James Moore: Banks need new approach for new year

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Outlook Sack as many people as you can while loudly bitching about your shareholders, competitors, government and regulators – the strategy adopted by Royal Bank of Scotland and Lloyds Banking Group for paying back nearly 30 million unwilling individual tax-paying investors whose government has so far made available £74bn just to keep these banks afloat.

Of the two, RBS has taken the lion's share of the cash and been the worst offender, although it's a close run thing. But its public and private bellyaching about the constraints placed on what it can pay out in bonuses culminated in a report that the entire board had threatened to resign over the issue. That put it a length in front of its rival with the winning post in sight for the Crass Behaviour Cup (sponsored by the British banking industry).

Of course, that report was ultimately denied – but only after several days had passed during which time the company's spin doctors had done precious little to damp down the flames of controversy. And it's worth noting that nothing was said about whether individual directors had walked to the edge of the plank.

It could be argued that RBS's complaints, its warnings about the damaging impact of top bankers – who wouldn't have any jobs were it not for the taxpayer – finding new employment with rivals if they didn't receive their January nose-bags had a significant impact on the way the Government framed its "super-tax" on banks' bonus pools.

Said tax hits the profitable and the prudent which have managed to get by without calling on the taxpayer's largess, far more than the profligate and profit-light which have been bailed out. It might be argued that the tax is framed to help RBS, although (of course) the likes of Barclays and HSBC appear to have been found a way to mitigate the impact (by Deutsche Bank of all people) by spreading the pain of the tax around all employees worldwide.

For its part Lloyds has used the furore surrounding RBS as an opportunity to fly under the radar, while quietly indulging in a bit of backslapping for managing to evade the Government's asset protection scheme thanks to a £13.5bn rights issue and £7.5bn from bond holders. A rights issue to which the taxpayer still had to contribute £5.7bn on top of £15bn already committed. That really is deserving of the champagne and oysters it treated the glitterati of the syndicated loans market to in the City at the end of November.

If these two were at school not even the most soft-hearted local authority appeals panel would reverse their exclusions and their report cards would contain strings of Fs.

As head of the British Bankers' Association, Angela Knight was again trying to put a good gloss on things with her New Year message yesterday. The industry "gets it" she says. It recognises the need for change. Well, the redoubtable Mrs Knight is only doing her job. But the actions of these two speak otherwise.

If Stephen Hester at RBS and his counterpart at Lloyds, Eric Daniels, are wise they will use the New Year to think very carefully about the way the way forward.

Because the New Year could present them with an opportunity to begin some sort of turnaround. For a start, they could take a lead in the debate over unauthorised overdraft charges. They've won their battle against the OFT on this issue, which is not the clear cut case of bad banks bullying consumers that it appears. But showing a willingness to give some ground would do wonders for their public image and their standing with the authorities.

Some signs that they take improving customer service seriously would also help. Mr Daniels constantly bangs on about how good Lloyds is on this front. Well, the Financial Services Authority – which will publish complaints figures for each bank this year – will show whether he's wearing a Savile Row suit or the emperor's new clothes. From bitter personal experience, I can testify that even if Lloyds is good, his merger partner (HBoS) is nothing short of dreadful.

Finally there is the general issue of how these businesses are run. Slash and burn is a tactic all too often used by executives in the absence of any creative ideas about how to generate sustainable growth from companies they run. After indulging in more than their fair share during the last year can Messrs Hester and Daniels show that they have more to them than has (so far) met the eye? If they can they might even earn the vast sums of money they are paid.