NAB’s narrow escape from ‘Fred the Shred’ Goodwin

Former Royal Bank of Scotland CEO Fred Goodwin, who led the bank into near collapse and lost his knighthood.

The appointment of Ross McEwan as chief executive of National Australia Bank continues the eerie link between the fortunes of NAB and the Royal Bank of Scotland.

Indeed the NAB-RBS saga is one of Australia’s most remarkable business stories and many (with tongue in cheek) argue that the wife of a former RBS-NAB executive should be given an award for saving not only the National Australia Bank but the Australian banking system.

But let’s go back to the mid 1990s, when the story starts.

Freddie Goodwin was a high-profile British accountant and was appointed chief executive of NAB’s UK operations. Around this time he also picked up the nickname “Fred the Shred”, reportedly for his reputation of ruthless efficiency and cost-cutting.

When the successful NAB chief Don Argus was set to retire as a banker around 1997-98 and take on the job of restoring the fortunes of BHP (he became chairman), the board of NAB decided to appoint Freddie Goodwin as Argus’s successor.

Read more: NAB ‘not a broken bank’| Tough Kiwis to the rescue

Freddie was called to Melbourne to meet with Don Argus. When Argus told Freddie of his appointment, Freddie beamed with delight and vowed to turn NAB into one of “the world’s leading banks”. He jubilantly returned from Don Argus’s office to his Melbourne apartment to tell his wife, Joyce.

But Joyce Goodwin became very angry and refused to live in Australia, demanding that Freddie get a job in the UK. She stormed out of the apartment, catching the next plane to London.

The next day a shattered Freddie Goodwin turned down the NAB job and followed his wife back to Britain.

Soon after he became deputy chief executive of the Royal Bank of Scotland and then later CEO, where he implemented the plan he had mapped out for NAB. The Royal Bank of Scotland became one of “the world’s leading banks” after a series of huge acquisitions.

Freddie Goodwin became Sir Frederick Goodwin in recognition of his achievements.

Then RBS chief Fred Goodwin arrives at Downing Street for a meeting with British prime minister Gordon Brown in 2008. Picture: AFP

In the global financial crisis the RBS acquisitions unravelled and huge losses were chalked up. The British government was required to spend around $100 billion to save the bank from the consequences of Freddie’s actions.

That’s what rescuing NAB might have cost the Australian government, but for Freddie Goodwin’s wife, Joyce.

In 2012 Sir Frederick Goodwin lost his knighthood and Lady Goodwin lost her title. They are now separated.

A year or so later Ross McEwan left Commonwealth Bank to rescue the RBS from the mistakes Goodwin had made.

But seriously, we were lucky on two fronts in the Goodwin affair, because it was the failure of Australian banks to play the crazy global subprime game that helped save us from the worst of the global financial crisis.

Another incident at the NAB played a role.

The man who became chief executive of NAB instead of Goodwin, Frank Cicutto, encountered minor international trading loss problems, which prompted a Reserve Bank review of Australian international banking activities, just when these prime market was at its craziest.

But for Cicutto’s minor errors and the investigation, some of our banks might have joined the boom.

Meanwhile Ross McEwan did an great job at Royal bank of Scotland and is an excellent choice as CEO to sort out a new set of NAB problems and take the bank into a new era.