Fred Goodwin

Fred Goodwin
Born	1958-08-17August 17, 1958 (age 68) Paisley, Renfrewshire, Scotland
Nationality	Scottish
Education	Chartered accountant
Occupation	Banker, chartered accountant
Company	Royal Bank of Scotland Group
Title	Former Group Chief Executive
Children	2

Frederick Anderson Goodwin (born 17 August 1958), widely known as Fred Goodwin, is a Scottish chartered accountant and former banker. He served as group chief executive of the Royal Bank of Scotland Group (RBS) from 2001 to 2008, a period in which the bank expanded rapidly through acquisitions before coming close to collapse during the 2008 financial crisis.

Goodwin trained as a chartered accountant with Touche Ross, led that firm's team handling the worldwide liquidation of the Bank of Credit and Commerce International after its 1991 collapse, and later ran Clydesdale Bank for National Australia Bank before joining RBS in 1998. As RBS chief executive he directed the bank's takeover of the much larger National Westminster Bank in 2000, and subsequently led a string of further acquisitions, including the Charter One Financial deal in the United States in 2004 and, in 2007, a consortium bid with Fortis and Santander for the Dutch bank ABN AMRO.

The ABN AMRO deal Goodwin had championed left the bank heavily exposed as the credit crisis intensified. In April 2008 Goodwin's bank raised £12 billion in a rights issue, and by October 2008 it required a government recapitalisation, with the state ultimately injecting some £45.5 billion of capital and taking a majority shareholding. Goodwin resigned as chief executive in October 2008, and RBS subsequently reported a loss of £24.1 billion for 2008, described at the time as the largest annual loss in British corporate history.

Goodwin's tenure and its aftermath produced sustained regulatory and parliamentary scrutiny. The Financial Services Authority's report of December 2011 found deficiencies in RBS's management, governance and culture and criticised the limited due diligence conducted before the ABN AMRO purchase; the Treasury Select Committee separately examined the bank's failure and Goodwin's evidence to it. Disclosure of the size of his pension entitlement in February 2009 caused public and political controversy, and in January 2012 the Honours Forfeiture Committee recommended, and the government acted to have the Crown annul, the knighthood he had received in 2004. Litigation brought by shareholders over the 2008 rights issue was settled by RBS in 2017, shortly before Goodwin was due to give evidence at trial.

Early life and education

Goodwin was born on 17 August 1958 in Paisley, Renfrewshire, Scotland. He trained as a chartered accountant and joined the firm Touche Ross, working as a contract manager on a management consultancy assignment at Rosyth Royal Dockyard between 1985 and 1987 before being made a partner in 1988. Following the collapse of the Bank of Credit and Commerce International (BCCI) in July 1991, Goodwin was put in charge of the Touche Ross team handling the bank's worldwide liquidation, a large and complex assignment spanning multiple jurisdictions. The scope and significance of his personal role in that liquidation was later questioned by the financial journalist Ian Fraser.

His work for Touche Ross brought him into contact with National Australia Bank, for which he carried out due diligence work related to its acquisitions of Clydesdale Bank and Yorkshire Bank. He was subsequently recruited as deputy chief executive of Clydesdale Bank in 1995, becoming chief executive of National Australia Bank's British banking operations the following year. At Clydesdale, Goodwin acquired a reputation for aggressive cost-cutting that earned him the City nickname "Fred the Shred".

Career

Deputy chief executive, Royal Bank of Scotland (1998 to 2001)

Goodwin joined the Royal Bank of Scotland in 1998 as deputy to the then chief executive, Sir George Mathewson. In 2000 RBS won a contested takeover battle for National Westminster Bank, a bank roughly three times its own size, against a rival approach from the Bank of Scotland; the deal, valued at around £20 billion, was completed on 6 March 2000. Goodwin succeeded Mathewson as group chief executive in January 2001, with Mathewson moving to the role of chairman. Following the takeover, Goodwin oversaw large-scale job reductions as RBS and NatWest operations were merged; by the end of 2000 he had achieved £653 million of a targeted £1.2 billion in cost savings, largely through headcount reductions. Coverage of the integration at the time described Goodwin's approach to the merger as unconventional for a hostile takeover of this kind, in that he paired the cost reductions with an explicit effort to maintain customer service standards across the combined branch network rather than pursuing cuts alone. Also in 2001, RBS's United States retail arm, Citizens Financial Group, acquired a network of Mellon Financial's retail banking branches, part of the earliest phase of the American expansion Goodwin directed from Edinburgh.

