RBS chief executive Ross McEwan: Welcome to the toughest job in UK banking

James Moore outlines five major challenges for the new man in the hot seat
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The Independent Online

Even though much of the "heavy lifting" involved in stabilising Royal Bank of Scotland has been done, Ross McEwan still has one of the toughest jobs in banking today.

Here, The Independent on Sunday looks at the biggest headaches facing the man trying to nurse a wounded RBS back to full health as he starts work this week.

1. Privatisation, or get the shares up to 500p

There is no bigger issue for RBS, which is still majority-owned by the taxpayer. A target of 2014 was talked about by Sir Philip Hampton, the chairman who will soon follow former chief executive Stephen Hester out of the door.

But that might prove hopelessly optimistic. For a start, the shares need to rise by about 30 per cent to get to the Government's "break even point".

They are on the books of UK plc for rather less than this, but it would be politically extremely difficult to sell at anything below the average 500p at which the taxpayer bought. Creative maths to make a lower price acceptable won't cut it.

2. To split or not to split?

One piece of business that will have to be cleaned up before that is the question of whether to split RBS into a "good" and a "bad" bank.

The bankers appointed by the Government to review options are set to report next month. The smart money is on them recommending against a full-scale break-up with, perhaps, a spin-off of the troubled Irish unit to serve as a sop to proponents of a split, such as former chancellor Lord Lawson.

However, RBS's private shareholders will have to be consulted and the bank's management will need to work out how to react to what the review says.

3. The sins of the past

They just keep on coming. The misdeeds that occurred during Fred Goodwin's mis-rule continue to haunt RBS.

Every time a scandal emerges from the bad days leading up to the financial crisis, it seems that RBS's name is nearby.

The most recent example was its alleged involvement in the sale of $2.4bn (£1.5bn) of mortgage-backed securities to two US credit unions, although Morgan Stanley is the main name in the frame for that one.

There also remains the review of sales of interest rate swaps to small business – where RBS's progress has been notably slow – and wrapping up the mis-selling of PPI products. Then there are civil lawsuits.

On this side of the Atlantic some shareholders are considering suing over RBS's 2008 rights issue, and there are a potential army of plaintiffs looking to claim a piece of RBS and other banks that were involved in Libor interest rate fixing.

4. The disposals

Bruce van Saun, the outgoing finance director of RBS, is taking the lead on the biggest of these. He is preparing to become chief executive of the bank's US arm, which it wants to spin off.

However, there is a lot of work to do to get that bank, which has a presence in 12 American states and sponsors the home stadium of baseball's Philadelphia Phillies team, into the sort of shape where this is feasible.

In the meantime there is also the the completion of the EU-mandated spin-off of Williams & Glyn's bank to Corsair Capital, which was agreed on Friday. He must also oversee the disposal of RBS's remaining interest in insurer Direct Line.

5. Detox

A work in progress, this one, but for the bank's long-term health before and after privatisation it is vitally important.

Despite the name of RBS continually being attatched to some sort of scandal or other, it does do some things well.

It has UK call centres and is good at providing mobile banking to remote areas, for example, both of which reflect well on the bank.

All the same, as New Zealand-born Mr McEwan, a retail banker, noted, banking ought to be a rather simple business but banks just don't do it very well. If he can make RBS beloved by its customers then handling 1,2,3, and 4 would be very much easier.

But that's a very big if.