Almost everything is going to change at Royal Bank of Scotland (RBS) over the next years, according to Stephen Hester, its chief executive since November.

The bank is going to take far less risk, and will shrink in size, operating in far fewer countries and lines of business than it did in the glory days under its previous buccaneering boss, Sir Fred Goodwin.

Under a completely new management team, the new RBS will be "humble", but "proud of its accomplishments" - once it has something to be proud of, Mr Hester said.

The five-point turnaround will take the full five years, Mr Hester predicts. To keep all of the bank's stakeholders on side during the painful process, the new boss proposes giving lots of disclosure along the way.

Each of RBS' divisions will have targets they must meet, and must show at the end that they work both as highly profitable individual businesses and also make sense as part of the whole. While RBS will become much smaller, Mr Hester believes it should still be a diverse entity on the grounds that well managed, broad banks are less likely to blow up than narrow institutions, which live or die by a single line of business.

Will the plan succeed? A lot depends on what happens to the economy over the next few years. Mr Hester struck a far more cautious note than his counterpart at Lloyds, Eric Daniels, saying that there were signs of green shoots, but they are still very small, and that the most likely scenario was for this recession to follow previous ones, with unemployment peaking two or three years after the economy has turned.

The role of the Government - how much it chooses to interfere in the management decisions of the 70 per cent state-owned bank - will also play a large part.

At the moment, there seems to be balance - albeit an uncomfortable one - between Downing Street's pressure for banks to lend to support customers who are struggling, and banks' requirement to hoard cash to rebuilt their capital strength, as is also dictated by regulators and politicians.

The final element will be regulation. All of the banks are keen to publicly support the need for stronger rules to prevent a return to boom and bust banking, where certain elements within financial institutions are allowed to expand dangerously, leaving Governments having to pick up the pieces. But, as Barclays' boss, John Varley, warned on Monday, there are also fears in the banking world that too zealous regulations or demands on banks over issues such as capital could risk "throttling" the economy.

Even if these broad trends go in RBS' favour, its recovery will be a "marathon not a sprint", Mr Hester predicts. One thing is certain, if RBS comes out as a winner from the banking crisis, its boss will be able to claim first prize in executive pay, taking home about £10 million for 2009 alone.

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