Group chief executive, Royal Bank of Scotland (2001 to 2008)

Expansion through acquisition

As chief executive, Goodwin pursued a strategy of growth through acquisition and organic expansion. Between his appointment as group chief executive and 2007, RBS's total assets grew by a multiple of 29, an average annual growth rate of 41 per cent, and the bank moved from outside the world's twenty largest banks by market capitalisation to ninth by 2007. When RBS announced its 2007 results in February 2008, it reported a record group operating profit of £10.3 billion (£7.7 billion after tax), and the bank's earnings per share had risen every year between 1997 and 2007. The Financial Services Authority later recorded that this apparent success was widely attributed to Goodwin's "overt and highly effective management philosophy", which the regulator characterised as combining tight cost control and centralisation of processing functions, a demonstrated ability to extract cost synergies from acquisitions, a strong focus on growth driven by clear targets and incentives, and an overt focus on capital "efficiency", meaning high leverage.

RBS's reported deals under Goodwin's leadership included the purchase of the Irish lender First Active, the acquisition of the Swiss private bank Bank von Ernst in 2003, and the 2004 purchase of the Cleveland, Ohio based Charter One Financial for $10.5 billion, which extended RBS's American retail banking arm, Citizens Financial Group, across the American Midwest. Also in 2001, Citizens Financial Group acquired a network of Mellon Financial's retail banking branches, part of the earliest phase of the American expansion Goodwin directed from Edinburgh. Goodwin was named "Businessman of the Year" by Forbes in its global edition in 2002, a recognition that credited the RBS acquisition strategy he directed.

By 2005, some RBS shareholders had begun to criticise Goodwin for prioritising international expansion over shorter-term returns, particularly following a $1.6 billion investment in a minority stake in Bank of China; the Dresdner Kleinwort analyst James Eden reported that some investors had accused Goodwin of "megalomania", a characterisation Eden himself said he regarded as unwarranted. In November 2005, facing investor unease over the bank's returns relative to competitors such as Barclays and HBOS, Goodwin told a Merrill Lynch investor conference that he "saw no strategic need for further acquisitions" and that RBS's priorities would shift toward organic growth and improving returns on equity. An analyst quoted at the time observed that Goodwin's acquisition-led strategy meant that "because Goodwin is very much the architect of the entire strategy, he gets the blame when things go wrong." The regulator's later review of internal RBS board papers found that a quarter of the RBS board had disagreed, in a confidential 2005 performance evaluation, that the board's review of strategic issues was satisfactory, and the 2006 evaluation recorded that a third of directors did not feel satisfied with the board's role in defining the bank's risk appetite.

Notwithstanding Goodwin's November 2005 pledge, in mid 2006 RBS's Global Banking and Markets (GBM) division, then chaired by Johnny Cameron with Brian Crowe as its chief executive, committed itself to a strategy of 25 per cent compound annual revenue growth, including a large expansion of its issuance of collateralised debt obligations (CDOs), with the goal of becoming a leading structured credit and leveraged finance house by 2010. The strategy was endorsed by the RBS group board, and GBM's revenues from structured credit were projected to grow from £51 million in 2005 to £300 million by 2008. The regulator's investigators later found that the strategy documentation put to the RBS board in June 2006 was not detailed, contained little analysis of the balance sheet risk involved in the planned growth, and included no evidence that the board's risk function had been asked to provide a comprehensive assessment of the risks before the expansion was approved.

ABN AMRO acquisition (2007)

In 2007, Goodwin led an RBS-headed consortium, together with the Belgian-Dutch group Fortis and the Spanish bank Santander, in a bid to acquire the Dutch bank ABN AMRO and divide its businesses among the three acquirers. The consortium's offer, reached after nearly seven months of contested bidding against a rival approach from Barclays, valued ABN AMRO at €71.1 billion, making it, at the time, the biggest takeover in banking history. Goodwin described the RBS-led offer as "superior" and "conspicuously more valuable" than the rival Barclays bid. Goodwin's bank was the largest member of the consortium, contributing 38.3 per cent of the offer price, equivalent to approximately 61 per cent of its own reported tier 1 capital at the end of 2006, and Goodwin's stated strategic rationale focused on ABN AMRO's North American business (LaSalle Bank), its global wholesale banking client base, its global payments system and its international retail network in Asia and the Middle East. Because ABN AMRO's agreed sale of LaSalle to Bank of America was disputed in the Dutch courts, the bank's own contemporaneous records show that Goodwin's Chairman's Committee unanimously approved the bid in April 2007 on the basis that "RBS does not need to do this deal" and would "walk away" if the price became too high, and that the March 2007 board minutes did not treat the acquisition as a "must do" deal. The offer was formally published on 20 July 2007, with 93 per cent of the £71.1 billion consideration payable in cash after the collapse of the LaSalle sale to the bank's benefit, and the acquisition completed on 17 October 2007, shortly before conditions in credit markets deteriorated sharply. At the shareholder vote on 10 August 2007, 94.5 per cent of the votes cast were in favour of the transaction Goodwin had championed.

