When news broke that James Graham, a renowned British playwright, had selected Fred Goodwin and the Royal Bank of Scotland as the focal point of his latest satire, Make It Happen, my excitement knew no bounds. The narrative of the ascension and downfall of the world’s largest bank, along with a mix of real and fictional characters, including the ghost of Adam Smith portrayed by Brian Cox from Succession, is truly captivating. With my roots in Scotland dating back to my early days in journalism, I have always been fascinated by Goodwin, the accountant who steered RBS to ruin and pushed Britain to the brink of financial collapse.
Over the past 17 years since RBS’s collapse, Goodwin has been portrayed as a caricature villain, oscillating between a megalomaniac and an introverted control freak. Hailing from Ferguslie Park, a deprived area near Glasgow, he earned a spot at Paisley Grammar, a school for ambitious individuals. As a student, he channeled his competitive spirit into playing pinball. As an adult, his ambition was to establish the largest bank globally, with its headquarters naturally in Scotland.
In the early 2000s, RBS climbed the ranks to become one of the top 10 global banks. Goodwin was knighted in 2004 for his “services to banking.” However, following the Lehman Brothers’ collapse in September 2008, the financial markets went into turmoil, leaving highly leveraged RBS in a vulnerable position. The UK government intervened with a £45.5bn rescue package, effectively nationalizing the bank. Goodwin, who believed he had done no wrong, was compelled to resign and later had his knighthood revoked. Presently, he spends his days on the golf course or tinkering with vintage cars, a disgraced recluse.
At the core of this Scottish tragedy lies the query of individual responsibility: was Goodwin a victim of circumstances beyond his control? Did loose monetary policies and regulatory loopholes fuel irrational conduct by bankers worldwide? Or were personal flaws and an ingrained corporate culture to blame for immense recklessness?
The absence of any bankers being prosecuted under the 2006 Companies Act for potential offenses related to RBS’s collapse suggests a lack of conclusive evidence. Fraud allegations are notoriously challenging to prove in court. Nonetheless, the issue of accountability remains unresolved. RBS’s fate was not predetermined. There were instances when key figures could have altered the course of events. Their failure stemmed from excessive deference to Goodwin, whose personal insecurities rendered him a ticking time bomb.
Countries like Iceland, Ireland, and Scotland bore a disproportionate brunt of the global financial crisis. Their populations were too small to sustain their overly ambitious aspirations as financial hubs. Yet, they were hesitant to seek talent externally. In Scotland’s case, it was a matter of national pride: the belief that the birthplace of Enlightenment thinkers like Adam Smith and David Hume should stand independently.
Over four decades ago, during my time as a young journalist at the Scotsman in Edinburgh, I witnessed this tenacious spirit while covering a three-way battle for control of the Royal Bank of Scotland. The “Battle Royal” culminated in an improbable victory for independence, a fleeting moment of triumph, and the subsequent downfall.
In 1980, the Royal Bank was a sedate institution led by Sir Michael Herries, a former head of Jardine Matheson trading company in Hong Kong and a recipient of the Military Cross for valor in World War II. When Standard Chartered proposed a friendly takeover, Herries acquiesced under the guidance of the Bank of England.
What followed was unexpected. The Hongkong and Shanghai Banking Corporation (later HSBC) disrupted the deal with a £500mn bid, 50% higher than Standard Chartered’s offer. Enraged by the Royal Bank board’s readiness to sell, a group of Scottish business leaders and politicians orchestrated a campaign to thwart both bids.
They approached a young English business reporter at the Scotsman, starting with covert messages from Peter de Vink, a Dutch immigrant and self-proclaimed financial specialist. This led to introductions with Angus Grossart, a merchant banker who humorously referred to himself as part of the “Scotia Nostra.” Other members included Iain Noble, a Scottish landowner and advocate for Gaelic language, and Alex Fletcher, a mid-level minister in the Thatcher government at the time.
Gathering support from academia, businesses, and labor unions, the resistance group argued that the Royal Bank’s takeover would reduce Scotland to a satellite economy within Britain. The Fraser of Allander Institute, a think tank at the University of Strathclyde, presented a report brimming with fervor. According to the report, if the Royal Bank lost its independence, Scotland would be reduced to mere manual laborers.
