hasty return to private shareholders’ hands will align with Osborne’s other two stated objectives: to support the British economy and secure the maximum value for money for the public.

When the March 2019 plans were announced in Philip Hammond’s Autumn Budget, they looked set to land taxpayers with a £26 billion loss.

And the current chancellor and Treasury owe the British public more than a return to the same defective banking system we had before the 2008 crisis. 

Government bailout

When the financial tidal wave hit London in 2008 following the Lehman Brothers collapse, RBS was in hot water. Its chief executive at the time, Fred Goodwin, repeatedly denied that the bank was insolvent. His deception came unstuck. RBS received a bailout from the Treasury to the tune of more than £45 billion and the government wound up with an 81 per cent stake in the bank. 

Some might have expected the bailout to call time on years of recklessness. In 2011 the Financial Conduct Authority published a report examining the reasons for the failure. Among them were ‘concerns and uncertainties over RBS’ underlying asset quality’, a botched takeover of ABN Amro; overly risky short-term funding and credit trading; and ‘an inadequate global regulatory capital framework’.

To cap things off, and in an attempt to explain so many counts of imprudence, the report also probed ‘underlying deficiencies in RBS management, governance and culture.’

Yet these concerns skate over the basic defect inherent in the banking sector. Commercial banks, for which profit is the raison d’être, lend primarily to unproductive activities like mortgages on existing homes and speculation on financial derivatives, on which they can generate the highest return.

Much less goes to the real economy, and in particular to SMEs. This incentive problem distorts the economy, produces financial instability, and perpetuates inequality. 

Banking casualties

The real economy is not the only casualty. Our present banking system is endemically destructive for the environment.

Bank lending is also influential in shifting funds towards fossil fuel and energy-intensive industries. Admittedly, RBS is less culpable here than other UK banks, especially Barclays and HSBC.

The 2017 Fossil Fuel Finance Report Card, published by a coalition including Banktrack and Rainforest Action Network, found a dramatic fall in its lending to ‘extreme fossil fuel’ activities since 2014. 

But on climate more broadly, RBS is a laggard. A 2016 report by Christian Aid found that RBS, like all other major banks in the UK, had no timeline for a transition to a low-carbon economy.

Neither did it engage with client firms on their own transition strategies. More recently, a survey of 15 European banks conducted by ShareAction placed RBS only 11th in the list. Lloyds, the other UK bank to come partly under public ownership in 2008, before being privatised early last year, is ranked last.

Instead of bringing needed change to a sclerotic banking sector, the bailout process has simply reset a broken model.

Introducing diversity 

There are alternatives. Britain has an unusually high proportion of its banking services provided by a very small number of privately owned organisations, as opposed to public savings or co-operative models.

Moreover, these giant firms operate at the national level, while other countries have far more regional or local banks.

The New Economics Foundation used international data to show that banks organised on a ‘stakeholder’ model, rather than seeking to maximise shareholder value as commercial banks do, contribute more to financial stability and local prosperity. They also lend more to businesses and promote financial inclusion. 

Public ownership of RBS is an opportunity for major, structural reform. Its assets still represent a significant chunk of the UK total.

The rewards of introducing diversity into the banking ecosystem, by dissolving RBS into a series of public, regional banks, would be substantial. The costs of returning to the old model are potentially greater still. 

This Author

Rob Macquarie is an economist for  Positive Money.

Executives at Royal Bank of Scotland can’t catch a break. Despite posting its first profit for a decade in its 2017 annual report last week, the bad press keeps coming for the bank, which has been under majority public ownership since 2008. A major fine by the US Department of Justice for mortgage mis-selling is expected this year.

Separately, RBS executives are currently embroiled in a Treasury Select Committee inquiry into mistreatment of small and medium-sized enterprises (SMEs) by the bank’s Global Restructuring Group (GRG) between 2008 and 2014.

This week, the inquiry revealed that three-quarters of the staff at a new restructuring department were formerly employed at GRG. Chairman Howard Davies delicately calls these enduring problems ‘legacy issues’.

Full-scale privatisation 

So one might forgive a dash of blue sky thinking and a fixation on distant goals. In a cautiously optimistic foreword to the annual report, reflecting on a share price that climbed 20 per cent over the year, Davies welcomed government plans to relaunch the privatisation process in March 2019.

But privatisation would be no triumph. Instead, selling the public stake in RBS would be a wasted opportunity for meaningful change. 

Full-scale privatisation is the stated endgame of a process of reform first announced, by the then chancellor George Osborne, in 2013. It is implausible that a hasty return to private shareholders’ hands will align with Osborne’s other two stated objectives: to support the British economy and secure the maximum value for money for the public.