Goodwin's bank funded most of its share of the cash consideration with debt rather than equity, and the majority of that debt was short-term: of the €22.6 billion cash it contributed, some €12.3 billion was raised through senior and bridge funding with a term of one year or less. The Review Team that produced the FSA's report judged this financing structure, agreed by Goodwin's board, to be "a risky financing strategy". The bank's core tier 1 capital ratio fell from 5.07 per cent in December 2006 to an anticipated 4.65 per cent in December 2007 as a direct consequence of the acquisition, and the transaction also generated £23.9 billion of goodwill on its balance sheet, of which £17.6 billion was attributable to the consortium partners' minority interests.

Goodwin's own due diligence before proceeding was, in the regulator's words, based on materials amounting to "two lever arch folders and a CD". The Review Team concluded that "the decision to make a bid of this scale on the basis of limited due diligence entailed a degree of risk-taking that can reasonably be criticised as a gamble", while noting that the limited scope of due diligence was in line with market practice for contested takeovers of this kind. The investment banking advisers Goodwin retained were, for the most part, paid a fee that was payable only on completion of the acquisition, a common arrangement at the time that the regulator's report noted made it "difficult to regard the adviser as independent".

The Review Team found that RBS's confidence in proceeding rested substantially on Goodwin's own record and RBS's reputation as an effective acquirer, in particular its earlier integration of NatWest, and concluded that this "sense of past success may have been justified" but "may also have led the RBS Board to be overconfident in its appraisal and challenge of new proposals". Johnny Cameron, the GBM chairman, later told the FSA's Enforcement Division in a compelled interview: "One of the things that went wrong for RBS was that... we bought NatWest as a hostile acquisition. We did no due diligence... After we bought NatWest, we had lots of surprises, but almost all of them were pleasant. And I think that lulled us into a sense of complacency around that. The fact is that the acquisition of ABN was also hostile... did we do sufficient due diligence. Absolutely not." RBS's own investor feedback at the time was mixed; the FSA's review of contemporaneous records found that while most institutional investors it surveyed had supported the deal, some hedge funds it interviewed years later recalled regarding the acquisition as an expensive, "unpopular" and "ridiculous vanity purchase", with one describing it as "a deal that Sir Fred Goodwin had to close to keep his job".

By April 2009, five months after Goodwin's departure, RBS's chairman, Sir Philip Hampton, told the bank's annual general meeting: "I don't think there can be any doubt that the key decision that led RBS to its difficulties was the acquisition of ABN AMRO... With the benefit of hindsight, it can now be seen as the wrong price, the wrong way to pay, at the wrong time and the wrong deal." RBS's chairman during the acquisition itself, Sir Tom McKillop, separately told the House of Commons Treasury Committee on 10 February 2009 that the deal had been "a bad mistake". The FSA's Review Team concluded that it is possible RBS would have failed even without the ABN AMRO acquisition, given the bank's pre-existing low capital ratio and dependence on wholesale funding, but that the acquisition "undoubtedly contributed significantly to RBS's vulnerability".

2008 rights issue and near collapse

As the global financial crisis intensified through 2008, the balance sheet Goodwin had built came under severe strain. The Financial Services Authority later attributed this to a combination of factors: a capital position that was weak even before the ABN AMRO deal and further weakened by it; heavy reliance on short-term wholesale funding, a position the ABN AMRO acquisition worsened; substantial losses on structured credit and collateralised debt obligations built up by GBM, the bank's investment banking division; and concerns about the quality of its wider loan book. The regulator's retrospective analysis estimated that, on the stricter capital definitions introduced after the crisis, the bank's common equity tier 1 ratio at the end of 2007, the last full year of Goodwin's tenure, was only around 2 per cent, against a future regulatory minimum of 4.5 per cent and a target of 9.5 per cent for the largest banks. On the same retrospective basis, its liquidity coverage ratio at the end of August 2008 was estimated at between 18 and 32 per cent, against a future standard of 100 per cent, meaning the bank would have needed between £125 billion and £166 billion of additional liquid assets to meet that standard.

Credit trading losses on structured credit, monoline insurance exposure and leveraged finance, largely accumulated within GBM as a result of the 2006 growth strategy, amounted to £3.18 billion in RBS's own book in 2007 and £7.78 billion in 2008, in addition to further losses on the assets RBS had acquired through ABN AMRO. Impairments on RBS's loans and advances totalled £32.5 billion between 2007 and 2010, and losses on credit trading activities totalled £17.7 billion over the same period. In April 2008, RBS launched a £12 billion rights issue, one of the largest cash calls in British corporate history at the time, to shore up its capital position; the FSA's report concluded that, while it seemed large at the time, the rights issue "turned out to be insufficient to ensure market confidence" once the autumn 2008 funding crisis began.