The Thatcher government, despite its free-market stance, accepted a Monopolies and Mergers Commission ruling against both the Standard Chartered and HSBC bids on the basis of “Scottish public interest” — a rare triumph for Scotland’s unique economic identity.
Within five years, the “Big Bang” deregulation allowed US mega-banks to assimilate London’s merchant banks and stockbrokers. While London expanded, the Royal Bank and its arch-rival Bank of Scotland stood firm. Bruce Pattullo, the longstanding CEO of Bank of Scotland, famously declared, “This is my castle, and I’ll pour boiling oil if you come near it.”
Another member of the (satirically dubbed) “Scottish Mafia” who stood firm was George Mathewson, the former head of the Scottish Development Agency (now Scottish Enterprise). Joining the Royal Bank in 1987, Mathewson, a trained physicist with a PhD in electrical engineering, spearheaded a series of managerial reforms that revolutionized the bank.
As detailed by Ian Fraser in Shredded: Inside RBS, The Bank That Broke Britain, most managers adhered to the “three-six-three rule” — borrowing at 3%, lending at 6%, and being on the golf course by 3 pm. These bankers were assessed not by the loans they extended but by their ability to evade bad debt. Under Mathewson’s leadership, banking shifted towards sales, profitability, and, critically, shareholder value. Essentially, a higher return on equity and a subsequent rise in share price.
This transformation was as much a cultural shift as a financial landscape alteration. It necessitated a new breed of bankers to execute the vision.
During the spring of 1997, Fred Goodwin was on a six-month assignment in Australia for Clydesdale Bank when he received a message from George Mathewson via a yellow sticker note on his desk. Upon returning the call, Mathewson offered him a prominent position but no guarantee of the CEO role. Feeling slighted, Goodwin declined. (Upon eventually joining in 1998 as deputy CEO with a promise of succession, he retrieved that same yellow sticker note. Goodwin was not one to forgive or forget easily.)
At that time, RBS was eager to expand beyond its borders. After considering Barclays, Mathewson set his sights on a bold acquisition of NatWest, a bank three times its size. Dubbed “ShatWest” or “CrapWest”, the English bank was floundering. A proposed merger with Legal & General insurance in 1999 had soured. NatWest was ripe for the taking, targeted not only by RBS but also by Bank of Scotland. Both viewed it as a matter of “eat or be eaten.”
The ensuing takeover battle was fierce, but RBS emerged victorious. Some Scots hailed it as the most significant win over the English since the Battle of Bannockburn in 1314. “It was a brilliant deal,” remarked a seasoned observer, “as NatWest was undervalued.”
Goodwin orchestrated the integration of NatWest seamlessly. Endowed with a sharp analytical mind, he earned the moniker “Fred the Shred” for his adept cost-cutting prowess. Upon assuming the CEO role in January 2001, he was resolute in pursuing growth. In Ireland, he expanded rapidly, leveraging Ulster Bank as a launchpad and issuing a £5 note in honor of football legend George Best. Subsequent deals targeted the US market primarily. However, the share price began to lag, with investors murmuring about a “Goodwin discount.”
Meanwhile, alarming reports of bullying behavior surfaced. Daily management meetings were rebranded as “morning beatings,” where executives were publicly humiliated routinely. At dinners, Goodwin would compel colleagues to perform acts. In one instance, upon learning that a senior RBS manager was overseas in the wee hours, Goodwin instructed for him to be woken up so he could deliver an Elvis Presley impersonation remotely. Naturally, the individual complied, eliciting nervous chuckles all around.
Goodwin was resolute in his mission to construct the world’s largest bank, with a Saltire flying high. He relocated the outdated RBS headquarters in St Andrew Square, Edinburgh, to a new greenbelt site at Gogarburn adjacent to Edinburgh airport. The expansive 350,000 sq ft campus accommodated 3,000 employees, complete with leisure facilities, tennis courts, a gym, medical center, and a standby corporate jet. During my visit as the FT editor