We know all this because Ross McEwan, the chief executive of RBS, has taken great pains to tell us about it.
The New Zealander wants the investment bank to focus on its home market – more or less pulling out of Asia, the Middle East, and central and eastern Europe – and retain just enough firepower so that it can service UK corporate clients.
It is all part of the strategy that was first laid out in Project Cook, the five-year plan that McEwan outlined at the beginning of 2014.
It was further fleshed out at the beginning of this year at the bank’s annual results presentation just after Cullinan had been unveiled as the head of the investment bank. It was clearly articulated and widely welcomed by the wider market.
So, given that McEwan and his executive team (of which Cullinan has long been a member) had already decided what they wanted to do with the investment bank and how quickly they wanted to do it, what was there left to disagree about?
Well, there’s implementation, and that’s not to be underestimated. Cullinan would have had to decide which bits of the business to wind down first and how quickly. That’s tricky.
An investment bank was once described to me as like a giant game of Jenga – pull the wrong piece out at the wrong time and the whole lot can come toppling down.
Shrinking an investment bank also costs money. Laying off staff and selling off assets (usually at less than the value for which they were bought) will inevitably erode a bank’s capital base – one of the reasons that RBS still employs several thousand investment bankers long after raising the white flag over this area of the business.
But Cullinan was brought in for his shrinking skills. He previously ran RBS’s “bad bank” – effectively a makeshift unit in which the lender shelved everything that it considered “non-core” and wanted to get rid of sharpish.
McEwan made a particular point in February of praising Cullinan for the speed with which he had wound down £38bn of toxic assets that were placed in the bad bank in 2013. The inference seemed to be that it was time for more of the same at the investment bank.
Ross McEwan wants the investment bank to focus on its home market
The market agreed and applauded. Analysts welcomed Cullinan’s appointment and the bank’s share price closed above 400p – close to the level at which the UK government might be able to break even on the 79pc stake that it took in bailing out RBS at the height of the credit crunch.
Yes, there were some details to iron out, but the broad thrust was clear. Other members of the executive committee would want a say in how the investment bank was wound down, but Cullinan was the man tasked with the job and should have had a high degree of autonomy in how he went about it. Time to get cracking.
And yet no. It is somewhat shocking that Cullinan’s relationships with other members of the executive team appear to have broken down to such an extent and so fast. It is not like he was an outsider or an unknown quantity. He has worked at RBS for around 10 years in two separate stints.
This may seem a bit “inside baseball” – of interest only to those with an unhealthy interest in the inner machinations of the investment banking industry (mea culpa). But, of course, the ramifications ripple far beyond the City of London.
George Osborne, the Chancellor of the Exchequer, has recently expressed a desire to offload the UK government’s stake in RBS as soon after the general election as possible if the Conservatives form the next Government. The other political parties are likely to have similar plans.
Now it appears that RBS’s investment bank remains a large potential obstacle to the realisation of that ambition.
But perhaps that shouldn’t come as a surprise. It was the investment bank that grew in the fat years and powered RBS to become one of the world’s largest banks. It was the investment bank that was worst hit by the credit crunch and dragged RBS into a Government bail-out. It was the plans for the investment bank over which former chief executive Stephen Hester clashed with George Osborne and which ultimately cost the banker his job.
And it is the investment bank that is once again creating problems for his successor.
RBS had a plan for the unit and it had the man who it was widely believed could execute that plan. But now Mr Cullinan is on his way. The bank’s shares have slipped 15pc since the end of February and were trading at 340p at Tuesday’s close.
The day on which UK taxpayers finally get their money back on the forced investment in the Royal Bank of Scotland appears to be disappearing over the horizon again.