National Westminster Bank

Early history (1658–1970s)

The bank's origins date back to 1658 with the foundation of Smith's Bank of Nottingham. Its oldest direct corporate ancestor, National Provincial Bank, was formed in 1833 as the National Provincial Bank of England. It merged with Union of London and Smith's Bank in 1918 to become National Provincial and Union Bank, shortening its name in 1924. District Bank (formed in 1829 as the Manchester and Liverpool District Banking Company) was acquired by National Provincial in 1962 and allowed to operate under its own name. Westminster Bank was formed in 1834 as London and Westminster Bank. It merged with London and County Bank in 1909 to become London County and Westminster Bank and with Parr's Bank in 1918 to become London County Westminster and Parrs Bank, shortening its name in 1923.

The creation of the modern National Westminister Bank was announced in 1968 and commenced trading on 1 January 1970 after the statutory process of integration had been completed by the National Westminster Bank Act 1969 (c. xxii). The three arrowheads device was adopted as the new bank's logo; according to the design firm, the logo represents the bank's three integrated constituents. The District, National Provincial and Westminster banks were fully integrated in the new firm's structure, but private bankers Coutts & Co (a 1920 National Provincial acquisition, established 1692), Ulster Bank in Northern Ireland (a 1917 Westminster acquisition, established 1836) and the Isle of Man Bank (a 1961 National Provincial acquisition, established 1865) continued as separate operations. Westminster Foreign Bank (established 1913) was restyled International Westminster Bank in 1973. Duncan Stirling, outgoing chairman of Westminster Bank, became first chairman of the fifth-largest bank in the world. In 1969 David Robarts, former chairman of National Provincial, assumed Stirling's position. In 1975, it was one of the first London banks to open a representative office in Scotland. It was a founder member of the Joint Credit Card Company (with Lloyds Bank, Midland Bank and Williams & Glyn's Bank) which launched the Access credit card (now part of Mastercard) in 1972 and in 1976 it introduced the Servicetill cash machine. The same banks, excluding Lloyds, were later responsible for the introduction of the Switch debit card (later branded Maestro) in 1988.

Expansion (1980s)

Deregulation in the 1980s, culminating in the Big Bang in 1986, also encouraged the bank to enter the securities business. County Bank, its merchant banking subsidiary formed in 1965, acquired various stockbroking and jobbing firms to create the investment banking arm County NatWest. National Westminster Home Loans was established in 1980 and other initiatives included the launch of the Piggy Account for children in 1983, the Credit Zone, a flexible overdraft facility on which customers only pay interest (now commonplace, this so-called pink debt was innovative when launched) and the development of the Mondex electronic purse (later sold to MasterCard Worldwide) in 1990. The Action Bank advertising campaign spearheaded a new marketing-led approach to business development. Under the direction of Robin Leigh-Pemberton, who became chairman in 1977, the bank also expanded internationally, forming National Westminster Bancorp in the United States of America with a network of 340 branches across two states, National Westminster Bank of Canada and NatWest Australia Bank; and opening branches on the European continent and in the Far East. In 1982, the Frankfurt office of International Westminster Bank merged with Global Bank AG to form Deutsche Westminster Bank. In 1985, Banco NatWest España was formed and National Westminster Bank SA was incorporated in 1988, taking over the bank's six branches in France and Monaco. In 1989, International Westminster Bank was merged into National Westminster Bank by Act of Parliament.

Completed in 1980, the bank built the National Westminster Tower (now known as Tower 42) in London to serve as its international headquarters. At a height of 600 feet (183 m) it was the tallest building in the UK until the topping-out of Canary Wharf Tower 10 years later; its footprint loosely approximating the bank's logo when viewed from the air, although the architect claimed the similarity was coincidence. Also worthy of note is National Westminster House (since renamed as 103 Colmore Row) in Birmingham: the building was sold to British Land in 2007 and demolished in 2015.

