We all know that computers go wrong sometimes. The hard drive goes haywire, the software freezes, and the broadband connection disappears for a sandwich and never comes back. Even so, most of us manage to get back on track within a few hours. At Royal Bank of Scotland, it seems to take days.
After embarking on what it described as a routine upgrade last week, RBS found its IT system crashing. For several days many customers of RBS, NatWest and Ulster Bank were unable to access their accounts. Branches had to stay open over the weekend as exasperated customers had to get back into the habit of driving to a bank and queuing up behind somebody who seems to be paying in 3,000 two pence pieces, then sending a money order to Tanzania, while chatting about the weather at the same time. Surprised? Not really. The point to remember is this: RBS is now, in effect, a state-owned institution. Like just about everything else run by the government, it is starting to turn into a shambles.
In truth, it is not just the computers that aren't working at RBS. The bank increasingly looks like the British Leyland of the 2010s a vast, sprawling, uncompetitive conglomerate that sucks up public money. There were some good businesses within British Leyland Land Rover, for example but they couldn't prosper while they were run by the government. There may be good businesses within RBS too but they will struggle while it is state-owned. The only sensible option is to break it up, sell the profitable bits, and close the rest down.
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It was no surprise that it was an IT system that revealed what RBS is fast becoming. Bringing together the government and computers is much like bringing together matter and anti-matter the results are usually explosive. The NHS has poured countless billions into computer systems that don't work. The Inland Revenue cheerfully loses millions of tax records.
The immigration service practically shuts down airports with systems that would keep the Queen waiting for several hours while the computer tried to check whether she was actually British or not. Any IT system run by the government is a fiasco.
RBS may look, and in some respects act, like a private company. But in truth it is turning into part of the public sector. When the bank crashed after the bonkers reign of Fred Goodwin, the strategy was to bail out the bank, take a chunk of the equity, put in some new management, slim the whole thing down, and then return it to private ownership as fast as possible.
But it hasn't worked out. The troubles at RBS ran far deeper than anyone realised at the time. The problems in Britain and the world economy turned out to be far worse, and much harder to fix, than anyone quite grasped back then. At first 2011 was bandied around as the date for returning RBS to the private sector. But that has now stretched into 2012, and there are still no signs of the company finding buyers for the 82% stake owned by the government.
So when is it finally going to be re-privatised? Right now there is no schedule. Britain looks to have too many banks at least of the old-fashioned sort, with lots of branches, high costs and poor customer service. Just take a look at the problems Lloyds-TSB is having selling off the 600-plus branches it is required to get rid of. No one seems to want them at least at the price Lloyds is asking. There are too many banks out there, and they don't make enough money.
So it looks as if the state may control RBS for years to come. Yet there is no evidence to suggest that the government is any good at running any kind of company, let alone a bank. Little by little the pressure of the market starts to recede and a civil services culture takes over. Why should anyone at RBS care about whether the customers are happy anymore than anyone at the Post Office or the NHS does, or anyone at British Leyland or British Telecom used to? One glitch' will follow another until eventually all its customers despair, and move their accounts somewhere else.
It's a disaster the government should recognise that Plan A hasn't worked, and switch to Plan B instead. What's that? Sell off the investment bank and close down any parts that can't be sold. Then break-up the retail arm of RBS into its constituent parts the RBS, NatWest and Ulster Bank chains (and perhaps divide NatWest into the old National and Westminster chains as well). Sell them or re-float them for whatever price you can get. If you can't find buyers then just give them to the staff for nothing. Ring-fence the banks so that depositors don't lose any money if the banks go bust then let them stand or fall.
Sure, the government would lose money. But there is no way it is ever going to get back the billons it pumped into RBS now. If it broke up the bank and sold it off, it would inject some much-needed competition into the banking market. And it would at least salvage something from the bail-out of RBS. Right now it is turning into an unwieldy state-owned conglomerate and a decade from now, it is not going to be worth anything at all.
Matthew Lynn is a columnist for Bloomberg, and writes weekly commentary syndicated in papers such as the Daily Telegraph, Die Welt, the Sydney Morning Herald, the South China Morning Post and the Miami Herald. He is also an associate editor of Spectator Business, and a regular contributor to The Spectator. Before that, he worked for the business section of the Sunday Times for ten years.
He has written books on finance and financial topics, including Bust: Greece, The Euro and The Sovereign Debt Crisis and The Long Depression: The Slump of 2008 to 2031. Matthew is also the author of the Death Force series of military thrillers and the founder of Lume Books, an independent publisher.
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