The Royal Bank of Scotland ‘s chief executive has said this week that he believes that the financial sector of the United Kingdom will be better off if the country remains inside the European Union.
Ross McEwan, the head of RBS, was talking in an interview with BBC programme “Newsnight”. In this interview said that the level of uncertainty that is being caused by the EU referendum could “slow down banking” in this country.
He went on to say that he wanted the referendum to be held as early as possible and thought that June would be the best outcome given the current timeline.
He also spoke about whether or not he thought it was likely that the Bank of England would be raising its base interest rates any time soon. He said that he did not expect an interest rate rise until 2017 at the earliest.
Last week the Bank of England released minutes from the most recent meeting on interest rates. The meeting is held by all the members of the interest rates setting committee, which then votes upon whether or not to change the base rate.
The committee voted unanimously, 9-0, for no change to the base rate of interest. Ian McCafferty had been the only one to continuously vote for an increase since August but this time he too voted to keep interest rates at the same record-low that they have been at for years.
Mark Carney, the governor of the Bank of England, said that the decision was an easy one to make given the current economic climate.
“The decision was whether or not to raise interest rates. It was an easy decision not to raise interest rates, now is not the time to be raising interest rates because we haven ‘t had, in my judgement and the judgement of everyone else on the monetary committee, we haven ‘t had sufficient build in domestic cost growth. The economy is using up some slack but there ‘s still a bit more to be done there.”
Mr McEwan went on to say that he had seen absolutely no “economic data that suggests we ‘d be better off in the short to medium term”.
The referendum must take place by 2017 at the very latest but many expect it to be held this year. McEwan added that he thinks that the level of uncertainty surrounding the UK ‘s membership of the EU was making it difficult for businesses to perform to their fullest potential.
“The issue we’ve got is the uncertainty which slows businesses down, which will over time slow down banking so it’s… really good that the government is trying to have the vote very quickly.”
Going on to discuss his views on interest rates, the Royal Bank of Scotland boss said that he does not expect to see an interest rates rise any time soon.
“We’re going to have lower interest rates for a lot longer than was anticipatedÖ I don’t think we’ll have rate rises for all this year and possibly all of 2017 as well.
“We just have to get used to an environment where we have low interest rates for a long period of time.”
The recent report that the Bank of England released also downgraded their predictions for the level of wage growth that they are now expecting to see. The Bank of England now say that they think the level of average weekly earning will go up by 3% this year. This is 0.75% lower than the level of 3.75% that they previously predicted three months ago.
Kamal Ahmed is the economics editor at the BBC, he says that it will take as long as 2018 before the Bank starts to see the wage growth that they are hoping for.
“The Bank said that persistent low inflation, increases in population and therefore labour supply and changes in taxes meant that it was unlikely that incomes would increase at the rate suggested last autumn.
It said that wage growth had “eased significantly more” than anticipated.
It will be 2018 before average weekly earnings are increasing at the rate experienced before the financial crisis, the Inflation Report suggested.
Nearly a decade after the start of the financial crisis, the feelgood factor is still pretty muted.”
McEwan also discussed the performance of RBS, saying that he thinks that the bank has managed to turn things around under his leadership. However, he also said it was likely that this year would mark the eighth consecutive year of losses for the bank.
The bank has been forced to put away sizeable amounts of cash in order to pay for fines regarding mis-selling Payment Protection Insurance and mis-selling mortgage backed securities.
When compared with the other banks in the city, RBS shares have fallen by nearly 45% in just one year. The public still hold a 73% stake in the company after it needed to be bailed out to the tune of £45bn back in 2008.
When he was asked whether or not he thought that the public would ever get that money back he replied: “At this rate noÖ We’d love to get that money back to the public because it’s the public’s money.
“But at the time, if they hadn’t saved RBS then a lot of the financial services in the UK would have probably collapsed.”
Whilst Mr McEwan made it clear that he feels like his, or rather, the public ‘s bank has turned a corner. This sentiment was not echoed by a recent survey that was performed by Which? consumer group. The survey asked 20,000 people in the time between September and January whether or not they were satisfied with the level of service which they received from their bank. The survey covered current accounts, savings accounts, credit cards and mortgages.
The results of the survey were not good for RBS, who were placed rock bottom of this list. The results also showed NatWest, who are owned by the Royal Bank of Scotland, as second worst. The bottom ten banks included Barclays, Bank of Scotland and Clydesdale, all of whom are part of the Lloyds Banking Group; Lloyds itself came tenth from last.
The survey said that RBS trailed First Direct (in first place) by around 21 percentage points, which only goes to show the uphill task being faced by the government owned institution. Which? published this survey as part of its ongoing effort to get the Competition and Markets Authority to reshape its investigation into the financial sector.
Richard Lloyd, director of Which?, said:
“It ‘s high time the industry put its customers first, and the competition inquiry needs to ensure banks are held to account for the way they treat them. The big players in this market need to get on the front foot and improve services instead of waiting to be forced into action.”
The investigation was due to be reported in May but has already been delayed well beyond that deadline. The chairman of the banking investigation, Alisdair Smith, has said:
“A number of new suggestions have been made, including proposals aimed at achieving better outcomes for current account customers with overdrafts”.
These survey results pose a big disappoint to Ross McEwan who has tried to win back support from the bank ‘s customers. In recent times he has tried to make things easier for customers by scrapping “teaser rates” and 0% credit transfers. There have also been a series of high profile IT failures, including one that happened on New Year ‘s day which meant people could not use their debit cards in shops.
The head of personal banking and business banking operations at RBS and NatWest, Les Matheson, said:
“While we are disappointed in these results, we are determined to do more and are working with Which? to support its campaign, including raising awareness and education of products, not just for our customers but across the banking industry.”