RBS faces struggle to find boss amid political meddling

Royal Bank of Scotland will struggle to recruit a suitable replacement for ousted chief executive Stephen Hester, someone who must steer it through privatisation and accept that political interference comes with the job.

Hester’s departure, engineered by chairman Philip Hampton with the backing of Britain’s finance ministry, presents RBS with the near-impossible task of finding an ideal candidate - an experienced banker untainted by the industry’s scandals who has the skill to deal with its biggest shareholder, the government.

Political and banking sources say that while Hampton took the initiative in removing Hester, he could not have done so without the support of finance minister George Osborne.

Britain holds a controlling 81 per cent stake in RBS after pumping 45.5 billion pounds (US$71 billion) in to keep it afloat during the 2008 financial crisis.

Matthew Beesley, head of global equities at Henderson, an investor in RBS, said Hester’s departure “clearly shows the hand of the government in the management of the bank”.

“It also shows very emphatically that shareholders - what few of them there are (government aside) - don’t like it. The sooner the bank is fully returned to the private sector, the better,” he said, pointing to a sharp drop in RBS shares after Wednesday’s announcement that Hester would go later this year.

During his five years at the helm, Hester oversaw a massive shrinking of the RBS balance sheet, all the while parrying criticism from politicians about the strategy and the size of his bonuses.