Fred Goodwin to step down as RBS chief

FROM proud banking icons to two humiliated, nationalised rumps: Scotland's two largest banks are being pulled from the brink of an economy-destroying collapse – but at the price of a proud, centuries-old independence. And nothing more epitomises that than the departure of Sir Fred Goodwin.

He took RBS from being a small UK player to one of the world's top five banks. In the process, he became Scotland's best-known and respected business figure.

But in recent months, the bank has been battered by the global financial storms and confidence has drained away at frightening speed.

Last week, shares in RBS plunged by 61 per cent to just 71.7p in the worst week ever for western banks. RBS, once worth £65 billion, has sunk to only £11 billion. Today's £15 billion capital injection will make the taxpayer the majority shareholder by far.

It is a shattering blow to Scotland's financial services sector and the livelihoods of the 106,000 people employed in the industry.

Taut, wiry, shrewd, tight-lipped, but with a sharp humour, Sir Fred was for years the best-known Scottish businessman worldwide.

RBS's acquisitions file bristled with solid brand names – NatWest, Coutts, Adam & Co, Direct Line, Ulster Bank, Churchill and Citizens Bank in the US.

He built the group up to be the second-biggest bank in Britain and the fifth-biggest in the world. Its market capitalisation topped that of Coca-Cola.

Then came the acquisition too far. Having signalled to fund managers and analysts that he had forsworn growth by acquisition, there came the daddy of them all last October – a £49 billion bid for Dutch bank giant ABN Amro as part of a consortium with Fortis and Santander.

The deal was completed just as the financial sky was darkening with problems spreading across the Atlantic from sub-prime mortgage lending in the US. RBS shares began to sag, but, by then, it was too locked into the bid to backtrack.

By early this year, its shares began to fall sharply on concerns over the group's exposure to "toxic" assets in the US. Half-yearly figures showed the group made a pre-tax loss of £691 million due to write-downs totalling £5.97 billion.

RBS's problems mounted and more assets came to be seen as toxic.

Sir Fred then sprang his boldest stroke of all – a £12 billion rights issue cash call on the banks' shareholders, at a knockdown price of 200p. It was the biggest rights issue in the history of the London Stock Exchange. But such was investors' confidence in the bank – and in Sir Fred – that all but 2 per cent of shareholders stumped up.

Yet far from RBS's problems being over, they got worse. The shares plunged below 200p as confidence in banks began to sink worldwide.

When Belgo-Dutch giant Fortis keeled over into nationalisation last month, worry mounted over RBS's ability to integrate its own parts of the ABN empire without triggering more write-downs. The ability to sell off surplus assets in worsening conditions further worried the markets.

Troubles were compounded when credit ratings agency Standard & Poor's cut its rating on the group amid fears over future earnings and write-downs. Then last week came a final epochal sell-off, smashing the group's shares.

This crisis will change the shape of banking for a generation, and consigns the Fred Goodwin model to history.

So what will he get? Last year, Sir Fred received pay and total emoluments of £4.2 million. He is on a one-year contract, which means he stands to receive his basic £1.2 million, and huge pension benefits.

However, more than two million share options have been wiped out and his total of 2.5 million shares and share options, valued at £5.7 million at the end of last December, is now worthless.