By early October 2008, days before Goodwin's departure was announced, the bank could access only overnight funding as other market participants became unwilling to lend to it for longer terms; it became dependent on Emergency Liquidity Assistance from the Bank of England from 7 October 2008, and the UK government announced a recapitalisation package the following day. The state's capital injections, including through the rights issue and subsequent recapitalisation, eventually totalled some £45.5 billion, leaving the government with a majority shareholding in the bank Goodwin had run; by December 2011, that stake was valued at around £20 billion.

Resignation (2008 to 2009)

On 11 October 2008, as a condition attached to the government's rescue of RBS, it was announced that Goodwin would step down as chief executive, to be succeeded by Stephen Hester. He formally left the bank at the start of 2009. In February 2009, RBS reported a loss of £24.1 billion for the 2008 financial year, described in contemporaneous coverage as the largest annual loss in the history of a British company.

RMJM (2010)

From January 2010, Goodwin was employed as a senior adviser on international business strategy to RMJM, an Edinburgh-based international architecture practice, to support its expansion plans in Asia. A firm spokesperson said Goodwin had "a huge amount of international business experience" that was "valuable and relevant to RMJM". RMJM's leadership said they had "thought long and hard" before making the appointment, but concluded that Goodwin's professional reputation in Asian markets had not suffered the same damage as it had in Britain. Goodwin left the position within about a year of taking it up.

Leadership and management style

Goodwin's management style at Clydesdale Bank and subsequently at RBS was widely characterised in the financial press as centralising and cost-focused, the reputation reflected in the nickname "Fred the Shred". The Financial Services Authority's December 2011 report recorded that RBS's apparent success under Goodwin was perceived at the time to be the product of "an overt and highly effective management philosophy", combining tight cost control and centralisation of processing functions, a strong focus on growth driven by clear targets and incentives, and an overt focus on capital "efficiency", meaning high leverage.

As early as 2003, the regulator's supervision team had identified that Goodwin's "assertive and robust" style created a risk of what it termed "CEO dominance", and it raised the issue in meetings with successive RBS chairmen between 2003 and 2006. An FSA record from March 2005 referred explicitly to RBS's "challenging management culture led by the CEO". By October 2006 the regulator's supervision team concluded that the risks associated with CEO dominance had been sufficiently mitigated for the matter to be formally closed, a conclusion the Review Team that later investigated RBS's failure judged, with hindsight, to have been premature and based on an incomplete picture of the effectiveness of board challenge.

When interviewed by the Review Team after RBS's failure, non-executive directors did not support press reports that they had felt "bullied" or unable to challenge Goodwin, and their assessments of his style varied; some described him as skilled in his handling of board relationships, courteous and professional in meetings, while others found him "cold, analytical and unsympathetic". A July 2008 internal audit memorandum to the RBS chairman recorded that most members of the bank's Group Executive Management Committee, when interviewed, criticised the way the committee operated, describing it as not "operating as a team", with conversations that were "typically bilateral", "performance targets" that "consume too much of the agenda", discussions that "often seem bullying in nature" and an atmosphere that was "often negative and is at a low point currently". The same memorandum recorded observations that "the Group CEO tends to operate too often in the CFO role" and that the chief financial officer "should be more independent in his decision making". Johnny Cameron, chairman of RBS's Global Banking and Markets division, told the FSA's Enforcement Division that Goodwin "is and was an optimist and he tended to take an optimistic view of what was likely to happen and had often in his life been proved right".

Goodwin's board relied heavily on assurances from GBM's own management, led jointly by its chairman, Johnny Cameron, who had a corporate and credit background, and its chief executive, Brian Crowe, who came from a trading background; the Review Team found that Cameron's lack of deep experience in traded markets limited his ability to report GBM's risks fully to the RBS board, of which he was the only representative from that division, although it concluded the overall mix of skills within GBM's management was acceptable. The Review Team's report raised, without resolving, questions about whether Goodwin's remuneration package, which was heavily weighted toward operating profit, earnings per share growth and return on equity rather than capital, liquidity or asset quality, gave him a rational incentive to prioritise growth over balance sheet resilience. Throughout Goodwin's tenure, RBS had no formal board-level risk committee separate from its audit committee, an arrangement the Review Team judged was not out of line with standard practice at the time but which meant risk oversight competed with audit matters for the board's attention. Below board level, the bank's Group Risk Committee, to which risk issues were in practice delegated, was found by RBS's own 2008 internal audit review not to have been well attended between January 2006 and April 2008, including by members of the Group Executive Management Committee that Goodwin chaired, and had become a forum that approved policies and reviewed historical data rather than one that identified and escalated emerging risks. The bank's Group Chief Risk Officer, appointed in January 2007, did not become a full voting member of Goodwin's executive committee until April 2008, shortly before Goodwin's departure.

