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The Royal Bank of Scotland Group PLC (Template:Lang-gd) is a banking and insurance holding company based in Edinburgh, Scotland. It is the largest banking group in Scotland, the second largest in the UK and Europe, and the fifth largest in the world by market capitalisation. Its shares have a primary listing on the London Stock Exchange.

Founded in Edinburgh in 1727 by royal charter, it is the second-oldest bank still in operation in the country, after the Bank of Scotland. The registered head office is located at St Andrew Square. In 2005, Queen Elizabeth II opened the bank's new head office building in Gogarburn.

The Royal Bank of Scotland Group operates a wide variety of banking brands offering personal and business banking, private banking, insurance and corporate finance throughout its operations located in Europe, North America and Asia. In the UK and Ireland the main subsidiary companies are: the Royal Bank of Scotland plc; NatWest; Ulster Bank; and Coutts. In the United States it owns Citizens Financial Group, the 8th largest bank in the country. Insurance companies include Direct Line, Churchill and Lombard Direct.

The Royal Bank of Scotland also continues to print banknotes in Scotland; and is the only bank in the UK that continues to print a £1 note. It is known in Scottish Gaelic as "Banca Rioghail na h-Alba", which is used on some of its buildings in the north west of Scotland , and also in its Gaelic chequebooks.

History

Foundation

The bank traces its origin to the Equivalent Society which was set up by investors in the failed Company of Scotland to protect the compensation they received as part of the arrangements of the 1707 Acts of Union. The Equivalent Society became the Equivalent Company in 1724, and the new company wished to move into banking. The British government received the request favourably as the "Old Bank", the Bank of Scotland, was suspected of having Jacobite sympathies. Accordingly the "New Bank" was chartered in 1727 as the Royal Bank of Scotland, with Archibald Campbell, Lord Ilay appointed as its first governor.

In 1728, the Royal Bank of Scotland became the first bank in the world to offer an overdraft facility.

Competition with the Bank of Scotland

Competition between the Old and New Banks was fierce, and centred on the issue of banknotes. The policy of the Royal Bank was to either drive the Bank of Scotland out of business or to take it over on favourable terms.

The Royal Bank built up large holdings of the Bank of Scotland's notes, which it acquired in exchange for its own notes, and then suddenly presented them to the Bank of Scotland for payment. To pay for these notes the Bank of Scotland was forced to call in its loans and, in March 1728, to suspend payments. The suspension relieved the immediate pressure on the Bank of Scotland at the cost of substantial damage to its reputation, and gave the Royal Bank a clear space to expand its own business, although the Royal Bank's increased note issue also made it more vulnerable to the same tactics.

Despite talk of a merger with the Bank of Scotland, the Royal Bank did not possess the wherewithal to complete the deal. By September 1728 the Bank of Scotland was able to start redeeming its notes again, with interest, and in March 1729 it restarted lending. To prevent similar attacks in the future, the Bank of Scotland put an "option clause" on its notes, giving it the right to make the notes interest-bearing while delaying payment for six months; the Royal Bank followed suit. Both banks eventually decided that the policy they had followed was mutually self-destructive and a truce was arranged, but it still took until 1751 before the two banks agreed to accept each other's notes.

Scottish Expansion

The Bank opened its first branch office outside Edinburgh in 1783 when the first Glasgow branch opened. Further branches were opened in Dundee, Rothesay, Dalkeith, Greenock, Port Glasgow and Leith during the early 1800s. In 1821, the Bank moved from its original head office in Edinburgh's Old Town to St Andrew's Square in the New Town which remains the Bank's registered head office to this day.

The rest of the 19th century saw the Bank pursue mergers with other Scottish banks, mainly in a response to failing institutions. The assets and liabilities of the Western Bank were acquired following its collapse in 1857 and in 1864 the Dundee Banking Co. was acquired. By 1910, the Bank had 158 branches and around 900 staff.

