There will be a cry for Sir Fred Goodwin’s head this week, when the chief executive of Royal Bank of Scotland (RBS) confirms a £12 billion rights issue and announces big write-offs.

There will also be an outcry over the role of Sir Tom McKillop, the group’s chairman, and whether he is strong enough to stand up to Goodwin.

Just how loud the carping will be remains to be seen, but one thing is certain: to ditch Goodwin now would be foolhardy.

He has been the architect of RBS’s growth, led the acquisition of ABN, the Dutch bank, and is best equipped to integrate the complex businesses.

If a new chief executive were installed he would have no accountability to Goodwin’s legacy. He would most likely carry out rough and brutal surgery, and at the moment that is the wrong medicine.

There’s plenty of time for recriminations down the track, particularly if Goodwin does not deliver the synergies which were mooted at the time of the ABN merger last year. Then Goodwin would rightly have to go.

However, the first order of business is to repair RBS’s capital base. That must be the priority of investors.

They can rightly question McKillop. He has been too silent as the bank’s chairman and needs to be heard more.

During the bid battle for ABN, McKillop was the invisible man, but it would be wrong to hold him solely to account.

At RBS there is a clear case for a senior nonexecutive with banking experience to be appointed to sit under McKillop.

The £6 billion write-off that RBS will announce from its continuing exposure to the sub-prime meltdown in America is bigger than expected, as is the rights issue (see pages 6 and 7). What this means is RBS has no intention of returning to either subject.

The proceeds of the cash call, combined with gains from disposals, will equip the bank with the firepower required to ride out the worst markets in postwar history.

There will be a cost, though. RBS will have to rebuild its reputation as a financial behemoth. It will have to prove it can still drive a progressive dividend pay-out and generate the earnings that the market wants from the ABN integration.

The biggest relief is that RBS is no longer in denial. Its capital ratios have been testing the limits for some time, and with the US housing market going into an even sharper decline in March, the board finally accepted it had to own up.

Its shareholders should put their hands in their pockets. The reward is a recapitalised bank with an international footprint at a time when banking will again be a profitable – albeit slower – business. It is up to the board to prove they are the right men to stay in charge.

London’s loss

It’s a perennial discussion among British business leaders: whether they should move their headquarters overseas to escape Britain’s pernicious tax regime.

Most big corporations, from HSBC to Glaxo Smith Kline and Prudential, carry out periodic studies then drop the idea – because the complexities often outweigh the attractions of lower tax.

Every so often, however, one does decide to quit, and last week it was Shire Pharmaceuticals that said it intends to move to Dublin. Its decision was triggered by growing frustration over how foreign subsidiaries are taxed.

The government should take heed of Shire’s move; business is becoming concerned about a breakdown in trust with the government and changes to the tax environment. And as the make-up of the FTSE 100 becomes increasingly international, the obstacles to moving overseas are becoming less onerous.

Take Tomkins, the building materials to auto-components group, as an example. In all but name, the company has in effect been Americanised. Its executive directors are now all based in the US. Its previous headquarters in Putney, southwest London, has been sold and scaled down. Tomkins, is now looking for a smaller office purely to house its tax and treasury functions.

At the annual meeting next month, the company is asking shareholders to allow it to denominate all its earnings and dividends in dollars.

Some 70% of Tomkins earnings are generated in America and it is now only a short step to redomiciling the company.

As yet the management team, who in the past have looked at a buy-out, have not approached the board with such a redomicile. It is only a matter of time.

The current chief executive and chairman are both starting to think about succession. Whoever takes over will have it at the top of their agenda. And Tomkins is not alone.

London needs to keep companies like this and the government should not underestimate how fragile the relationship has become.

Hannam’s the man

David Mayhew, chairman of JP Morgan Cazenove, is leading the search for a new chief executive to replace the departed Robert Pickering. It is becoming clear that external candidates are being preferred against internal ones.

At what cost, however? The most prolific dealmaker within JP Morgan Cazenove is Ian Hannam. Last year he was accountable for a large slice of the investment bank’s revenues, advising on a string of deals.

Hannam has the skills to become chief executive, and if he is overlooked he could pack his bags.

That would be a giant headache for Pickering’s replacement and rich pickings for another firm that wants one of London’s most successful bankers.

Bang to rights

Black marks for Bradford & Bingley, the struggling mortgage bank, which last week denied it was planning a rights issue.

This is what happened: Steven Crawshaw, the chief executive, wanted to raise around £300m and intended to announce a cash call at the group’s annual meeting. However, there was a split among his advisers. Two wanted to do it and the third advised against.

Crawshaw lost his nerve and pulled the issue, but the group’s attempt to deny the story was pitiful.

If Crawshaw had held his nerve, he would have got in before RBS. Instead, he could now be last in the queue.

john.waples@sunday-times.co.uk

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