Coutts & Co has changed its chief executive just as
the bank becomes embroiled in a new financial embarrassment, this
time an abortive £1 billion scheme to give its clients tax
advantages through a complex trust scheme. John Evans reports on a
busy month for the bank.
Coutts & Co has appointed Michael Morley, the former head of
wealth at failed Kaupthing Singer & Friedlander, as its new
chief executive. He replaces outgoing CEO Sarah Deaves, who is
moving to become managing director of affluent banking at Coutts’
parent RBS.
Go deeper with GlobalData
While Morley left KSF before its Icelandic parent collapsed, some
eyebrows were raised at the appointment at a bank which has long
sought to stress its prestigious nature, as private banker to Queen
Elizabeth II and other royals.
This was not a widely-held reaction, however, as Morley is
undoubtedly one of the most experienced private banking executives
in London.
He joins Coutts with a background of over 29 years’ in financial
services, including head of International Private Banking at
Barclays Wealth.
He also spent eight years with Merrill Lynch, becoming managing
director and later moving on to become director of Private Wealth
Services for Europe and the Middle East in 1999.
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By GlobalDataJohn Baines, chief executive of RBS Wealth Management, said Morley
“has a very impressive and solid track record of creating and
growing businesses, both in the UK and overseas, and brings with
him many years of wealth management experience.”
One of Morley’s first priorities will be to overcome the tarnishing
of the Coutts brand.
The bank has recently been hit by two embarrassments. It has been
caught up in a tax avoidance scheme for about 300 of its clients.
The scheme involved a Swiss-based investment trust, Castle Trust,
which made a deliberate loss in order to allow clients to make
deductions from their UK tax bills.
Clients forced to repay
Its clients have been forced to repay up to £400 million in tax
they had hoped to avoid after HM Revenue & Customs ruled that
the scheme had breached UK tax regulations. Coutts had no role in
actually setting up Castle Trust, operated by Exco Bierbaum
Securities, a securities broker, and there is no suggestion it knew
the scheme was illegal.
Coutts declined to comment on Castle Trust, saying it was “unaware”
of any legal action by clients.
This is the second controversial client affair in which Coutts has
become embroiled. Nectar loyalty card tycoon Sir Keith Mills
started a campaign to shame Coutts after the bank allegedly advised
him to keep his cash in savings bonds issued by AIG, the troubled
US insurer. Coutts denied it mis-sold the bonds and said it made
plain they were not risk-free.
The latest trust scheme again raises the issue of potential
conflicts of interest for Coutts, as a bank within the RBS group
which in turn is owned 70 percent by the UK government.
Still, RBS chief executive Stephen Hester has named wealth
management as a core expertise of the group as part of its recovery
strategy, arguing that Coutts will not be sold off even though it
would raise valuable cash for the ailing Edinburgh-based
bank.
Meanwhile, RBS has made a major strategic hire as part of its
recovery plans. A top ANZ banker, Brian Hartzer, has been recruited
to run its British retail operations, including wealth management.
Hartzer, previously headed ANZ’s Australian retail franchise.
