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RBS Appoints New General Counsel

April 13, 2016

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Recent changes at the Royal Bank of Scotland (R.B.S.) illustrate the ever-evolving nature of general counsel (GCs) and legal teams in the post-financial crisis era. As banks and global lending institutions face increased legal costs due to past improper conduct and heightened regulatory scrutiny, the demand for experienced counsel grows. This exemplifies the general trend of GCs tending to relocate to different companies in relatively short amounts of time.

At the end of March 2016, R.B.S. hired Michael Shaw as new general counsel in the wake of a series of shake-ups in R.B.S.’s compliance staff. Shaw previously served for six years as deputy counsel at Barclays, one of R.B.S.’s rivals, and enters the ranks with a full load of legal and financial issues to address, as R.B.S. has not reported full-year profits since 2007.

Compliance Team Restructuring at R.B.S.

In January of 2015, several changes were made to the R.B.S. compliance team, including:

  • The retirement of Chris Campbell, the general counsel for R.B.S.
  • Carolina Garces-Monterrubio, previously acting as compliance officer for R.B.S.’s Europe, Middle East and Africa teams, departed to work for HSBC
  • Mary Squire, former R.B.S. head of sanctions and anti-money laundering, also departed for HSBC

The restructuring of the bank’s compliance team is part of larger efforts to downsize, in attempts to create a “smaller, more focused, but ultimately more valuable bank,” R.B.S. Chief Executive Ross McEwan said.

Dealing with Previous Mismanagement at R.B.S.

Upon his arrival, Shaw will have his fair share of work cut out for him. He and his team will need to strategize and address many of R.B.S.’ issues stemming from the financial crisis, such as:

  • Managing increased legal costs associated with the bank’s improper sale of loan protection insurance
  • Potential fines related to the sale of mortgage securities in the U.S.
  • Major expenditures and costs related to regulatory and litigation charges, as well as restructuring costs
  • Losses of about $200 million on the sale of a $36.5 billion portfolio of Canadian and American loans to Mizuho Bank
  • Consistent quarterly losses

McEwan also states that one of their main aims is to avoid exposing shareholders to the scale of risk that occurred in the past. This may require an overhaul not just of company policies, but also of the overall culture of the bank.  

GC Trends Coming to Life

In his blue paper titled, “General Counsel as Lawyer-Statesman”, Ben W. Heineman, Jr. outlines some major trends in the role of general counsel. In the past, general counsel have sometimes focused on specific, administrative or transaction-based functions; however, this role has become enhanced to require a much broader role, encompassing a great deal of business functions while at the same time addressing broad legal issues, such as antitrust and unfair business practices.

For instance, even as Shaw was leaving his former position, Barclays streamlined its legal team by creating “pools of lawyers working across its four core business divisions, instead of operating separate legal divisions for its various business”.

Thus, general counsel (and in-house legal teams) are now being required to function much more broadly both in terms of business functions and legal/ethics monitoring. This constant re-calibration of the team according to experience and business acumen may explain the shorter shelf-life of a general counsel at any one organization.

We are also seeing an increased cooperation between in-house teams and outside legal firms who can provide additional expertise in specific areas where the more broadly-focused in-house teams need assistance. For Shaw, these newer trends may require a greater flexibility than was traditionally required of GC’s at major banks and lending entities.

What to Expect at R.B.S.

In the case of Shaw’s recent hiring, we can expect continual adjustments to be made at R.B.S. as the streamlined team continues to take shape. Shaw will formally join R.B.S. on April 19, where he is expected to oversee legal matters in areas such as litigation, competition, employment, and other divisions.

The role of the general counsel is a very important one. In recent decades it has evolved tremendously, and it will continue to do so as organizations respond to changes and developments in the markets. If you are interested in learning more about global issues on important matters like corporate governance, securities litigation, and other major areas, contact us today at Kessler Topaz. Our team of attorneys is dedicated to providing information, education, and representation in various fields of corporate operation.