The Royal Bank of Scotland: new parliament, new challenges
June 01, 1999
A Parliament last sat in Edinburgh in 1707. The return this summer of self-government for Scotland is the most recent symbol of a resurgence in Scottish identity and national confidence. How will it work out in practice, as hard-headed commentators question the economic viability of a nation within a nation? Enter, centre-stage, Scotland’s financial services sector, which grew dramatically during the three centuries since the Act of Union and still maintains a distinctive position within the UK and the global economy.
The Royal Bank of Scotland was founded by Royal Charter in 1727. The following year it invented the first ever bank overdraft and grew gradually, opening its first branch in 1783 in Glasgow and in London in 1874. Growth through the 20th century continued, fuelled by mergers and banking consolidation. Today it is a diversified financial services group, offering a full range of bank and savings accounts, card services and life assurance, along with motor and home insurance through Direct Line. It has 35,000 staff (29,000 in UK) and assets in excess of ?75 billion. Pre-tax profits last year were over £1 billion and The Royal Bank is in the top 50 of UK companies by market capitalisation. The branch network is 650 strong throughout Great Britain.
The Royal Bank has a tradition of innovation, pioneering telephone and electronic banking. Launched in 1985, Direct Line is now the market leader in telephone insurance, as the largest UK private motor insurer and eighth largest home insurer. The Royal Bank is also active in recent trends towards ‘supermarket banking’. Well placed to expand into the English market, it has joint ventures with Tesco on financial products and provides Virgin Direct with its innovative combined banking account.
Outside the UK, The Royal Bank owns Citizens Financial Group, a leading American bank, focused in New England with almost 300 branches. It also has a strategic alliance with Banco Santander of Spain giving access to a wider international market.
Scotland
Headquartered in Edinburgh, it is inevitable that within Scotland The Royal Bank is seen as one of the country’s leading businesses, with all the expectations that go with that. Key audiences are smaller and arguably more demanding, and the return of the Parliament presents a challenge to play a more active role. There may be greater pressure on reporting of community involvement and wider social responsibility. This will require Scottish business as a whole to articulate more clearly just what it already does and where the boundaries should lie between the sectors.
But Scotland, as a country within a country, also offers opportunities, because of its size to work up projects, before adopting them in the rest of the UK. It is easier to have a clear impact, both in the community and on the business, for example building corporate reputation as an active partner in the community.
Programme review
In common with many other companies, The Royal Bank has asked hard questions in recent years about the purpose of community relations. A major strategic review in 1998 resulted in the community programme being explicitly aligned to business goals, specifically to increase the Bank’s profile, improve its image and support its brand values.
The result is a clear focus on priority topics, chosen because of their strategic relevance to the business:
* finance and education;
* finance and social exclusion;
* finance and micro-economic development.
Flagships
Under education, one example is a major in-kind gift of one thousand refurbished computers to schools in Scotland. Another is a programme with the Scottish Consultative Council on the Curriculum which will entitle all Scottish schools to education on financial services.
Flagship projects on micro-economic development include long-standing support for the Prince’s Scottish Youth Business Trust, as well as PYBT in England and Wales. For the former, The Royal Bank is currently sponsoring the new business awards; for PYBT, a grant fund is assisting businesses in south Wales and the Manchester area, where The Royal Bank has a strong branch presence. Other support for micro-economic development includes sponsorship of Scottish Enterprise’s programme of Personal Enterprise Shows around Scotland, encouraging new business formation, and in Glasgow specifically providing support to The Glasgow Collection, part of the 1999 UK City of Architecture programme.
On financial exclusion, the Bank’s deputy group chief executive, Fred Goodwin, is heading the UK government’s task force on how banks can help credit unions to access ‘unbanked’ communities.
These projects focus appropriately on finance in the community, given the nature of the business, but wider community needs are also part of the programme. One example is in the environment and extends like the branch network throughout the UK. The Royal Bank is providing ?450,000 funding for one thousand specially designed mileposts to be located on the 8,000 mile National Cycle Network being developed by Sustrans, the civil engineering charity. Recognised British artists from Scotland, England and Wales have produced three different designs for each country.
Programme management
As with many other companies, The Royal Bank has previously focused reporting on the contributions made at the corporate centre. On this basis, the UK community contribution totalled £2.5 million in the 1998 financial year, excluding time and in-kind contributions. Not included in this total were activities outside the UK, although Citizens has a very active community programme, going beyond the requirements of the Community Reinvestment Act.
Mindful of the demands for accurate information in this area, likely to grow in the context of the new Scottish politics, The Royal Bank was a founding member of the Scottish Benchmarking Group. The initiative helps its members to record more fully their total community contribution, adopting a common approach to vexed questions such as the valuation of in kind gifts and near-commercial activities.
The sponsorship and community programme is managed through the Corporate Affairs department in Edinburgh, with a team of seven staff covering the whole of Great Britain. Jim Bellany and John Laydon are responsible for the programme. An Appeals Committee headed by The Royal Bank’s chairman meets regularly to consider major community programme support.
Employees
An innovative feature of The Royal Bank activities is the Community Action Programme which encourages employee involvement. Grants of between ?100 and ?1,000 are available for projects which benefit the local community, but only to teams of two or more who give of their own time. The purpose is not to match fundraising, but to support practical projects – such as renovating a playground for inner city kids or volunteering to help adults develop their literacy and numeracy skills.
Employees submit their plans in advance and, if the idea is not immediately supportable, community staff will work with the team to develop the project. Ultimately over 90% of applicants succeed. Along with the offer of funding comes a package of support for gaining publicity. This is in keeping with the community programme’s focus on business goals, as is the deliberate emphasis on teams of employees working together. Completed projects are considered for the Annual CAP Chairman’s Awards.
Future challenges
Expectations about good corporate citizenship may develop in Scotland in unforeseen ways and it is possible that a distinctive form could emerge. So The Royal Bank will need to communicate proactively its current activities, confident of their worth, and remain responsive to the needs and demands of its stakeholders.
Some development may be necessary around more encouragement for employees to get involved, for example with a pound-for-pound fundraising scheme or formal policy on time-off. The Royal Bank is already a member of Opportunity 2000, and mainstream employment policies will increasingly come under the spotlight too.
Another issue is the environment, where banks are being urged to play a greater role in spreading best practice. Environmental issues are already considered during loan evaluations, for example, and an audit of policies and practices is currently underway.
On consumers, The Royal Bank has previously considered cause related marketing as a possible initiative, but an effective mechanism has yet to be found. It is clear that concerns about access to financial services and the link with social exclusion are set to grow, perhaps more so in Scotland, and The Royal Bank will need to respond.
Whatever the future may hold, companies like The Royal Bank have a challenging part to play at this exciting time in Scotland’s history.
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