When the March 2019 plans were announced in Philip Hammond’s Autumn Budget, they looked set to land taxpayers with a £26 billion loss.

And the current chancellor and Treasury owe the British public more than a return to the same defective banking system we had before the 2008 crisis. 

Government bailout

When the financial tidal wave hit London in 2008 following the Lehman Brothers collapse, RBS was in hot water. Its chief executive at the time, Fred Goodwin, repeatedly denied that the bank was insolvent. His deception came unstuck. RBS received a bailout from the Treasury to the tune of more than £45 billion and the government wound up with an 81 per cent stake in the bank. 

Some might have expected the bailout to call time on years of recklessness. In 2011 the Financial Conduct Authority published a report examining the reasons for the failure. Among them were ‘concerns and uncertainties over RBS’ underlying asset quality’, a botched takeover of ABN Amro; overly risky short-term funding and credit trading; and ‘an inadequate global regulatory capital framework’.

To cap things off, and in an attempt to explain so many counts of imprudence, the report also probed ‘underlying deficiencies in RBS management, governance and culture.’

Yet these concerns skate over the basic defect inherent in the banking sector. Commercial banks, for which profit is the raison d’être, lend primarily to unproductive activities like mortgages on existing homes and speculation on financial derivatives, on which they can generate the highest return.

Much less goes to the real economy, and in particular to SMEs. This incentive problem distorts the economy, produces financial instability, and perpetuates inequality. 

Banking casualties

The real economy is not the only casualty. Our present banking system is endemically destructive for the environment.

Bank lending is also influential in shifting funds towards fossil fuel and energy-intensive industries. Admittedly, RBS is less culpable here than other UK banks, especially Barclays and HSBC.

The 2017 Fossil Fuel Finance Report Card, published by a coalition including Banktrack and Rainforest Action Network, found a dramatic fall in its lending to ‘extreme fossil fuel’ activities since 2014. 

But on climate more broadly, RBS is a laggard. A 2016 report by Christian Aid found that RBS, like all other major banks in the UK, had no timeline for a transition to a low-carbon economy.

Neither did it engage with client firms on their own transition strategies. More recently, a survey of 15 European banks conducted by ShareAction placed RBS only 11th in the list. Lloyds, the other UK bank to come partly under public ownership in 2008, before being privatised early last year, is ranked last.

Instead of bringing needed change to a sclerotic banking sector, the bailout process has simply reset a broken model.

Introducing diversity 

There are alternatives. Britain has an unusually high proportion of its banking services provided by a very small number of privately owned organisations, as opposed to public savings or co-operative models.

Moreover, these giant firms operate at the national level, while other countries have far more regional or local banks.

The New Economics Foundation used international data to show that banks organised on a ‘stakeholder’ model, rather than seeking to maximise shareholder value as commercial banks do, contribute more to financial stability and local prosperity. They also lend more to businesses and promote financial inclusion. 

Public ownership of RBS is an opportunity for major, structural reform. Its assets still represent a significant chunk of the UK total.

The rewards of introducing diversity into the banking ecosystem, by dissolving RBS into a series of public, regional banks, would be substantial. The costs of returning to the old model are potentially greater still. 

This Author

Rob Macquarie is an economist for  Positive Money.

The tech world is head over heels for lithium-ion batteries. They’re energetic, they hold their charge longer and they’re lighter – far lighter – than their rechargeable counterparts. It’s no surprise really that they’re in your phone. And thanks – in part – to the boom of electric vehicles (here’s looking at you Elon Musk), the market for them is predicted to rocket from $65 billion today to $100 billion by 2025.

An essential material that makes up the lithium-ion battery in your pocket is called cobalt. It was likely mined for in the Democratic Republic of the Congo (DRC), which supplies over 50% of the world’s cobalt supply.

Some of that cobalt may have been extracted by artisanal miners working in the southern reaches of the country. These miners – of which there is an estimated 110,000-150,000 – work deep underground in man-made tunnels, and while they use only their hands and rudimentary tools to dig, the cobalt they sell makes up one-fifth of the entire quantity currently exported from the DRC.

In April and May 2015, Amnesty International and Africa Resources Watch (Afrewatch) researchers travelled to the southern DRC to investigate whether human rights abuses were driving the global trade in cobalt. They came face to face with children like Paul, who at 14 had already been mining for two years, and often spent 24 hours at a time underground: “I arrived in the morning and would leave the following morning… I had to relieve myself down in the tunnels.”

Inside mines; out of minds

Amnesty International and Afrewatch’s follow-up report “This is What We Die For” blew the lid off a tangled supply chain that starts with artisanal miners and allegedly ends with multinational electronics giants including Apple, Samsung, Dell and LG.