Non-executive directors interviewed by the Review Team said they had been able and prepared to challenge Goodwin, but the clearest examples they could give of proposals substantially amended as a result of that challenge were the board's reduction in the scale of the 2005 Bank of China investment and reductions made by the remuneration committee to some proposed bonuses. The RBS board itself had 17 directors for most of the period under review, and the Review Team separately questioned whether a board of that size, and one that lacked deep collective experience of investment banking and structured credit trading, was well placed to challenge Goodwin's assumptions.

Analysts covering RBS during Goodwin's tenure described his strategy as narrowly focused on acquisition-led growth; one analyst likened his approach to that of a "one-club golfer", repeatedly applying the same expansionary strategy regardless of changing market conditions, adding that "because Goodwin is very much the architect of the entire strategy, he gets the blame when things go wrong". RBS's own 2007 staff survey recorded that 66 per cent of employees agreed that the Group Executive Management Committee Goodwin chaired "provides good leadership", a more positive picture than the one that emerged from the 2008 internal audit interviews described above; the Review Team concluded that the more complex picture which emerged from its own inquiry was "clearly more complex than the one-dimensional 'dominant CEO' sometimes suggested in the media". The regulator's report separately recorded that an adviser to RBS's executive training programme had told investigators that the bank was unusual among major banks in having many "hill climbers" but almost no "hill finders": strong in people who could reliably execute an agreed strategy, but comparatively weak in strategic thinking.

Major deals and strategic decisions

The four transactions that defined Goodwin's tenure, in order of scale, were the 2007 consortium acquisition of ABN AMRO, valued at €71.1 billion; the 2000 takeover of National Westminster Bank, valued at around £20 billion; the 2004 purchase of Charter One Financial in the United States for $10.5 billion; and RBS Greenwich Capital's decision, taken under Goodwin, to expand structured credit issuance from $3.3 billion of CDO deals in 2005 to $11.7 billion between July 2006 and May 2007 alone. RBS also acquired First Active in Ireland and the Swiss private bank Bank von Ernst during Goodwin's tenure. Each of the two largest deals was later examined in detail by the Financial Services Authority, which found that the ABN AMRO acquisition in particular had been agreed on the basis of inadequate due diligence and financed in a way that left RBS more exposed to short-term funding markets. To meet the capital demands created by that acquisition and by deteriorating credit markets, RBS raised £12 billion from shareholders in a rights issue in April 2008, before requiring a further, much larger government-backed recapitalisation later that year.

The expansion of structured credit that Goodwin's board approved in 2006 took RBS Greenwich Capital, GBM's American arm, from the second-largest issuer of residential and commercial mortgage-backed securities in the American market in 2005, with an 11.8 per cent market share across 78 deals, to ninth place with a 5.9 per cent share by 2007 as the bank scaled the business back once conditions deteriorated. In the global CDO market specifically, RBS's ranking by total issuance rose from 24th in 2002, when it completed just two deals worth $400 million, to a peak of 14th in 2004 and 15th in 2006, with its market share peaking at 3.69 per cent that year before falling back to 1.22 per cent by 2008 as the business retrenched. Between July 2006 and May 2007 alone, under the growth strategy Goodwin's board had endorsed, RBS Greenwich Capital completed 15 CDO transactions worth $11.7 billion, more than triple the $3.3 billion of CDO business the whole of GBM had completed in 2005.

Financial and market performance

Under Goodwin, the bank's total assets grew from £871.4 billion at the end of 2006 to £1,840.8 billion at the end of 2007, the year of the ABN AMRO acquisition, before reaching £2,401.7 billion at the end of 2008, the year of his departure. Group revenue was £28.0 billion in 2006 and £30.4 billion in 2007, before falling to £25.9 billion in 2008. Profit before tax and centrally allocated overheads was £9.2 billion in 2006 and £9.8 billion in 2007, but the group recorded a loss before tax of £40.7 billion in 2008, driven substantially by a £30.1 billion write-down of goodwill, including on the ABN AMRO and Charter One acquisitions Goodwin had led; the after-tax result moved from a profit of £6.2 billion in 2006 and £7.3 billion in 2007 to a loss of £24.1 billion in 2008, then the largest annual loss recorded by a company in British corporate history. Basic earnings per share rose in every year from 1997 to 2007, from around 55 pence to over 220 pence on the regulator's own reconstructed figures, and this record of growth was, at the time, widely credited to Goodwin's leadership before the 2008 results reversed it. The bank's strategy under Goodwin was later described by its own investors as "opportunistic" rather than tightly focused, seeking growth through whatever acquisitions or organic openings presented themselves across investment banking, the United States and the Far East.

