RBS denies boardroom reshuffle rumour

Royal Bank of Scotland today denied a report that its chief executive and chairman are to step down in the wake of the Government's bail-out package.

It was reported today that Sir Fred Goodwin and his chairman Sir Tom McKillop are leaving, with replacements already lined up.

Asked if the pair were going to step down, a spokeswoman for the bank said: "No."

The bank, whose share price fell nearly 40% yesterday, added in a statement: "We have been uniquely focussed on working with government and the other banks to bring stability to the system. Management changes have not been a feature of these discussions."

Sir Fred, who earned more than £4 million last year, welcomed the rescue package announcement.

Under its terms, NatWest owner RBS is one of eight banks and building societies able to obtain up to £25 billion of capital support. Banks must also cap executive pay and shareholder dividends as part of the plan.

Sir Fred, 50, said: "We welcome this comprehensive package of measures in response to unprecedented conditions in the financial system. The Government has increased support in a number of important areas."

"The proposals will enable us to strengthen our position and to support our customers across the economy."

Both his and Sir Tom's positions have been under scrutiny since the group was forced to raise £12 billion from investors earlier this year.

RBS has also written off nearly £6 billion from credit crunch-linked investments this year, making it one of the worst UK banks to be affected by the sub-prime loans crisis.

RBS, the UK's second biggest bank, declined to comment on how much extra capital it might need from the Government as part of the recapitalisation scheme.

The group announced its first loss in 40 years as it unveiled first-half figures in August, but assured investors that its fundraising efforts had sufficiently strengthened its finances.

The £691 million pre-tax deficit compared with £5 billion of profits the bank made during the same period last year.

A large chunk of the financial hit came from recently-acquired Dutch bank ABN, bought for nearly £50 billion as part of a consortium of banks led by RBS. Not only has ABN contributed to the bank's write-downs, but the cost of the deal knocked RBS's balance sheet.

The takeover was agreed at the height of the market just before the credit crunch struck, with the price now looking excessive given the share falls since in the banking sector.

One of its partners in the ABN takeover – Belgium bank Fortis – has since had to be part-nationalised and broken up, largely after it ran into trouble with costs associated with the deal.

RBS is also thought to be facing difficulties integrating its portion of ABN without having to make more big write-offs.

Meanwhile the bank is reportedly struggling to find buyers for its Churchill Insurance and Direct Line businesses, put up for sale in April.

Earlier this week the group's troubles were compounded further when credit ratings agency Standard & Poor's cut its rating on the firm amid fears over its future earnings and write-downs.

The move effectively means that RBS is now deemed a less safe institution to lend money to, which is set to make it even more difficult for the bank to secure funds at a time when interbank lending has all but frozen.