Royal Bank of Scotland

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Posted by bender 04/16/2009 @ 16:09

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Royal Bank of Scotland

Registered Head Office of the Royal Bank of Scotland Group in St Andrew Square, Edinburgh.

The Royal Bank of Scotland plc (Scottish Gaelic: Banca Rìoghail na h-Alba) is one of the retail banking subsidiaries of the Royal Bank of Scotland Group plc, and together with NatWest and Ulster Bank, provides branch banking facilities in the United Kingdom. Royal Bank of Scotland has around 700 branches, mainly in Scotland though there are branches in many larger towns and cities throughout England and Wales. The Royal Bank of Scotland and its parent, the Royal Bank of Scotland Group, are completely separate from the fellow Edinburgh based bank, the Bank of Scotland, which pre-dates the Royal Bank of Scotland by 32 years. The Bank of Scotland was effective in raising funds for the Jacobite Rebellion and as a result, The Royal Bank of Scotland was established to provide a bank with strong Hanoverian and Whig ties.

The bank traces its origin to the Equivalent Society which was set up by investors in the failed Company of Scotland to protect the compensation they received as part of the arrangements of the 1707 Acts of Union. The Equivalent Society became the Equivalent Company in 1724, and the new company wished to move into banking. The British government received the request favourably as the "Old Bank", the Bank of Scotland, was suspected of having Jacobite sympathies. Accordingly the "New Bank" was chartered in 1727 as the Royal Bank of Scotland, with Archibald Campbell, Lord Ilay appointed as its first governor.

In 1728, the Royal Bank of Scotland became the first bank in the world to offer an overdraft facility.

Competition between the Old and New Banks was fierce, and centred on the issue of banknotes. The policy of the Royal Bank was to either drive the Bank of Scotland out of business or to take it over on favourable terms.

The Royal Bank built up large holdings of the Bank of Scotland's notes, which it acquired in exchange for its own notes, and then suddenly presented them to the Bank of Scotland for payment. To pay for these notes the Bank of Scotland was forced to call in its loans and, in March 1728, to suspend payments. The suspension relieved the immediate pressure on the Bank of Scotland at the cost of substantial damage to its reputation, and gave the Royal Bank a clear space to expand its own business, although the Royal Bank's increased note issue also made it more vulnerable to the same tactics.

Despite talk of a merger with the Bank of Scotland, the Royal Bank did not possess the wherewithal to complete the deal. By September 1728 the Bank of Scotland was able to start redeeming its notes again, with interest, and in March 1729 it restarted lending. To prevent similar attacks in the future, the Bank of Scotland put an "option clause" on its notes, giving it the right to make the notes interest-bearing while delaying payment for six months; the Royal Bank followed suit. Both banks eventually decided that the policy they had followed was mutually self-destructive and a truce was arranged, but it still took until 1751 before the two banks agreed to accept each other's notes.

The bank opened its first branch office outside Edinburgh in 1783 when the first Glasgow branch opened. Further branches were opened in Dundee, Rothesay, Dalkeith, Greenock, Port Glasgow and Leith during the early 1800s. In 1821, the bank moved from its original head office in Edinburgh's Old Town to St Andrew Square in the New Town which remains the bank's registered head office to this day.

The rest of the 19th century saw the bank pursue mergers with other Scottish banks, mainly in a response to failing institutions. The assets and liabilities of the Western Bank were acquired following its collapse in 1857 and in 1864 the Dundee Banking Co. was acquired. By 1910, the bank had 158 branches and around 900 staff.

In 1969, the bank merged with the National Commercial Bank of Scotland to become the largest clearing bank in Scotland.

The expansion of the British Empire in the latter half of the 19th century saw the emergence of London as the world's largest financial centre, attracting the Scottish banks to expand south into England. The first London branch of the Royal Bank of Scotland opened in 1874. However, the English banks moved to prevent further expansion by the Scottish banks in England, and after a government committee was set up to examine the matter, the Scottish banks decided to drop their expansion plans. An agreement was reached whereby English banks would not open branches in Scotland; and Scottish banks would not open branches in England outside of London. This agreement remained in place until the 1960s, although various cross border acquisitions were permitted.

