The Royal Bank of Scotland plc ()Token and symbolic use of the Scottish Gaelic name occurs on some Royal Bank of Scotland buildings and customer stationery such as cheque books. Gaelic is not used on the Royal Bank of Scotland website, for contracts or on their banknotes., is a major retail and commercial bank based in Edinburgh, Scotland. It is one of the retail banking subsidiaries of NatWest Group (formerly known as The Royal Bank of Scotland Group), together with NatWest and Ulster Bank. The Royal Bank of Scotland has 62 branches in Scotland. The bank is completely separate from the fellow Edinburgh-based bank, the Bank of Scotland, which pre-dates the Royal Bank by 32 years. The Royal Bank of Scotland was established to provide a bank with strong Hanoverian and Whig ties.
Following ringfencing of the Group's core domestic business, the bank became a direct subsidiary of NatWest Holdings in 2019. NatWest Markets comprises the Group's investment banking arm. To give it legal form, the former RBS entity was renamed NatWest Markets in 2018; at the same time Adam and Company (which held a separate PRA banking licence) was renamed The Royal Bank of Scotland, with Adam and Company continuing as an RBS private banking brand until 2022.Treanor, Jill. RBS to strengthen NatWest brand. The Guardian. 30 September 2016.
History
Foundation
The bank traces its origin to the Society of the Subscribed Equivalent Debt, 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" on 21 November 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 on 31 May 1727 as the Royal Bank of Scotland, with Archibald Campbell, Lord Ilay, appointed its first governor.
On 31 May 1728, the Royal Bank of Scotland invented the overdraft, which was later considered an innovation in modern banking. It allowed William Hogg, a merchant in the High Street of Edinburgh, access to £1,000 (£ in today's value) credit.
Competition with the Bank of Scotland
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 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, then suddenly presented to the Bank of Scotland for payment. To pay 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 resumed 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.
Scottish expansion The bank opened its first branch office outside Edinburgh in 1783 when it opened one in Glasgow, in part of a draper's shop in the High Street. Further branches were opened in Dundee, Rothesay, Dalkeith, Greenock, Port Glasgow, and Leith in the first part of the nineteenth century.
In 1821, the bank moved from its original head office in Edinburgh's Old Town to Dundas House, on St. Andrew Square in the New Town. The building as seen along George Street forms the eastern end of the central vista in New Town. It was designed for Sir Lawrence Dundas by Sir William Chambers as a Palladian mansion, completed in 1774. An axial banking hall (Telling Room) behind the building, designed by John Dick Peddie, was added in 1857; it features a domed roof, painted blue internally, with gold star-shaped coffers. The banking hall continues in use as a branch of the bank, and Dundas House remains the registered head office of the bank to this day.
The rest of the nineteenth century saw the bank pursue mergers with other Scottish banks, chiefly as a response to failing institutions. The assets and liabilities of the Western Bank were acquired following its collapse in 1857; the Dundee Banking Company was acquired in 1864. By 1910, the Royal Bank of Scotland had 158 branches and around 900 staff.
By 1969, economic conditions were becoming more difficult for the banking sector. In response, the Royal Bank of Scotland merged with National Commercial Bank of Scotland. The merger resulted in a new holding company, the National and Commercial Banking Group, with 662 branches in Scotland, which all transferred to the Royal Bank name. The holding company was renamed The Royal Bank of Scotland Group in 1979Directors' Report and Accounts Chairman's statement (p.5) The Royal Bank of Scotland Group, 7 December 1979 and became NatWest Group in July 2020.
Expansion into England
The expansion of the British Empire in the latter half of the nineteenth century saw the emergence of London as the largest financial centre in the world, attracting Scottish banks to expand southward into England. The first London branch of the Royal Bank of Scotland opened in 1874. However, English banks moved to prevent further expansion by Scottish banks into England; and, after a government committee was set up to examine the matter, the Scottish banks chose to drop their expansion plans. An agreement was reached, under which English banks would not open branches in Scotland and Scottish banks would not open branches in England outside 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), which continued as a branch of the Royal Bank of Scotland; Williams Deacon's Bank, based in northwestern England (in 1930) and Glyn, Mills & Co. (in 1939), which together came to be known as the Three Banks Group; the English and Welsh branches were reorganised as Williams & Glyn's Bank in 1969, before adopting the Royal Bank name in 1985.
Takeover bids
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 directors on the basis that 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 responded favourably. 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 to a merger plan that would have seen 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. 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 Nationaland both banks sold their respective shareholdings.
International expansion
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.
From 1988 to 2015, it owned Citizens Financial Group, a bank in the United States, and from 2005 to 2009 RBS Group was the second-largest shareholder in the Bank of China, itself the world's fifth-largest bank by market capitalisation in February 2008.
Recent history
Following the implosion of the Royal Bank of Scotland in 2008 while under the direction of directors at its Edinburgh headquarters, and its rescue by taxpayer funds, it became a subsidiary of the UK Government. On 20 January 2011, Royal Bank of Scotland were fined £28.58 million for anti-competitive practices that were enacted with Barclays in relation to the pricing of loan products for large professional services firms. Also in 2011, Royal Bank of Scotland prevented Basic Account holders from using the ATMs of most rival banks (although they could still use those of NatWest, Tesco, Morrisons and the Post Office).
In June 2012, computer problems prevented customers accessing accounts. Royal Bank of Scotland released a statement on 12 June 2013 that announced a transition in which CEO Stephen Hester would stand down in December 2013 for the financial institution "to return to private ownership by the end of 2014". For his part in the procession of the transition, Hester received 12 months' pay and benefits worth £1.6 million, as well as the potential for £4 million in shares. The Royal Bank of Scotland stated that, as of the announcement, the search for Hester's successor would commence. Hester was replaced as CEO by New Zealander Ross McEwan, formerly the head of the bank's retail arm, on 1 October 2013. McEwan, who was 56 years old at the start of his tenure, will receive no bonus for his work in 2013 or at the end of 2014, and his pension will be replaced by an annual cash sum equivalent to 35 percent of his salary as CEO.