The interview: Stuart Foster

Stuart Foster, Managing Director, Institutional Banking and Depository Services, at RBS International, says growing investment between the two jurisdictions means the relationship between London and the Channel Islands is more important than ever – and that a strong bond will be even more crucial as Brexit looms large

Tell us about your background and early life.

My dad was in the Army, moving around a bit, and I was born in Edinburgh. After he served various tours, he settled in Catterick and, as a result, I went to secondary school in North Yorkshire and went to college in Darlington.

I worked hard at A-levels to get the required grades to get me into St Andrews – and ended up doing pretty well there. I think that’s where I really matured as an individual, as a student and as a worker – coming out with a first-class degree.

What was it that tempted you into financial services?

I really didn’t have a clear idea of what I wanted to do or of what sort of career I would eventually want. As a result of that, I actually decided I wanted to do a further academic course. 

So I took a masters in literature, which was a segue into a doctorate in modern history and, as a result of all that, I embarked on a career in academia.

However, at the age of 27 or 28 I decided I liked the teaching more than the research. I had seen a number of my friends move into financial services and embark on interesting careers, which sparked my interest. So I applied to a few banks, including RBS. 

One of the MDs of RBS came up to Edinburgh to interview me, I got the job – and joined the investment bank in the year 2000 to work in structured finance.

How did your role at RBS evolve to where you are today?

I stayed in investment banking roles for around eight years – which obviously took us up to a very interesting time for RBS, with the financial crash and all the fallout that came with that.

In 2008, I joined the UK corporate bank, as I passionately wanted to make a difference in rebuilding the bank and to understand banking more holistically.

I joined the coverage team there, initially to help out with some of the challenges thrown up by 2008 – such as our real-estate exposure and how to get a grip on that. 

But then quite quickly I moved on to the forward-looking side of the corporate coverage business, which involved working with large corporates.

The interesting thing in working with large corporates is that you get to see every angle of how a bank operates – every service we deliver and everything we do. I found that really insightful and I did that for a number of years. 

Then, around five or six years ago, I made the choice between player-manager deal-doer and scale leader, when I went to run the financial institutions professional services business, which also had the healthcare and education sectors within it. 

That gave me the opportunity to shape national sector strategies for those businesses, along with responsibility for the P&L and the balance sheet of the large corporate sector. 

That was great because it meant working in interesting sectors, a national remit, the chance to shape strategy and leadership insight.  

It was the chance to shape things and see how they grow, while at the same time setting the tone and the culture, which are both vitally important to me.

Then in 2018, [RBSI Chief Executive] Andrew McLaughlin contacted me to say that he was going to revamp RBSI after four or five years of huge change, and that he was looking for someone to help drive growth, and to invest, digitise and transform the business. 

So I was attracted to that role because it was the chance to really shape and influence the strategy of what we are doing.

RBSI is UK-centred, with its HQ in Jersey, and serves Europe with both offshore and onshore offerings. Tell us why that structure works.

One of our USPs is that we are in all of the right places. It’s clear that our Lux/Lon funds are growing, so we needed to be in those regions – and that’s proving to be a shrewd move at this stage. 

We need to be in London because that’s where many of the fund managers – the decision-makers – are, while Luxembourg continues to develop rapidly as a centre point for the funds world in the EU. 

And we absolutely still need to be in Jersey and Guernsey because that’s where a huge amount of the infrastructure, clients and intermediaries continue to reside. The islands are obviously hugely important. But so are London and Luxembourg.

But, while all of our clients are spread across all these different places, our proposition is that you should be able to pick up the phone from anywhere and we will join up the dots internally. We will do so efficiently and avoid unnecessary duplication and cost.

We’ll work that out ourselves through CRM systems and internal connectivity, so that when a client picks up the phone from Jersey or Guernsey, that information we need to be able to do what we need to do quickly and efficiently is there and ready to go. 

That’s really important to us. It’s really important that we are in all these places geographically – but equally important that we can service everyone in the same way. 

Why does that relationship between London and the Channel Islands continue to be so important to the structure and the sector in general?

The relationship is enormously important and it’s growing all the time. We see it as a business (with purpose), but you can extrapolate what we’re seeing into the wider business community.

The links have to be ever-closer; they have to be ever more seamless and, going forward, we will rely on each other even more.

There is good investment moving from the Channel Islands to the City, and vice versa – and, of course, together we need to work out the EU question and how we plan to manage Brexit, which we will.

There is just an enormously important symbiotic relationship that is working really well for us as an organisation, and that is only going to strengthen over the coming years. Brexit or no Brexit, the Channel Islands are just such an important pivot for the UK.

You mentioned you took this role with a remit to grow the business. Tell us how you plan to achieve that growth.

We know we are in an incredibly privileged position in financial services. We have a successful business in institutional banking and of course across the wider RBSI. 

And, as growth occurs in global asset management, as is projected, and things like more alternative funds are raised, then even more banking services are going to be required. That’s a great backdrop for us as an established business with a 20-year history, a great reputation, a strong balance sheet and talented professionals in the right jurisdictions.
 
Our job now is to leverage all of those things that are going for us and, as a large corporate banking business, understand the sector in a way that other corporate banks don’t.

We can’t just be a provider of products and services. We have to truly understand what’s going on with our customers – and by that I mean all stakeholders in the funds ecosystem, particularly the end investors.

We need to make sure we maintain our trusted adviser status, so we avoid being commoditised in the way that some banking services are clearly going to.
 
There are a number of ways we can do that. First, we need to have what I call ‘brilliant basics’, which is about digitising and automating everything you can. 

We were already on that journey, but Covid-19 means we need to double down or even triple down on that now, and accelerate it – because while many think that is about efficiency, it is actually more about customer experience.