The Royal Bank's English expansion plans were resurrected after World War I, when it acquired various small English banks, including London based Drummonds Bank in 1924; and Williams Deacon's Bank based in North West England in 1930; and Glyn, Mills and Co in 1939. The latter two were merged in 1970 to form Williams and Glyn's Bank; and later rebranded as the Royal Bank of Scotland in 1985.

Notes issued by Scottish banks circulate widely and may be used as a means of payment throughout Scotland and the rest of the United Kingdom; although they do not have the status of legal tender they are accepted as promissory notes. It should be noted that no paper money is legal tender in Scotland, even that issued by the Bank of England (which is legal tender in England and Wales).

The current series of Royal Bank of Scotland notes was originally issued in 1987. On the front of each note is a picture of Lord Ilay (1682–1761), the first governor of the bank. The image is based on a portrait of Lord Ilay painted in 1744 by the Edinburgh artist Allan Ramsay.

The front of the notes also include an engraving of the facade of Sir Laurence Dundas's mansion in St. Andrew Square, Edinburgh, which was built by Sir William Chambers in 1774 and later became the bank's headquarters, the bank's coat of arms and the 1969 arrows logo and branding. The background graphic on both sides of the notes is an radial star design which is based on the ornate ceiling of the banking hall in the old headquarters building, designed by J M Dick Peddie in 1857.

The RBS Group uses branding developed for the Bank on its merger with the National Commercial Bank of Scotland in 1969. The Group's logo takes the form of an abstract symbol of four inward-pointing arrows known as the "Daisy Wheel" and is based on an arrangement of 36 piles of coins in a 6 by 6 square, representing the accumulation and concentration of wealth by the Group.

Since 2006 the brand has moved away from referring to both the Group brand and its retail banking brand as the "Royal Bank of Scotland", instead using the "RBS" acronym. This is intended to support the positioning of the bank as a Global financial services player as opposed to its roots as a smaller, national bank. An example of the current branding can be found in the Six Nations Championship in rugby union, which it sponsors as the RBS 6 Nations. However, "Royal Bank of Scotland" appears to still be the best-known name, and most branches still display the original signage.

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Royal Bank of Scotland Group

Logo of the Royal Bank of Scotland

The Royal Bank of Scotland Group (LSE: RBS) is a majority part-nationalised British banking and insurance holding company in which HM Treasury holds a 74% controlling shareholding, through the UK Financial Investments Limited. The group is based in Edinburgh, Scotland, and is the world's largest company by assets.

In the United Kingdom it includes The Royal Bank of Scotland Plc founded in 1727 by a Royal Charter of King George I and the National Westminster Bank, which can trace its lineage back to 1650, and Ulster Bank in Ireland.

RBS Group is the largest banking group in Scotland, and at its peak was the second largest in the UK and Europe (fifth in stock market value), and the fifth largest in the world by market capitalisation. According to Forbes Global 2000, it was the tenth largest company in the world. Its shares have a primary listing on the London Stock Exchange. The registered head office of the group and the UK clearing bank are located at St Andrew Square. In 2005, Queen Elizabeth II opened the bank's new head office building in Gogarburn, Edinburgh.

The RBS Group operates a wide variety of banking brands offering personal and business banking, private banking, insurance and corporate finance throughout its operations located in Europe, North America and Asia. In the UK and Republic of Ireland, the main subsidiary companies are: The Royal Bank of Scotland; National Westminster Bank; Ulster Bank; Drummonds and Coutts & Co. In the United States, it owns Citizens Financial Group, the 8th largest bank in the country. From 2004 to 2009 it was the second largest shareholder in the Bank of China, itself the world's fifth largest bank by market capitalization in February 2008. Insurance companies include Churchill Insurance, Direct Line, Privilege, and NIG.

The group issues banknotes in Scotland and Northern Ireland and, as of 2008, Royal Bank of Scotland is the only bank in the UK still to print a £1 note.