Linking together the different actors in the supply chain revealed: children employed washing and sorting stones or carrying heavy loads for earnings of less that US $2 a day; adults working without state-provided legal protections or even basic safety equipment such as gloves or respirators; incidences of mine collapses and underground accidents (between September 2014 and December 2015, reports of fatal accidents involving over 80 artisanal miners were broadcast by the DRC’s UN-run radio station, Radio Okapi); and companies that had, the report alleges, not exercised any due diligence relating to their cobalt supply chain prior to receiving a letter from Amnesty and Afrewatch.

“The abuses in mines remain out of sight and out of mind because in today’s global marketplace consumers have no idea about the conditions at the mine, factory, and assembly line. We found that traders are buying cobalt without asking questions about how and where it was mined,” says  Emmanuel Umpula, Executive Director of Afrewatch (Africa Resources Watch).

Almost two years on, in November 2017, Amnesty International published the Time to Recharge report. It refocused attention on 29 companies processing or using materials that contain cobalt. Some of the findings were pretty encouraging: 22 of the companies had actively looked into their links with Huayou Cobalt: a company whose subsidiary in the DRC (Congo Dongfang International Mining SARL) was discovered to be a major buyer of artisanal cobalt.

Some of the findings, however, were not encouraging at all:

“Almost two years after Amnesty International first revealed the scale of the problem, none of the 29 companies named in this report are carrying out human rights due diligence on their cobalt supply chains in line with international standards.” – Amnesty International.

These companies were, according to Amnesty International, already perfectly capable of “putting in place clear and detailed policies to address human rights impact of mineral supply chains – particularly when required to do so by law.”

Most already had policies for managing risks associated with “conflict minerals” (tin, tantalum, tungsten and gold) from the DRC, as they were obligated to under section 1502 of the Dodd-Frank Act in the USA.

The Dodd-Frank Act, which was signed into United States federal law by President Obama in 2010, shone a light on the role tin (used in phones as solder), tantalum (used to produce capacitors), tungsten (used for vibration motors) and gold (popular for printed circuit boards and connectors) had in financing rebel groups in the DRC. Prior to the Dodd-Frank Act, some mines in the DRC were illegally controlled by government troops and armed militias who profited from the minerals extracted from them to the tune of an estimated $185 million every year.

Section 1502 of the Act required companies to disclose the presence of conflict minerals from the DRC in their supply chains. The ripple effect this small stipulation had on the nation was gargantuan. Joseph Kabila, the Congolese President, banned all mineral exports in North and South Kivu and Maniema provinces and operations came to a screeching halt in many communities where mining was the only paid employment available.

Laura Seay of the Center for Global Development sums it up concisely: “section 1502 has inadvertently and directly negatively affected up to 5-12 million Congolese civilians.”

A smarter smartphone?

In May 2013, the social enterprise company Fairphone decided that there was another way to source raw materials like tin, tantalum, tungsten and gold without relying on potentially shadowy supply chains. After three years of running as a campaigning organisation raising awareness about conflict minerals, it was time to actually release a mobile which would kickstart the market for fair electronics. When it broke, as phones tend to do, its intrepid owners would buy spare parts online and crack on with their own DIY repair. And this phone would be manufactured using conflict-free minerals from conflict-affected countries.

Rather than eschew countries like the Democratic Republic of the Congo, Fairphone was instead able to source traceable tin, tantalum and tungsten from the DRC and Rwanda and make use of Fairtrade gold from mines in Peru.

When Fairphone launched the Fairphone 2 in July 2015, it sat down with The Dragonfly Initiative, a sustainability advisory firm, and wrote out a long list of the 40 different materials that made up its new phone. This list was whittled down to 10 materials: tin, tantalum, tungsten, gold, cobalt, copper, gallium, indium, nickel and rare earth metals.

Why these 10? “These materials are all frequently used in the electronics industry, have a range of mining-related issues, and are not likely to be substituted in the near future,” says Fairphone.

Now, Fairphone is examining one material at a time to uncover future possibilities for increased transparency and responsibility in its supply chains. It’s a small-scale effort, but it’s one that’s beginning to be echoed in the actions of the big players too.

In 2016, Apple reported that it was working on a programme to verify individual artisanal cobalt mines and that 100% of its cobalt smelter and refiner partners were participating in third-party, independent audits.

This good news probably comes too late for the smartphone in your pocket. But, if you prolong the life cycle of your mobile and recycle (or trade it in) when it is time to say goodbye, you can prevent valuable resources from languishing in landfills.

And when it comes to looking for a new phone? Well, you can do a little digging of your own into which companies are working towards a future where mobiles are not powered by human rights abuses.

This Author

Kathryn Hindess is a writer at The Lush Times. This article is part of a new content-sharing arrangement with the environmental, animal rights, and social justice news channel The Lush Times.