And we need to really think about how we’re set up as a business – what we do outside of the brilliant basics to really add value to our clients. What is it that we can give them that they don’t even know they need? That means we need to think very hard about our place in the market and how we can evolve to stay ahead.

As an example, I think about the depository business. There’s a business that has incredible customer advocacy, but it is a manual business right now.

So we are completely overhauling and transforming that business. We are building a data-led cloud platform that will be a leader in governance, credit-flow management and data insight. And it will be purpose driven.

Its central objective is to look after the investments of 10 million pension investors – an enormous responsibility. It’s a market leader and, with the investment, has an incredibly exciting future ahead.

In terms of protecting that view of us as a trusted partner, that’s something we need to protect even more at this time. In times of crisis there is a lot of erratic behaviour, and so we are really pleased to be a stable counterparty in amongst that. 

We are hugely well capitalised, with good liquidity, and we are well rated – and that matters a lot at the moment. That’s why we make our balance sheet available to our clients. We need to be careful how we deploy it, but it demonstrates our consistency – while our commitment to digitisation shows our boldness.

The business has been on a digital development drive. How important is it to manage automation in a way that ensures it adds value rather than erodes your ‘trusted partner’ mantra?

That’s absolutely the case. We want to take out the boring stuff and the stuff that no one wants to be doing every day, so that the time and expertise we free up can be used to keep our customers and clients happier through the things that are important to them – such as greater value-adding insights.

An example is account opening in the Channel Islands – that’s an area where we will automate and digitise, making it easier and faster for clients. But actually we still need skilled individuals to understand how funds are structured, to interpret the data they are getting and to make very quick decisions. That’s a great example of where we’re automating the basics but using expertise to make that customer experience the best it can possibly be.

What role have fintechs played in that digital drive – and is it fair to say we are seeing greater partnerships between the fintechs and the traditional banks now?

You are right that in the past few years there has been a shift – a shift both in terms of the fintech attitude to the big companies and in our attitude to partnering with them. They have realised they can’t grow and get to where they want to be without the client numbers, the scale and the investment.

We realise we are not great at change and we need some help in making change happen more quickly. So there has definitely been a meeting of minds.

I would say that, for a while now, both RBSI and NatWest Group have had a pretty good reputation for innovation and change.

We have shown that through the likes of Tyl [the NatWest service launched to help small businesses accept Chip & PIN, contactless and telephony payments either in-store, over the phone or online using a mobile terminal] and through RBSI’s [account-opening portal] KYCP.

And there’s no doubt fintech partners will be a big part of further innovations going forward. We are working with them in a much more proactive and obvious way to get that speed and agility in change. 

What’s also interesting is that it’s helping drive cultural change in the organisation. We need to be faster, braver and bolder when making decisions, and the more our teams are exposed to and work with fintechs, the more they are seeing the pace at which we can change and evolve.

How will all of this affect the sector going forward? What are the trends and developments you are monitoring closely?

Liquidity is still very much out there. Funds are being raised. We’re still seeing quite significant transaction flow – so, if anything, we see quite a lot of opportunity going forward because funds will be raised that want to invest. 

There may be a bit of delay, particularly around alternatives as they look for best value. But again, a lot of the purposeful activity that resonates hugely with us – around investing in climate, renewables and solar, for example – will increase as government encouragement around those areas increases. 

And, of course, the private equity funds and the real estate funds are all building up liquidity to invest – so they will all need banking services too, which is all part of the healthy backdrop I explained earlier. That hasn’t really gone away for banks.

In terms of trends as an organisation, I think it’s fair to say we will continue to develop and invest in our ESG proposition – a strategic priority for us, even though I think we are already very strong there. 

Our privileged position means we can make a real difference to society – for instance, the transition to a green economy, through our banking services or because we hold such strong data.

From a Covid-19 point of view, this awful pandemic has clearly had a significant impact on the banking sector, as it has on many others. But for us it doesn’t change our commitment to the sectors we serve at all. 

As for working from home, I subscribe to the balance. This is a new era and people work in different ways, but that need for human contact with colleagues, customers and networks is still crucial – not least in terms of the informal communications and the ideas-generation and human-capital value that fuels. 

So I think we are heading for a balance rather than a complete shift out of offices completely.

What Covid has taught us, and this comes back to a point I made earlier, is the need to make decisions quicker and in a more agile way. 

The way we crossed boundaries, broke down silos and improved the way we work was really quick. And I think that speed of decision-making can’t be allowed to slow down as we move forward now. That’s a challenge for the leaders in all businesses.

Amid all of this, Brexit still looms large. How is the group planning for that?

Brexit is a huge issue for us as a group. NatWest, of course, has its Brexit plans in place. In terms of RBSI, our clients are hedged by having offices elsewhere, notably Luxembourg, where we are too. And I think the benefit for us is that we are in the right jurisdictions already. 

That said, depending on how Brexit plays out over the coming months, we need to review and continue to think about how we are set up to deliver our strategy in a post-Brexit world, whatever that looks like. 

But, as I say, we are protected by the jurisdictions we are in, not least Luxembourg.

And, finally, what are the aspirations for the future? Where does RBSI go from here?

My aspiration and commitment is to grow the business in the coming years – so that’s the objective for RBSI. We are fortunate to have been entrusted with significant investment and we have to provide a tangible return while adding value to our customers. 

But that’s exciting – and it’s great to be in a business that’s thinking that way and looking to expand in the markets it is in. 

RBSI is already a vital cog in this group – and we have the opportunity to increase the importance of our role further, not just through our growth strategy, our digitisation plans and our commitment to ESG, but through our desire to diversify and our dedication to using data and technology.

Harnessing all those things puts us at the forefront of what a 21st century banking organisation looks like.