During the late 1970s and early 1980s the Royal Bank was the subject of three separate takeover approaches. In 1979, Lloyds Bank, which had previously built up a 16.4% stake in the Royal Bank, made a takeover approach for the remaining shares it did not own. The offer was rejected by the board of management on the basis it was detrimental to the bank's operations. However when the Standard Chartered Bank, proposed a merger with the Royal Bank in 1980, the board of management responded favourably to the offer. Standard Chartered Bank was headquartered in London, although most of its operations were in the Far East, and the Royal Bank saw advantages in creating a truly international banking group. Approval was received from the Bank of England, and the two banks agreed a merger plan that would see the Standard Chartered acquire the Royal Bank and keep the UK operations based in Edinburgh. However the bid was scuppered by the Hongkong and Shanghai Banking Corporation (HSBC) which tabled a rival offer. The bid by HSBC was not backed by the Bank of England, and was subsequently rejected by the Royal Bank’s board of management. However the British government referred both bids to the Monopolies and Mergers Commission; both were subsequently rejected as being against the public interest.

The Bank did obtain an international partnership with Banco Santander Central Hispano of Spain, each bank taking a 5% stake in the other. However this arrangement ended in 2005, when Banco Santander Central Hispano acquired UK bank, Abbey National – and both banks sold their respective shareholdings.

The first international office of the bank was opened in New York in 1960. Subsequent international banks were opened in Chicago, Los Angeles, Houston and Hong Kong. In 1988 the bank acquired Citizens Financial Group, a bank based in Rhode Island, United States. Since then, Citizens has acquired several other American banks, and in 2004 acquired Charter One Bank to become the 8th largest bank in the United States.

The Royal Bank also opened offices in Europe and now has subsidiaries in: Austria, Switzerland, France, Italy, Germany, Greece, Spain, Portugal, Denmark, Norway, Sweden and the Federation of Bosnia and Herzegovina. In the Asia-Pacific region, the bank has offices in: India, Australia, China, Hong Kong, Japan and Singapore.

The late 1990s saw a new wave of consolidation in the financial services sector. In 1999, the Bank of Scotland launched a hostile takeover bid for English rival, NatWest. The Bank of Scotland intended to fund the deal by selling off many of the NatWest’s subsidiary companies, including Ulster Bank and Coutts. However, the Royal Bank subsequently tabled a counter-offer, sparking off the largest hostile takeover battle in UK corporate history. A key differentiation from the Bank of Scotland’s bid was the Royal Bank’s plan to retain all of NatWest’s subsidiaries. Although NatWest, one of the "Big 4" English clearing banks, was significantly larger than either Scottish bank, it had a recent history of poor financial performance and plans to merge with insurance company Legal & General were not well received, prompting a 26% fall in share price.

On 11 February 2000, the Royal Bank of Scotland was declared the winner in the takeover battle, becoming the second largest banking group in the UK after HSBC Holdings. NatWest and the Royal Bank of Scotland became subsidiaries of the holding company; The Royal Bank of Scotland Group. NatWest as a distinct banking brand was retained, although many back office functions of the bank were merged with the Royal Bank's leading to over 18,000 job losses throughout the UK.

In 1967, RBS became the first Scottish bank to install an Automated Teller Machine, and by 1980 the service, known as Cashline had become the busiest ATM network in the world. Today it is now the largest privately owned ATM network in the UK, it is also a member of the LINK ATM network. In 1997, RBS was the first bank in the world to make its ATMs available to all cardholders. The word Cashline, in Scotland at least has become a generic term for an ATM.

In August 2005, the bank expanded into China, acquiring a 10% stake in the Bank of China for £1.7 billion .

A new international headquarters was built at Gogarburn on the outskirts of Edinburgh, and was opened by Queen Elizabeth II and Prince Philip, Duke of Edinburgh in 2005. The St Andrew Square office still remains the official registered head office.

The bank was the 2005 recipient of the Wharton Infosys Business Transformation Award, an award given to enterprises and individuals who use information technology in a society-transforming way.

The Group is part of a consortium with Belgian bank Fortis and Spanish bank Banco Santander that acquired Dutch Bank ABN AMRO a on 10 October 2007. Rivals speculated that RBS had overpaid for the Dutch bank although the bank pointed out that of the £49bn paid for ABN Amro, RBS's share was only £10bn.

Coutts Bank's international businesses were renamed RBS Coutts on 1 January 2008.

