The costs keep piling up.

The Sick State of Banking at RBS

Mark Gilbert is a Bloomberg View columnist and writes editorials on economics, finance and politics. He was London bureau chief for Bloomberg News and is the author of “Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable.”
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A food company that regularly poisoned people wouldn't expect to stay in business for long. A pharmaceutical company whose drugs made patients sick would be shut down. But a bank that repeatedly rips off its customers? Why, it can just keep paying fines, toss out a "mea culpa" press release, and get back to business as usual -- even when it's 80 percent owned by taxpayers.

That would appear to be the case for Royal Bank of Scotland Group. Today, the bank was fined14.47 million pounds ($24 million) for giving customers poor advice about their home loans, a service that should be about as basic as retail banking gets. Of the 164 cases reviewed by the Financial Conduct Authority, just two were deemed to be up to snuff. Moreover, it took the bank a year to take action after the regulator first pointed out its shortcomings as a mortgage adviser.

RBS isn't the only U.K. bank to behave mendaciously: Lloyds Banking Group and Barclays Plc are similarly entwined in litigation and compensation claims. In fact, banks around the world have been found guilty of conduct unbecoming. RBS, though, received the biggest U.K. bailout (45.5 billion pounds in 2008), and its conduct seems to be taking longer to reform. Today's fine, for example, is for wrongdoing that lasted until March 2013, long after banks had been put on notice that taxpayer support would no longer be available and that regulators were watching.

Sifting through thelawsuits to work out what RBS has paid, been fined or simply set aside for its various financial crimes provides a mind-boggling picture of misdeeds, with numbers that escalate each quarter. Last year, the bank paid $612 million for its part in manipulating Libor money-market rates. In January, it said it had set aside 3.1 billion pounds to pay future claims, including 1.9 billion pounds for potential mortgage-bond selling fines.

Other naughtiness includes the misselling of interest-rate hedging swaps to companies, and saddling retail customers with loan insurance they didn't need. Last year it agreed to pay $100 million to U.S. regulators to settle accusations that it violated sanctions programs targeting Iran, Sudan, Myanmar and Cuba. Still to come are the results of the investigation into currency rigging, which is likely to produce eye-watering penalties.

We still allow our banks too much leeway. While bad banks don't kill people in the same way as adulterated food or contaminated medicine, they can trash the economy, ruin individual lives and hobble companies. RBS seems to have employed deceit, malpractice and malfeasance, and fines don't seem to have altered its behavior. The bank should reconsider the employment prospects of everyone -- even at the highest levels of management -- involved in the 162 mortgage cases that the FCA deemed to be below par. If individuals aren't held to account, the culture of banking won't change and standards won't improve.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Mark Gilbert at

To contact the editor on this story:
Max Berley at