Case Study:
The Causes of the Collapse of Royal Bank of
Scotland
Aziz Durrani
Senior Financial Sector Specialist
The SEACEN Centre
1
Introduction
• The scale of the financial crisis erupting in 2008 brought home that,
in assessing a financial institution’s health, it was no longer
sufficient to look just at facts and figures.
• The scope had to be extended to include the people behind these
figures – those that pull the strings.
• After all, if the ripples from a pebble thrown into a lake have a
distorting effect, it is not the pebble that should be held
accountable, but the hand that threw it.
2
Case Study
• Please refer to the 2011 report by the FSA entitled ‘The Failure of
the Royal Bank of Scotland’.
• The aim of the case study is to look into the causes of the failure of
RBS and how these gave rise to many of the new regulatory
changes following the financial crisis (such as Basel III, Fundamental
Review of the Trading Book, and IFRS 9). It will also examine the
governance and culture within RBS and also the failures of the
regulator and the supervisory regime so that similar errors can be
avoided in future.
3
Case Study - Logistics
•
You will work on this task in your country groups, as highlighted in red in the breakdown that
follows.
•
You can either prepare a formal PowerPoint presentation or speak from your prepared notes.
•
Within your groups, please decide who will cover Part 1 and who will cover Part 2. During the
presentations, we will expect you to share your presentations (if you have one) and also switch
on your mics and cams so that the Group can see and hear your presentation.
•
Email addresses of everyone in your group has been provided to you so please reach out to
them / set up a WhatsApp/ Zoom call to go through who will do what in the group etc. This can
be done on Tuesday 8th June during the Case Study Preparation time.
•
We have also arranged for Breakout Rooms within Microsoft Teams. For those of you that want
to make use of these breakout rooms, please join the Microsoft Teams session using the link
provided and we will then put you into your Group rooms. You are welcome to remain in the
room for the duration of the exercise and use it to discuss questions etc. with the rest of your
Group.
4
Case Study – Part 1: The Failure of RBS
• Each Group will need to review one of the key reasons that led to RBS’s
failure and present a summary to the rest of the Group. Your presentation
should also include the changes to the global regulatory regime that
emerged as a result of each issue.
•
•
•
•
•
•
Group 1- RBS’s Capital Position (p.64 – p.93) - NBC
Group 2 – RBS’ Liquidity Position (p.94 – p.120) – BSP & MAM
Group 3 – Asset Quality (p.120 – p.140) – BNM & BCTL
Group 4 – Credit Trading (p.140 – p.159) – BPNG & BOT
Group 5 – The ABN Amro Acquisition (p.159 – p.188) – CBSL, BOL & CBM
Group 6 – Systemic Vulnerabilities (p.188 – p.219) – AMBD, NRB, RBI
5
Case Study – Part 2: Governance and Culture in RBS,
and the Failures of the FSA
• Each Group will review aspects of either the culture within RBS or failures at
the FSA and provide a summary to the rest of the Group.
• Group 6- Management, Governance and Culture at RBS (p.223 – p.238) AMBD, NRB, RBI
• Group 5 - The FSA’s Supervision of Management, Governance and Culture
and Key Lessons and Recommendations (p.238 – p.252) – CBSL, BOL & CBM
• Group 4 - The FSA’s Philosophy and Approach to Supervision (p.254 – p.267)
- BPNG & BOT
• Group 3 - Major Areas of Focus of the FSA’s Supervision of RBS (p.267 –
p.279) – BNM & BCTL
• Group 2 - Resourcing and How the FSA Supervised the Global Markets and
Banking Unit (p.279– p.286) – BSP & MAM
• Group 1 - Improvements Made to the Supervisory Approach (p.286 – p.292)
- NBC
6
If you have any questions, please email:
Aziz Durrani
Senior Financial Sector Specialist
Aziz.Durrani@seacen.org
7