The Bank that Sank

A 10 pound note in my wallet, would have fetched me nearly 2 Royal Bank of Scotland shares during 2006, but you will be surprised that the same ten pound note will get me 86 shares of RBS, today! But will I invest in those shares? Surely not, do you ponder why NOT?

RBS was on the brink of non-existence last night after facing the biggest loss in corporate history. The worth of RBS has steadily fallen to 4.5 billion pounds, from a sweet 75 billion just 2 years ago. It is predicted that the bank might be soon nationalized, though this critical proposal is strongly opposed by Alistair Darling.

The fateful investors had to lose a proportion of their valuable shares when RBS paid an overpriced 20 billion pound bill to acquire the Dutch bank ABN Amro, last year. The giant fall in the face value of shares, is leading to yet another ‘rescue scheme’ shelled out from the tax payer’s money. The UK Government will increase its stake in the ailing bank from 58% to 70%, in the pretext that its insolvent banks do not make it an insolvent country.

Hats off to Sir Fred Goodwin, CEO of RBS for transforming his company to one of the biggest financial institutions in the world, by cleverly acquiring NATWEST bringing it under the umbrella of RBS.

But the head of this conglomerate is criticized for breeding a big pool of ‘Yes Men’, who lacked autonomy and free will. His rival counterparts, in the city proved better at strategic leading. The industry cheered RBS, as it enhanced the image of Scotland, which was better known for its Great Highland Bagpipe and the ravishing flora and fauna. But unfortunately the cheer lasted not for long.

Being a very determined head, Sir Fred took part in the ‘banking auction’ and bought out ABN, from his rival bidder Barclays. It is strange to note why this reputed and calculative CEO, did not walk out, rejecting this deal, for the skies were dark and murky, as it was the depressing season of the ‘credit crunch’.

Did it not strike him that he would be blamed by his stake holders? Did he not realize the importance of security to his valuable shareholders? Did he not remember he might be yet again called ‘Fred the Shred’? (for cutting promising jobs). Did he not infer that the Prime Minister cannot sign blank cheques?

‘Strange are the ways of men’, my mind remembers.



(Picture Coutesy: www.fx-mm.com)