Page last updated at 14:03 GMT, Thursday, 26 February 2009

History: Royal Bank of Scotland

The Royal Bank of Scotland has not escaped the problems encountered by banking systems throughout the world.

Here, the BBC Scotland news website outlines the bank's history from its promising beginnings in the early 1700s to announcing the largest annual loss in UK corporate history in 2009.

Royal Bank of Scotland London headquarters

RBS announced that its 2008 loss totalled £24.1bn ($34.2bn), the largest in UK corporate history.

The bulk of the loss stemmed from a £16.2bn write-down of assets, which was mainly linked to its purchase of Dutch bank ABN Amro in 2007.

It also said it would put £325bn of toxic assets into a scheme that offers insurance for any further losses, and said the Treasury was also injecting a further £13bn into the bank.

RBS also came under fire after it emerged its former boss Sir Fred Goodwin was already drawing a pension of £650,000 a year.

Sir Fred Goodwin and Sir Tom McKillop at the Treasury Committee session

The bank's former bosses appeared before MPs on the Treasury Select Committee to explain their role in the banking crisis.

Former chief executive Sir Fred Goodwin and chairman Sir Tom McKillop apologised for the bank's failure.

They also said the bonus culture had contributed to the crisis and needed to be reviewed.

A Williams Formula One car

The Royal Bank of Scotland announced that it would halve its funding of British sport as a result of the global economic downturn.

The bank will end its sponsorship of the Williams Formula One team at the end of 2010.

It said its deals with individuals such as tennis star Andy Murray would also be reviewed.

But it extended its sponsorship of the Six Nations rugby union championship for a further four years in a deal worth £20m.

Ian Hamilton

A former QC raised a civil court case against the bank, claiming it concealed the true state of its finances when it sold him shares.

Ian Hamilton alleged RBS was already insolvent when it launched a £12bn rights issue in April last year. The bank denied the claims.

The former QC wanted his case heard in a small claims court to limit possible legal costs but a sheriff ruled that the complexity of the case meant it would have to be heard in a higher court.

Mr Hamilton then abandoned the case.

Alistair Darling

Chancellor Alistair Darling announced that the government was limiting bonuses paid out to RBS staff.

Bonuses would be cut from the £2.5bn paid last year to £340m, and Mr Darling said there would be "no reward for people who have failed".

Future bonuses will no longer be paid in cash, but in shares.

RBS branch

The bank said there would be up to 2,300 job losses from its back office operations across the UK.

It also announced 3,000 job cuts from its global banking and markets workforce in October.

The bank employs about 170,000 people, of which roughly 100,000 are in the UK.

Stephen Hester

Royal Bank of Scotland signalled that it expected to make its first annual loss in 2008 as it unveiled more write-downs on assets hit by the credit crunch.

New RBS boss Stephen Hester told BBC News that making a profit would prove difficult.

"The scale of the market disruption and the economic downturn that is happening as a consequence means that credit losses are rising very sharply," said Mr Hester.

RBS also detailed plans to raise £19.7bn as part of the government's bank bail-out plan.

2008 - OCTOBER

The bank's chief executive and chairman stood down after the government announced a £20bn bail-out.

The plan was meant to secure the bank's future, but it also means profits will have to be shared with the government, which now owns a 70% share.

A further £17bn was put into HBOS and Lloyds TSB as part of the government's £37bn bail-out.

2008 - AUGUST

The bank posted a pre-tax loss of £691m during the first six months of 2008, the second-biggest loss in UK banking history.

RBS said it had been hit by £5.9bn of write-downs after the credit crunch cut the value of many of its mortgages and assets. The bank made a profit of £5bn during the same period last year.

Sir Fred Goodwin warned at the time that a "deteriorating economic outlook" would compound problems in financial markets.

2008 - APRIL
Fred Goodwin

Under controversial chief executive Sir Fred Goodwin the bank was forced to raise an extra £12bn from a rights issue.

The rights issue was announced as part of a trading update and was one of the largest seen in UK corporate history.

The firm also announced a write-down of £5.9bn before tax, following its exposure to the credit markets.

2007 - OCTOBER

RBS purchased the Dutch bank ABN Amro on 8 October.

But according to some critics this was a takeover too far.

About 86% of ABN Amro's shareholders accepted a 71bn euro ($98.5bn; £49bn) offer put on the table by the RBS consortium, which included Dutch bank Fortis and Spain's Santander.


On 14 September, the Queen opened the new RBS headquarters in Edinburgh.

It was promoted as a world-class working environment providing office accommodation for 3,250 staff.

The complex boasted High Street outlets, health and leisure facilities and a creche catering for up to 70 children.

nat west sign

In March 2000 the Royal Bank acquired National Westminster Bank plc in the biggest takeover in the history of British banking.

The move served to create a huge group, with a highly diversified portfolio of services for personal, business and corporate customers.

After the merger of the Royal Bank and NatWest the businesses of the two groups were combined, and the enormous task of integrating their IT systems began. NatWest's retail bank continues to operate as a distinct and separate brand on the High Street.


The Royal Bank refocused on its core business of retail banking, acquiring the private bank of Adam & Company.

It launched Direct Banking in 1994, which quickly became Britain's fastest-growing 24-hour telephone banking operation.

In 1997, it announced the UK's first fully-fledged online banking service, as well as joint financial services ventures with both Tesco and Virgin Direct.

direct line logo

During the 1980s the group diversified, setting up its "innovative car insurance company" Direct Line.

It became the first UK insurance firm to use the telephone as its main channel of communication.

When it started out it employed 63 people - there are now more than 10,000 employees based in call centres in Birmingham, Bristol, Glasgow, Leeds and Manchester.


The Royal Bank of Scotland itself was founded in Edinburgh, by royal charter, on 31 May, 1727.

It opened its first branch in Glasgow in 1783 and developed a large network of offices throughout Scotland during the 19th Century.

In 1874 it opened a branch office in London and from the 1920s it developed, by acquisition, a major presence in England.

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