In 1969, the Bank merged with the National Commercial Bank of Scotland to become the largest clearing bank in Scotland.

Expansion into England

The expansion of the British Empire in the latter half of the 19th century saw the emergence of London as the world's largest financial centre, attracting the Scottish banks to expand south into England. The first London branch of the Royal Bank of Scotland opened in 1874. However, the English banks moved to prevent further expansion by the Scottish banks in England, and after a government committee was set up to examine the matter, the Scottish banks decided to drop their expansion plans. An agreement was reached whereby English banks would not open branches in Scotland; and Scottish banks would not open branches in England outside of London. This agreement remained in place until the 1960s, although various cross border acquistions were permitted.

The Royal Bank's English expansion plans were resurrected after World War I, when it acquired various small English banks, including London based Drummonds Bank in 1924; and William Deacon's Bank based in North West England in 1930; and Glyn, Mills and Co in 1939. The latter two were merged in 1970 to form William and Glyn's Bank; and later rebranded as the Royal Bank of Scotland in 1985.

Takeover bids

During the late 1970s and early 1980s the Royal Bank was the subject of three separate takeover approaches. In 1979, Lloyds Bank, which had previously built up a 16.4% stake in the Bank, made a takeover approach for the remaining shares it did not own. The offer was rejected by the board of management on the basis it was detrimental to the Bank’s operations. However when the Standard Chartered Bank, proposed a merger with the Bank in 1980, the board of management responded favourably to the offer. Standard Chartered Bank was headquartered in London, although most of its operations were in the Far East, and the Royal Bank saw advantages in creating a truly international banking group. Approval was received from the Bank of England, and the two banks agreed a merger plan that would see the Standard Chartered acquire the Royal Bank and keep the UK operations based in Edinburgh. However the bid was scuppered by the Hongkong and Shanghai Banking Corporation (HSBC) which tabled a rival offer. The bid by HSBC was not backed by the Bank of England; and was subsequently rejected by the Royal Bank’s board of management. However the British government referred both bids to the Monopolies and Mergers Commission; and both were subsequently rejected as being against the public interest.

The Bank did obtain a international partnership with Banco Santander Central Hispano of Spain, each bank taking a 5% stake in the other. However this arrangement ended in 2005, when Banco Santander Central Hispano acquired UK bank, Abbey National- and both banks sold their respective shareholdings.

International expansion

The first international office of the Bank was opened in New York in 1960. Subsequent international banks were opened in Chicago, Los Angeles, Houston and Hong Kong. In 1988 the Bank acquired Citizens Financial Group, a bank based in Rhode Island, United States. Since then, Citizens has acquired several other American banks, and in 2004 acquired Charter One Bank to become the 8th largest bank in the United States.

Outwith North America, the Royal Bank also opened offices in Europe and now has subsidiaries in: Austria, Switzerland France, Italy, Germany, Spain, Portugal, Denmark, Norway and Sweden. In the Asia-Pacific region, the Bank has officres in: Australia, China, Hong Kong, Japan and Singapore.

National Westminster Bank

The late 1990s saw a new wave of consolidation in the financial services sector. In 1999, the Bank of Scotland launched a hostile takeover bid for English rival, the NatWest. The Bank of Scotland intended to fund the deal by selling off many of the NatWest’s subsidiary companies, including the Ulster Bank and Coutts. However, the Royal Bank subsequently tabled a counter-offer, sparking off the largest hostile takeover battle in UK corporate history. A key differentiation from the Bank of Scotland’s bid was the Royal Bank’s plan to retain all of NatWest’s subsidiaries. Although NatWest, one of the "Big 4" English clearing banks, was significantly larger than both Scottish banks, it had a history of poor financial performance, and plans to merge with insurance company Legal & General were not well received, prompting a 26% fall in share price.