After previous denials following press coverage, on the 22 April 2008 RBS announced a rights issue which aimed to raise £12billion in new capital to offset a writedown of £5.9billion resulting from the bad investments and to shore up its reserves following the purchase of ABN-Amro. This was the largest rights issue in British corporate history. The bank also announced plans to divest some of its subsidiaries to raise further funds, notably its insurance divisions Direct Line and Churchill.

On 13 October 2008, in a move aimed at recapitalising the bank, it was announced that the British Government would take a stake of up to 58% in the Group. The aim was to "make available new tier 1 capital to UK banks and building societies to strengthen their resources permitting them to restructure their finances, while maintaining their support for the real economy, through the recapitalisation scheme which has been made available to eligible institutions". A rights issue to existing shareholders having failed to secure more than minimal take-up, the government subsequently found itself owning more than 57% of the bank's equity share capital.

The Treasury would infuse £37 billion ($64 billion, €47 billion) of new capital into Royal Bank of Scotland Group Plc, Lloyds TSB and HBOS Plc, to avert financial sector collapse. The government stressed, however, that it was not "standard public ownership" and that the banks would return to private investors "at the right time.".

Chancellor of the Exchequer Alistair Darling stated UK taxpayers would benefit from the government's rescue plan, as it will have some control over RBS in exchange for £5 billion in preference shares and underwriting the issuance of a further £15 billion in ordinary shares. If shareholder take-up of the share issue was 0% then total government ownership in RBS would be 58% and if shareholder take-up was 100% then total government ownership in RBS would be 0%.. In the event, less than 56 million new shares were taken up by investors, or 0.24pc of the total offered by RBS in October 2008.

As a consequence of this rescue the Chief Executive of the group Sir Fred Goodwin offered his resignation which was duly accepted. Chairman Sir Tom McKillop has confirmed he will stand down from that role when his contract expires in March, 2009. Goodwin was replaced by Stephen Hester, previously Chief Executive of British Land, who took over at the Royal Bank of Scotland in November, 2008.

On the 19th January, 2009 the British Government announced a further injection of funds into the UK banking system in an attempt to restart personal and business lending. This would involve the creation of a state-backed insurance scheme which would allow banks to insure against existing loans going into default, in an attempt to restore the banks' confidence.

At the same time the government announced its' intention to convert the preference shares in RBS that it had acquired in October 2008 to ordinary shares. This would remove some of the repayment conditions made at the time but would increase the state's holding in the bank from 58% to 70%, effectively nationalising the group .

On the same day RBS released a trading statement in which it expected to post full-year trading losses (before writedowns) of between seven and eight billion pounds. The group also announced writedowns on assets (primarily related to the takeover of Dutch bank ABN-Amro) of around twenty billion pounds. The combined total of £28 billion is the biggest ever annual loss in UK corporate history. As a result the group's share price fell over 66% in one day to 11.6p per share, from a 52-week high of 354p per share, itself a drop of 97%. Some commentators called this the Blue Monday Crash.

In June 2008 RBS sold the subsidiary Angel Trains for £3.6 billion as part of a £10 billion assets sale to raise cash.

In late October 2008 it was reported that the insurance company Swiss Re and venture-capital firm CVC Capital Partners were to purchase the insurance division for a reported £6 billion which would reduce some of the funds needed from the Treasury .

RBS' contractual commitment to retain the 4.26% Bank of China (BoC) stake ended on 31 December 2008, and the shares were sold on 14 January 2009. Exchange rate fluctuations meant that RBS made no profit on the deal. The Scottish press suggested two reasons for the move: the need for a bank mainly owned by HM Treasury to focus scarce capital on British markets, and the growth possibility of RBS' own China operations . However, Chinese sources noted that BoC had been unhappy with RBS' continued expansion of mainland operations rivalling BoC in the highly profitable wealth management sector.

In March 2009 RBS announced the closure of its tax avoidance department, which had helped it avoid £500m of tax by channelling billions of pounds through securitized assets in tax havens such as the Cayman Islands. The closure was partly due to a lack of funds to continue the measures, and partly due to the 70% taxpayer stake in the bank .

Also in March 2009, RBS revealed that its' traders had been involved in the purchase and sale of sub-prime securities under the supervision of Sir Fred Goodwin .

