Royal Bank of Scotland Crisis: Risk Management Recommendations Report

This report analyzes the Royal Bank of Scotland (RBS) crisis, focusing on the factors that led to its downfall. It examines the role of key figures like Fred Goodwin and the culture of excessive risk-taking within the bank. The report highlights the flawed risk assessments, the pursuit of profits through fees and interest, and the disregard for the interests of customers and society. It also discusses the lack of oversight and the aggressive cost-saving schemes. The author recommends the implementation of stricter laws governing financial sectors to prevent future crises and protect taxpayers. The report is a case study that offers valuable insights into the importance of effective risk management in the banking industry and the consequences of unchecked greed and poor governance.

Inside RBS, the bank that broke Britain 1
Inside RBS, the bank that broke Britain
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Inside RBS, the bank that broke Britain 2
Recommendations as Risk Manager
The Royal Bank of Scotland was known to be one of the biggest banks at the time of
its zenith with an asset value of about 3 million United Stated dollars with employees of
about 200,000 (Fraser, 2014). The bank had many branches and as a result, was preferred and
admired by many borrowers and investors. It is believed that its name caused anger and
resettlement in which the former CEO, Mr Fred Goodwin, is exposed as one of the
architectures of the severe financial crisis of the year 1929. Moreover, in Shredded, Ian
Fraser is revealed as one of the lifters on the lid that led to the catastrophic mistakes which in
turn brought the bank to the blink of its collapse, scrutinizing the roles that were conducted
by RBS’s managers who failed to check Goodwin’s hubris (Fraser, 2014).
The bank paid out billions of pounds in bonuses annually, and it seemed that all the
activities were geared to maximize these at all level. The bank further paid bonus on
unrealized profits, and due to the flawed risks assessments, massive profits with
accompanying bonuses were booked on the translations that turned out to generate losses.
This pertinacious culture encouraged reckless risk-taking and total disregard for the interest
of the bank, its customers and the society as a whole.
In overall, the Royal Bank of Scotland conceives profits based on fees and interest
they pose of their customers out of the business so that it could grab the underlying assets
used as security for their loans. This is probably considered as a new low and even for the
extremely greedy banking sectors. Royal Bank of Scotland is currently known to be fending
off a number of lawsuits that are associated with this behaviour (Fraser, 2014). There still
exist honest and ethical bankers around, and of course many are perceived to be running a
scam which is similar to the way Mr Goodwin was allowed to run and operate the Royal
Bank of Scotland. Bankers like “Fred the Shred” take enormous long term risks indicating

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considerable profits in the short run because no provisions are taken for the eventuality that
their gamblers will definitely fail.
One of the mistakes as though not mentioned in the book is how and why a person
like Fred Goodwin or “Fred the Shred” as it is nicknamed in the book, as a result of his
saving costs, become the Chief Executive Officer (CEO) of the RBS. This can be speculated
due to the bill of the commercial culture of the greed at that particular time. The nature of Mr
Goodwin which was abrasive and poor human relationship skills was known inside the bank.
The CEO (Mr Goodwin) also had a reputation for the aggressive cost-saving schemes which
even included cutting of 18000 jobs during the merger between RBS with NatWest while at
the same moment, pursuing acquisitions and mergers (Fraser, 2014). As seen, there was
nothing that was hidden within its agenda, and this should not be the case. Thus the
shareholders should not at any point readily hand over the running and operational activities
of the bank anyhow without more in-depth consideration.
Also, the banking is supposed to provide a supporting function so that the real
economy can work more efficiently which was contrary to the banking system of the Royal
Bank of Scotland. Since the financial sector has grown so big, it should now become the
master of the economy and as a cruel master as well.
To prevent the occurrence of any other crisis in the near future, laws that govern
financial sectors such banks should be created. This will prevent certain executives and
managers who run and govern the banks from stealing or running away with money or legally
steal from society. If this is not done now and in the near future, will continue to watch more
and even worse cases of financial crisis. And this, will compel the taxpayers to bail out more
people like the likes of “Fred the Shred.”

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References
Fraser, I., 2014. Shredded: Inside RBS, the Bank That Broke Britain. First Edition edition ed.
Birlinn: Birlinn.