The Financial Services Authority's 2011 report concluded that this growth had been accompanied by a weak underlying capital position: RBS's common equity tier 1 ratio, recalculated on the stricter definitions introduced after the crisis, stood at around 2 per cent at the end of 2007, and its core tier 1 ratio fell from 5.07 per cent in December 2006 to 4.65 per cent in December 2007 as a direct result of the ABN AMRO acquisition. The FSA identified RBS's reliance on short-term wholesale funding, substantial losses on structured credit and collateralised debt obligations built up within GBM, and the strain imposed by the ABN AMRO acquisition as the principal factors in the bank's near-failure. The bank's £12 billion rights issue in April 2008 was, at the time, one of the largest cash calls ever made by a British company, but the FSA later judged it insufficient to restore market confidence once the autumn 2008 crisis began. The government's capital support for the bank totalled approximately £45.5 billion, and press reporting at the time put the state's resulting shareholding at around 60 per cent shortly after the October 2008 recapitalisation, rising to nearer 70 per cent as further capital was injected in subsequent months.

Within the credit market losses that emerged from the structured credit and leveraged finance strategy Goodwin's board had approved, RBS's own book (excluding assets acquired with ABN AMRO) lost £1.86 billion on retained super senior CDO positions, £1.82 billion on exposure to monoline bond insurers, and £907 million on leveraged finance in 2007 and 2008 combined. By 2008, GBM represented some 70 per cent of the group's total assets, up from 57 per cent in 2006, a growth in scale that had taken place under Goodwin's oversight as the division came to dominate the bank's balance sheet.

Board memberships and outside roles

As group chief executive, Goodwin sat on the RBS board of directors and on its Chairman's Committee, a body that included all board members and was convened to allow rapid decisions between full board meetings; both fora met frequently to consider the ABN AMRO acquisition, with the full board meeting seven times and the Chairman's Committee twelve times between March and September 2007 alone. Goodwin also served as chairman of The Prince's Trust, a charity supporting young people, during part of his time as RBS chief executive. In May 2008 he was appointed Honorary Air Commodore of No. 602 (City of Glasgow) Squadron, an appointment recorded in the London Gazette.

Controversies

Financial Services Authority report (December 2011)

On 12 December 2011, the Financial Services Authority published its report into the failure of the bank Goodwin had led, a review it had begun following a request from the Treasury Select Committee. Lord Turner wrote in his foreword that the bank's "failure in October 2008 has imposed large costs on UK citizens", noting that the government's £45.5 billion equity injection was, on its own, "only a small part of the cost resulting from the financial crisis", the larger costs arising from the recession in which the bank's collapse "played a significant role". He added that the report aimed to explain to a reasonably sceptical public "whether failure resulted from a level of incompetence, a lack of integrity, or dishonesty which can be subject to legal sanction", and separately to explain why the FSA's own regulation and supervision of the bank had been so deficient. The report identified six, and arguably seven, key factors behind the failure that occurred under Goodwin: weaknesses in the bank's capital position; over-reliance on short-term wholesale funding; concerns about the underlying quality of its assets; substantial losses in credit trading activities; the ABN AMRO acquisition, pursued "without appropriate heed to the risks involved and with inadequate due diligence"; the bank's vulnerability, in common with other weakly positioned banks, to the systemic loss of confidence that followed the collapse of Lehman Brothers; and, the report suggested, likely underlying deficiencies in its management, governance and culture. Central to the ABN AMRO finding was the regulator's discovery that Goodwin's bank had relied on due diligence materials amounting to "two lever arch folders and a CD". Lord Turner wrote that "the multiple poor decisions that RBS made suggest that there are likely to have been underlying deficiencies in RBS management, governance and culture which made it prone to make poor decisions."