The RBS Group uses branding developed for the Bank on its merger with the National Commercial Bank of Scotland in 1969. The Group's logo takes the form of an abstract symbol of four inward-pointing arrows known as the "Daisy Wheel" and is based on an arrangement of 36 piles of coins in a 6 by 6 square, representing the accumulation and concentration of wealth by the Group.

The RBS Group is split into 8 operating areas. Each operating area has several subsidiary businesses.

Ulster Bank Group provides personal and business banking services in Northern Ireland and the Republic of Ireland under the Ulster Bank and First Active brands.

The fifth largest banking group in the United States, headed by Ellen Alemany this division includes the Bank's businesses in North America, including Citizens Financial Group and Charter One Bank.

This 'invisible' 8th division provides centralised back-office services for much of RBS Group, ranging from Cash/Coin Management, Call Centres, to Desktop Support and general IT for the more visible banking & insurance brands like Royal Bank, Direct Line, NatWest, etc.

The group has been adversely affected by the Subprime mortgage crisis and the accurate evaluation of its assets. It has been supported by the UK Government, who now own a majority of its shares on the London stock exchange.

During Goodwin's tenure as CEO he attracted some criticism for lavish spending, including on the construction of a £350m headquarters in Edinburgh opened by the Queen in 2005 and $500m headquarters in the US begun in 2006, and the use of a Dassault Falcon 900 jet owned by leasing subsidiary Lombard for occasional corporate travel. Revelations that RBS had spent £200m on celebrity endorsements also went down badly.

In February 2009 RBS reported that while Sir Fred was at the helm it had posted a loss of £24.1bn, the biggest loss in UK corporate history. His responsibility for the expansion of RBS, which led to the losses, has drawn widespread criticism. His image was not enhanced by the news that emerged in questioning by the Treasury Select Committee of the House of Commons on 10 February 2009, that Goodwin has no technical bank training, and has no formal banking qualifications.

RBS is accused of sponsoring oil and coal mining by pressure groups like Friends of the Earth. Like many banks, RBS provides the financial means for companies to build coal-fired power stations and dig new coal mines at sites all over the world. RBS is helping to provide an estimated £8bn over the last two years to energy corporation E.ON, and other companies utilising coal .

In 2000 and 2001, the bank was the target of threats of violence over its provision of banking facilities for the animal testing company Huntingdon Life Sciences. The action resulted in RBS withdrawing the company's overdraft facility, causing the company to obtain alternative funding on a tight deadline.

On 17 January 2008 environmental groups wrote to Goodwin to urge him to exercise his leadership to resolve environmental problems associated with the ABN AMRO-financed Sakhalin II project (RBS, Fortis and Banco Santander acquired ABN AMRO in 2007).

In June 2004, RBS admitted that it owned a Dassault Falcon 900 jet worth £17.5m for the use of Goodwin and the board, a fact not disclosed in the annual report. Based in Paris for maintenance and tax purposes, the jet is also leased to the bank's clients via Lombard. In light of the 2008/9 recapitalisation program, new CEO Hestor placed the jet up for sale in January 2009.

The group's pound sterling banknote issues are in wide circulation in Scotland and Northern Ireland. In Scotland, Royal Bank of Scotland banknotes include the UK's last £1 note. Ulster Bank is one of four issuers of Northern Ireland banknotes, though, like other private sector banks, it does not issue notes in the Republic of Ireland, where the official currency is the euro.

As of 23 March 2009.

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Royal Bank of Scotland International

RBS International building in Saint Helier

The Royal Bank of Scotland International Limited (RBS International) is an offshore bank headquartered in Jersey. It is the offshore banking arm of the Royal Bank of Scotland Group, offering a range of offshore banking services for personal, business, commercial, corporate and financial intermediary customers. It came into being on 1 March 1996 following a re-structuring operation.

RBS International has a presence in multiple locations including Jersey, Guernsey, and the Isle of Man. A subsidiary office, The Royal Bank of Scotland (Gibraltar) Limited operates in Gibraltar.

On 4th March 2009, RBSI announced 90 job losses at its off-shore branches.

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Source : Wikipedia