The most important business of banks is not even accepting deposits or making loans. The primary task is something much simpler: moving funds from one customer's account to another so that people don't have to walk round with large supplies of cash to pay their bills. This activity is called money transmission. However much you puff yourself up, you are not really a bank if you cannot do it. Yet for a week, Britain's second largest banking group, the Royal Bank of Scotland, has been unable to carry out this function reliably.
It is a very shocking situation. Nor is it over. The latest statement informs us that RBS and its subsidiary, NatWest, are continuing to try to update "a few specific sets of transactions"; that "a small number of customers may experience delays". We have heard from the bank, but there is another party involved which hasn't yet said a word. This is Her Majesty's Government, which owns 84 per cent of the shares of RBS. It beggars belief that the owner of a large organisation that has failed to deliver an essential service to millions of people has made no comment. The owner bears a responsibility here as well as to the directors and senior staff.
Why so silent on this occasion? Probably because there are no votes in it. However, there are two reasons why a short statement now with the promise of a longer comment once the situation is clearer would be appropriate. It would give customers reassurance that somebody over and above the board is looking out for their interests. It would also show that the major shareholder well understood that management deficiencies at RBS run deep and that some dramatic changes will need to be swiftly set in train.
Outsiders can only guess what went wrong. At heart of the problem was a serious technical error. Very quickly the question becomes not so much what was the error but why was it allowed to happen.The upgrade of the bank's computer system that gave rise to the incident took place during the working week rather than at the weekend. Was this unfortunate timing unavoidable?
If government were not composed mainly of people who have never spent a day in a business setting, it would know what to do. Wait for the report of what went wrong. If it shows serious deficiencies, press for management changes up to the level of chief executive. And if there is resistance, call an extraordinary general meeting and force the changes through with the Government's voting power. Unfortunately, nothing so forthright is likely to happen.