Controversy (1980s–1990s)

The bank was hit by the stock market crash of 1987 and involvement in the collapse of Blue Arrow. The Department of Trade and Industry report on the affair was critical of the bank's management and resulted in the resignation of several members of the board, including then-chairman Lord Boardman. Later, the bank would divest its overseas subsidiaries. The North American operations were sold to Fleet Bank and Hong Kong Bank of Canada, and the Australian and New Zealand branches were sold to Salomon Smith Barney and the National Australia Bank. Thereafter the bank concentrated on its core domestic business as the restyled NatWest Group, reflecting its modern positioning as a portfolio of businesses. In the 1993 Bishopsgate bombing, the NatWest Tower was devastated by a Provisional IRA bomb and the bank vacated the building and later sold it. Then, in 1997, NatWest Markets, the corporate and investment banking arm formed in 1992, revealed that a £50 million ($67.75 million) loss had been discovered, revised to £90.5 million ($122.62 million) after further investigations. Investor and shareholder confidence was so badly shaken that the Bank of England had to instruct the board of directors to resist calls for the resignation of its most senior executives in an effort to draw a line under the affair. The bank's internal controls and risk management were severely criticised in 2000 and its aggressive push into investment banking questioned, after a lengthy investigation by the Securities and Futures Authority. The bank's move into complicated derivative products that it did not fully understand seemed to indicate poor management. By the end of 1997 parts of NatWest Markets had been sold, others becoming Greenwich NatWest in 1998. It had purchased Gleacher Partners in 1996 for $135 million only to resell it back to GP's founder for just $4 million 3 years later in 1999.

Takeover (1990s–2000s)

In 1999, the chairman, Lord Alexander of Weedon, announced a merger with Legal & General in a friendly £10.7 billion deal, the first between a bank and an insurance company in UK history. The move was poorly received in the London financial markets and NatWest's share price fell substantially. Seen as a driver of the ill-advised investment banking expansion, Derek Wanless was forced to resign as chief executive following the appointment of Sir David Rowland (who became executive chairman). Also in 1999, in response to the much reduced NatWest market capitalisation, the much smaller Bank of Scotland made a hostile takeover bid for NatWest. The Bank of Scotland's aim was to break up the NatWest Group and dispose of its non-retail assets. NatWest was forced to abandon its merger, but refused to agree to a takeover by a rival bank. The Royal Bank of Scotland tabled another hostile offer, of £21 billion, outbidding the Bank of Scotland. The takeover of NatWest in early 2000 was the biggest in UK history. Once Britain's most profitable bank, it was delisted from the London Stock Exchange and became, with its subsidiaries, component parts of the Royal Bank of Scotland Group. The outcome of this bitter struggle set the tone for a round of consolidation in the financial sector as it prepared for a new age of fierce global competition. The Royal Bank of Scotland Group became the second-largest bank in the UK and Europe (after HSBC) and the fifth-largest in the world by market capitalisation. According to Forbes Global 2000, it was then the 13th-largest company in the world. NatWest was retained as a distinct brand with its own banking licence, but many back office functions were merged with those of the Royal Bank, leading to over 18,000 job losses.

Attempted divestment (2008–2017)

In 2008, it was announced that HM Government would take a stake of up to 58% in the Royal Bank of Scotland in a move aimed at recapitalising the group. HM Treasury subscribed for £5 billion in preference shares and underwrote the issuance of £15bn of new ordinary shares offered to RBS shareholders and new institutional shareholders at the fixed price of 65.5p. As a consequence of the mismanagement that necessitated this rescue, the chief executive, Fred Goodwin (who secured the takeover of NatWest), offered his resignation, which was duly accepted. Chairman Tom McKillop also confirmed he would stand down from that role when his contract expired in 2009. Goodwin was replaced by Stephen Hester, previously chief executive of British Land.

In 2009, the RBS Group announced that it would divest all 311 RBS branches in England and Wales (known as Williams & Glyn's until 1985) together with the seven NatWest branches in Scotland as a standalone business, to comply with European Commission state aid requirements. In August 2010, it was announced that the branches would be sold to Santander UK, along with the accounts of 1.8 million personal customers and 244,000 SME customers. Santander withdrew from the sale in October 2012. On 27 September 2013, the RBS Group confirmed it had agreed to sell 308 RBS branches in England and Wales and 6 NatWest branches in Scotland to the Corsair consortium. This figure was reduced to 307 by May 2015. The branches were to have been separated from the group in 2016 as a standalone business operating under the previously dormant Williams & Glyn brand.

NatWest provides a full range of banking and insurance services to personal, business and commercial customers, including the first dedicated bank account in Britain to be delivered and supported entirely in the Polish language. The bank has won Your Mortgage Magazine's Best Bank for Mortgages award 13 times in the last 17 years, more than any other lender.

