A true rebranding... or is it just lipstick on a pig?

RBS’ decision to scrap the three-letter acronym it has used for 11 years and seek to return to its roots by readopting the Royal Bank of Scotland title will get the nation thinking. Is this institution, once cherished by so many Scots, really making a return to its roots? Or is this just another cynical marketing ploy?

Does the £1 billion rebrand mean the bank has – finally – learnt some lessons from its collapse six years ago? Or is this just the equivalent of lipstick on a pig?

Founded in 1727, the Royal Bank of Scotland was a creature of the Scottish establishment. It invented the overdraft (or ‘cash credit’ as it was known), enabling 18th Century Scottish merchants to punch above their weight, and underpinned Scotland’s economic renaissance and industrial revolution. In the Age of Enlightenment, the Royal Bank of Scotland and the older Bank of Scotland were seen as positive forces for good – described by free-market economist Adam Smith as ‘a great benefit to trade’.

But in the late 1980s British banks started to lose the plot. Obsession with shareholder value meant they had fewer qualms about ripping off customers. Economic liberalisation led them to believe they had to ‘eat’ (acquire other banks) or ‘be eaten’ (be acquired by other banks).

They lost interest in local branches and focused on so-called casino banking – complex trading in parcels of debt and gambling on derivatives, swaps and options – which was profitable, risky and much more interesting than sustaining the real economy. RBS took every aspect of this banking revolution to extremes. It went on an acquisition spree, spending £21 billion on Nat-West in 2000 and making a further 27 acquisitions around the world in 2001-07. Then it essentially killed itself by paying €72 billion for, and failing properly to digest, Amsterdam-based ABN AMRO three months after the start of the credit crisis.

Feted in financial circles, chief executive Fred ‘The Shred’ Goodwin became increasingly detached from reality from 2002 – and the bank lost sight of its raison d’etre. As he chased the Holy Grail of usurping HSBC as the world’s biggest bank, Goodwin saw the Royal Bank of Scotland name as a turn-off for international customers, a brake on progress and smacking of parochialism. So he crunched it to just three letters – RBS. The new name suited his goals; brash, modern, stateless. Loads of other banks were doing it, too, including ANZ, BBVA, BNPP, HSBC, ING, NAB and UBS.

The problem RBS now faces is its name is for ever linked to the years of excess, the ignominious failures of 2007 and Goodwin’s extraordinary greed. It remains a toxic brand because of its failure fully to reform. Some of the bad practices that caused it to collapse have yet to be eradicated.

So will RBS customers buy this latest attempt to airbrush the past 15 years from history? Personally, I doubt it.

For the rebrand to succeed, current chief executive Ross McEwan must implement root-and-branch reforms and demonstrate that – in all areas of its business, including, for example, the way in which it treats small businesses in ‘distress’ – the bank has mended its ways and the customer once again is king.

Unless that happens, I suspect this Caledonian makeover is doomed to fail.