On February 11, 2000, the Royal Bank of Scotland was declared the winner in the takeover battle, becoming the second largest banking group in the UK after HSBC Holdings. The NatWest brand was retained, although many back office functions of the bank were merged with the Royal Bank's leading to over 18,000 job losses throughout the UK.

Recent history

As the Royal Bank of Scotland has expanded over the years, it gradually outgrew its small head office in St Andrew’s Square. A new international headquarters was built at Gogarburn on the outskirts of Edinburgh, and was opened by Queen Elizabeth II and Prince Philip, Duke of Edinburgh in 2005. The St Andrew’s Square office still remains the official registered head office.

In August 2004, the Royal Bank expanded into China, acquiring a 10% stake in the Bank of China for £1.7 billion .

Corporate Structure

The Royal Bank of Scotland Group is split into 8 operating areas. Each operating area has several subsidiary businesses.

Retail Banking

This is the group’s main UK business, offering personal and business banking services. Services are operatered under both the Royal Bank of Scotland and NatWest brand names. Key subsidiaries include:

• Child & Co
• Drummond Bank
• NatWest
• NatWest Life
• Royal Bank of Scotland
• Royal Scottish Assurance

Wealth Management

This is the group’s private bank division providing services to wealthy individuals:

• Adam and Company
• Coutts Group
• Coutts Bank von Ernst
• NatWest Offshore
• NatWest Stockbrokers
• Royal Bank of Scotland International

Retail- Direct Channels

This division is responsible for the group’s credit card businesses in the UK and Europe; including internet and telephone based banking brands; and processing facilities for retailers. Key subsidiaries and brands include:

• Comfort Card
• Direct Line
• Lombard Direct
• MINT
• Tesco Personal Finance (50% joint venture with Tesco)
• The One account
• Streamline Merchant Services

Corporate Markets

This division consists of UK Corporate Banking which provides financing, leasing services and transaction processing to corporate customers. The Global Banking and Markets division provides debt and risk management to corporate and institutional customers in markets around the world. Key subsidiaries include:

• Angel Trains
• Bibit
• Jamjarcars
• Lombard
• RBS Greenwich Capital
• RBS Nordisk Renting
• WorldPay

RBS Insurance

RBS Insurance is the second largest general insurance provider in the UK, as well as a growing presence in Spain, Italy, and Germany, Key brands include:

• Churchill
• Direct Line
• Privilege

Ulster Bank

Ulster Bank provides personal and business banking services in Northern Ireland and the Republic of Ireland under the Ulster Bank and First Active brands.

Citizens

This division includes the Bank's businesses in the United States, Citizens Financial Group and Charter One Bank.

Banknotes

The Royal Bank of Scotland, along with Clydesdale Bank and Bank of Scotland, still prints its own banknotes for Scotland. The current designs of the notes depict Lord Ilay (1682-1761), the first governor of the bank on the front, and Scottish castles on the back.

In circulation are:

• 1 pound note featuring Edinburgh Castle
• 5 pound note featuring Culzean Castle
• 10 pound note featuring Glamis Castle
• 20 pound note featuring Brodick Castle
• 50 pound note featuring Inverness Castle
• 100 pound note featuring Balmoral Castle

Occasionally the Royal Bank issues commemorative banknotes. Examples are the £20 note for the 100th birthday of Queen Elizabeth, the Queen Mother in 2000, and the £5 note honouring veteran golfer Jack Nicklaus in his last competitive Open competition at St Andrews in 2005. These notes are much sought-after by collectors and they rarely remain long in circulation.

See also

• Banks of the United Kingdom
• British banknotes
• List of banks

External links

• The Royal Bank of Scotland Group official site
• Royal Bank of Scotland plc- UK retail bank
• RBS Company Announcements

• Royal Bank of Scotland Group
• Banks of the United Kingdom
• Banks of Scotland
• Companies of Scotland
• Companies based in Edinburgh
• Companies listed on the London Stock Exchange
• 1727 establishments
• Organisations based in Scotland with royal patronage