The FSA's Enforcement Division separately investigated three specific areas: decision-making and controls within GBM, focused on Johnny Cameron as its chairman; the decision to proceed with the ABN AMRO acquisition; and the preparation of RBS's investment circulars. Enforcement Division concluded that, while GBM's expansion and its retention of super senior CDO positions reflected poor decisions in retrospect, they had not been outside the bounds of reasonableness at the time and did not meet the standard of individual culpability required for action against a person; on this basis, the FSA reached a settlement with Cameron under which he agreed not to perform any significant influence function or undertake further full-time employment in financial services, without any finding of regulatory breach against him and without admission on his part. Enforcement Division also considered specifically "whether the flaws in senior management's oversight of GBM provided grounds for bringing enforcement action against Sir Fred Goodwin for failing to appoint suitably qualified individuals to run the GBM business", focusing on whether it had been reasonable to appoint Cameron, who had a credit rather than a markets background, to chair the division; it concluded there was little chance of successful action on this basis, since Cameron had assistance from others with relevant trading expertise and the overall mix of skills and experience among GBM's management was acceptable. The FSA also concluded, more broadly, that no individual or the firm should face enforcement action over the ABN AMRO acquisition or RBS's investment circulars, and stated plainly that "poor decisions made by RBS's management and Board clearly played a major role in RBS's failure", while explaining that its rules contained no concept of strict liability and that a successful case required clear evidence of individual incompetence, dishonesty or a lack of integrity, which its investigation had not found.

Drawing directly on the RBS case, the report recommended that regulators consider requiring formal approval before a bank could undertake a major acquisition of the kind Goodwin had led in 2007, and that boards considering such a deal should be required to obtain independent advice from an adviser whose fee was not contingent on the transaction completing, a response to the finding that Goodwin's own advisers on the ABN AMRO bid had been paid on a success-fee basis. The report also noted that the regulator had increased the supervisory team assigned to RBS from six people in August 2007, shortly before the ABN AMRO deal closed, to twenty-three by the time the report was published, a measure of how lightly supervised the bank had been during the acquisitions Goodwin directed.

Treasury Select Committee

Goodwin gave evidence to the House of Commons Treasury Select Committee on 10 February 2009, alongside other bank executives whose institutions had required government support. He offered what was reported at the time as a "profound and unqualified apology for all the distress that has been caused", telling the committee he had apologised previously and was "happy to do so again". The following year, the committee took its own evidence on the Financial Services Authority's December 2011 report into the bank's failure. Goodwin's successor as chief executive, Stephen Hester, told the same committee on 11 February 2009 that "risk management systems at RBS need a lot of change", identifying rules on the size and concentration of exposures as one area for improvement, a remark the FSA's later report cited as evidence of the deficiencies that had built up in the risk systems Goodwin had overseen.

Pension controversy

In February 2009, it was reported that Goodwin's departure from RBS had left him entitled to draw an annual pension of around £703,000 for life, beginning at age fifty rather than the scheme's normal retirement age of sixty, and that he had already drawn a tax-free lump sum of around £3 million against it. Paul Myners, the Treasury minister responsible for the government's shareholding in RBS, told Parliament that he personally had not negotiated, settled or approved the terms of Goodwin's departure, and that "someone in RBS took the decision to treat him more favourably than required"; asked about the RBS board's decision to allow Goodwin to draw his full pension immediately, rather than from age sixty, Myners said one "would have had to have been a monkey" to think that reasonable. Prime Minister Gordon Brown described the pension award as "unjustifiable" and said the government would pursue legal avenues to try to recover part of it, although officials cautioned that the legal options for doing so were limited. Reporting at the time put the estimated capital value of Goodwin's pension entitlement at up to £25 million, and noted that he had also received a separate payment of around £1.2 million in connection with his departure in 2008.

On 18 June 2009, following negotiation with RBS and after the bank's internal inquiry into his conduct found no wrongdoing, Goodwin agreed to reduce his annual pension from £703,000 to £342,500, a cut of around 51 per cent. RBS's chairman said the reduction followed discussions in which Goodwin had voluntarily agreed to accept a smaller sum, after the bank's own review concluded there were no legal grounds on which it could unilaterally reduce the award.

Rights issue litigation (2013 to 2017)

Between 2013 and 2017, Goodwin's former bank faced litigation in the High Court of Justice in England and Wales brought by groups of current and former shareholders who alleged that untrue or misleading statements, and improper omissions, had been made in connection with the £12 billion rights issue announced in April 2008 while Goodwin was chief executive, in alleged breach of the Financial Services and Markets Act 2000. It reached settlements without admission of liability with groups representing the great majority of claimants: by December 2016 it had settled with groups representing about 78 per cent of the claims by value, and settlements were later reached covering more than 98 per cent of claimants, with an aggregate settlement fund of around £900 million made available, subject to validation of claims. The case was the first claim under section 90 of the Financial Services and Markets Act 2000 to reach trial in an English court. A trial covering the small remaining group of claimants had already been delayed three times, in part because lawyers struggled to make contact with some claimants, before it was scheduled to begin on 22 May 2017, a hearing at which Goodwin was expected to give evidence for the first time about the rights issue and the bank's collapse. The remaining shareholders accepted a settlement offer of 82 pence per share shortly before the trial was due to open, a resolution that meant Goodwin was not required to testify.