NatWest provides a digital assistant, Cora, to respond to customer enquiries. In 2023, it handled over 10 million queries. From 2025, the bank entered into a partnership with OpenAI, the first such collaboration by a UK bank, to enhance the chatbot's generative AI capabilities.

Operating under the name Esme Loans, NatWest provided a digital lending platform for SMEs also available to customers not banking with NatWest or RBS. Esme Loans commenced trading on 17 February 2017, after being founded out of the bank's new product development programme NatWest Innovation Cell by Richard Kerton, Veronika Lovett, and Lucy Hasson. Esme loans was closed in 2021.

The bank operates "mobile branches" using converted vans to serve rural areas around St Austell, Swansea, Carlisle, Devon and North Wales.

Controversy

Litigation

The so-called NatWest Three—Giles Darby, David Bermingham and Gary Mulgrew—were extradited to the United States in 2006 on charges relating to a transaction with Enron Corporation in 2000 while they were working for Greenwich NatWest. It has been argued that the alleged crime was committed by British citizens living in the UK against a British company based in London and therefore, any resulting criminal case falls under the jurisdiction of the English courts. However, the Serious Fraud Office decided not to prosecute due to lack of evidence. There has been criticism that the Americans do not have to produce a prima facie case, or even a reasonable one, to extradite British citizens, whereas no such facility exists to extradite US citizens to the UK. On 28 November 2007 the three admitted one charge of wire fraud after a plea bargain. On 22 February 2008 they were each sentenced to 37 months in prison.

Following discussions between the Office of Fair Trading, the Financial Ombudsman Service, the Financial Services Authority and the major banks, proceedings were issued on 27 July 2007 in a test case against the banks to determine the legality and enforceability of certain charges relating to unauthorised overdrafts. It is argued that these are contrary to the Unfair Terms in Consumer Contracts Regulations 1999; Schedule 2(e) of which gives a non-exhaustive list of terms which may be regarded as unfair, such as a term requiring a consumer who fails in his obligation to pay a disproportionately high sum in compensation. Penalty charges are irrecoverable at common law. The precedent for this was Dunlop Pneumatic Tyre Co. Ltd. v New Garage and Motor Co. Ltd. [1915] AC 79 along with Murray v Leisure Play [2005] EWCA Civ 963, where it was held that a contractual party can only recover damages for an actual loss or liquidated losses. The RBS Group maintained that its charges were fair and enforceable and stated it intended to defend its position vigorously. On 24 April 2008, the High Court found that although these charges could not constitute penalties, they are challengeable under the Unfair Contract Terms Act 1977 and the Unfair Terms in Consumer Contracts Regulations 1999. On 26 February 2009, the Court of Appeal ruled that fees for unauthorised overdrafts and bounced cheques are subject to regulation by the OFT under these rules.

In September 2009, NatWest announced dramatic cuts in their overdraft fees. The unpaid item fee was reduced to £5 from £38 and the card misuse fee was reduced from £35 to £15. The cuts came at a time when the row over the legality of unauthorised borrowing, estimated to earn current account providers about £2.6 billion a year, had reached the House of Lords.

Computer failures

In late June 2012, the group suffered a major computer malfunction, resulting in some customers' account balances not updating correctly. Completions of some new home purchases were delayed, customers were stranded abroad, and one man was held in prison. As a result of the error, RBS and NatWest announced that over 1,200 of their busiest branches would extend their hours throughout the week, including the bank's first Sunday opening, to enable the customers affected to access cash. On 25 June, over 1,000 branches opened for extended hours, and the number of phone staff was doubled.

Some customers also reported problems with direct debits and standing orders being returned unpaid due to their account balances not updating correctly. However, RBS stated in an announcement that they would work directly with the receiving banks and companies to ensure that all payments were processed. As a result of the system outage, RBS also announced that they would work with credit rating agencies directly to ensure no customer's credit file was permanently impacted. They also announced that no customer would be permanently out of pocket because of the system outage, and launched a dedicated new freephone helpline for the incident, as well as an online help point to guide and advise customers with any queries they had during the outage.

In December 2013, a similar computer failure led to a number of customers being unable to use NatWest card services to pay for goods. This second major outage of services fell on what is known as Cyber Monday, when major retailers discount goods to boost Christmas shopping. The Group chief executive at the time conceded that the bank would have "to do better".