Superinjunction (2011)

On 10 March 2011, the Liberal Democrat backbench MP John Hemming used parliamentary privilege in the House of Commons to refer to the existence of a privacy injunction, without naming the person who had obtained it. On 19 May 2011, Lord Stoneham asked in the House of Lords "how can it be right for a super-injunction to hide the alleged relationship between Sir Fred Goodwin and a senior colleague", a question that, made under parliamentary privilege, allowed the press to lawfully report that the injunction concerned Goodwin. Later the same day, the High Court varied the order so that Goodwin could be identified, while continuing to protect the identity of the woman involved. Commentary on the case, including a lengthy analysis by the barrister and former Court of Appeal judge Sir Stephen Sedley published in the London Review of Books, noted that the matter as lawfully reported concerned an undisclosed relationship between Goodwin and a senior colleague, and that Goodwin's stated concern in seeking the order was to protect his business reputation. Sedley's analysis framed the underlying constitutional question as one about "the misuse of that undoubted historic freedom" of parliamentary privilege to name a person protected by a court order, rather than about the private conduct itself, and he was critical of the way some newspapers had characterised the parliamentary intervention. He concluded that the eventual position, in which Goodwin's identity was disclosed but the identity of the other person involved remained protected, was "the correct outcome". Sedley's essay considered Goodwin's case alongside a similar episode involving the footballer Ryan Giggs later in 2011, in which another MP again used parliamentary privilege to name a party to a privacy injunction, treating both as examples of the tension between open parliamentary debate and court orders protecting personal privacy. No further private details beyond those lawfully placed in the public record through Parliament and the courts are reported here.

Knighthood annulled (2012)

Goodwin's knighthood, awarded "for services to Banking" in the 2004 Birthday Honours and formally conferred on 25 November 2004, was cancelled and annulled by the Crown on the advice of the government, with the decision recorded in notices published in the London, Edinburgh and Belfast editions of The Gazette between 1 and 3 February 2012. The decision, announced on 31 January 2012, followed a recommendation from the Honours Forfeiture Committee, chaired by Sir Bob Kerslake, which advised that Goodwin had "brought the honours system into disrepute". A Cabinet Office statement said the case was exceptional given "the scale and severity of the impact of his actions as CEO of RBS", noting that both the Financial Services Authority and the Treasury Select Committee had found that RBS's failure played an important part in triggering the worst UK recession since the Second World War and had imposed significant direct costs on taxpayers and businesses; the statement concluded that "the retention of a Knighthood for 'services to banking' could not be sustained." The review was reported to have been requested by the then Prime Minister, David Cameron.

The decision was itself controversial. The former Chancellor of the Exchequer Alistair Darling, who had overseen the RBS rescue in 2008, said the annulment appeared to have been made "on a whim" and questioned why other bankers involved in the crisis had not faced similar action. Some political and business figures, including representatives of the Institute of Directors, argued more broadly against what they characterised as "anti-business hysteria" surrounding the decision. The University of St Andrews, which had awarded Goodwin an honorary Doctor of Laws degree in June 2004, did not withdraw that honour following the annulment of his knighthood.

Personal life

Goodwin is married and has two children. Press reporting in 2011, arising from the parliamentary and High Court proceedings described above, disclosed that Goodwin had had an undisclosed relationship with a senior RBS colleague; those proceedings, and commentary on them, form the extent of what is reported here about that matter. Beyond the matters placed on the public record by Parliament and the courts, no further details of Goodwin's family or private life are reported in this article.

Recognition

• 2002: Named "Businessman of the Year" by the global edition of Forbes magazine.
• 12 June 2004: Knighted in the Queen's Birthday Honours "for services to Banking"; formally conferred as a Knight Bachelor on 25 November 2004.
• June 2004: Awarded an honorary Doctor of Laws degree by the University of St Andrews.
• 27 May 2008: Appointed Honorary Air Commodore of No. 602 (City of Glasgow) Squadron.
• 1 to 3 February 2012: Knighthood cancelled and annulled by the Crown on the advice of the Honours Forfeiture Committee and the UK government.

See also

• Royal Bank of Scotland Group
• George Mathewson
• Stephen Hester
• 2008 United Kingdom bank rescue package
• ABN AMRO
• National Westminster Bank

External links

• <ref>"Goodwin knighthood decision".Cabinet Office, UK Government.Retrieved 26 September 2026.</ref>
• <ref>"Notices relating to Frederick Anderson Goodwin".The Gazette.Retrieved 26 September 2026.</ref>
• <ref>"The failure of the Royal Bank of Scotland: FSA Board Report".Financial Conduct Authority (successor to the Financial Services Authority).December 2011.Retrieved 26 September 2026.</ref>