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Authors: Ray Perman, Alistair Darling
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which had a big shareholding in Bank of Scotland, was also pressing the Bank to take part in consortia which it was leading. The board was cautious about
‘taking crumbs from other men’s tables’, as one board paper put it, 8 but nevertheless, the Bank did lend.
The total debt of Latin American governments quadrupled over eight years while at the same time economic recovery meant that interest rates rose. Inevitably some countries could not meet their
interest charges and repayments and panic ensued when first Mexico, then Argentina and Brazil teetered on the edge of default. The consequences for the banks were dire. The total capital of some US
and London banks would have been wiped out had they been forced to write off all their lending to the region. The IMF did have to step in, but the sums were so large that all it could do was extend
debt terms to allow banks time to write off their loans. Bank of Scotland had the least exposure of any UK clearing bank, but had it had towrite off the lot in one go, it
would have lost more than a quarter of its capital.
The international rescue bought time and although the Bank wrote off some debts, it adopted an innovative solution to others. David Jenkins, the Bank’s Economist, was pressed into a new
role, travelling South America to negotiate debt-for-equity swaps which saw the Bank acquire, among other things, a hotel on Copacabana Beach in Rio de Janeiro, a tomato-paste factory in north-east
Brazil, and a stake in the country’s third-largest paper producer. 9 Jenkins, short, bald, dapper, with a wry wit and ready smile, must
have cut an unlikely figure touring some of the more remote areas of Brazil and Chile. He turned his adventures into a series of humorous articles for
The Scottish Banker
magazine.
4
Cometh the hour, cometh the man
At the end of the 1970s a quiet revolution occurred at the top of Bank of Scotland. The appropriately named Tom Risk was appointed one of two deputy Governors. 1
Risk was a corporate lawyer who had been a director of the Bank for some time. Importantly, he had chaired its corporate banking subsidiary, initially named Bank of Scotland Finance Company, but
later relaunched with the old British Linen Bank name. His chief executive there had been Bruce Pattullo, the manager who had led the Bank to raise its profile in the oil industry. Risk was a
strategist and a shrewd judge of character. Along with some of the other board members he was concerned that the Bank’s lacklustre performance over the previous decade made it vulnerable to a
takeover. With the retirement of the Treasurer (Chief Executive) looming, he persuaded his fellow directors to leap a generation, ignore the potential candidates among the general managers and
promote Pattullo, who was made Deputy Treasurer and Chief General Manager in 1979 and promoted to the top post the following year at the age of 41.
It was not only Pattullo’s youth which was unusual. His background made him a very strange animal in clearing banking on either side of the border. Whereas most recruits had joined the
Bank from state schools, Pattullo had been educated at prep school, Rugby and Hertford College, Oxford. There he had developed an interest in economics and fancied a career in finance, but while
his university contemporaries might have gone into stockbroking or one of the blue-blooded London merchant banks, he opted to join Bank of Scotland as one of the first of a handful of candidates on
its new graduate programme. Recruiting from university was a radical departure forthe Bank, but any difference to its usual method of training stopped there. Pattullo was
still required to work in a branch ‘passing money over the counter’ and to study for the Institute exams, although having acquired the habit of studying on his own at Oxford, he opted
for correspondence, rather than night classes. He won the Institute’s first prize in his exam year. As with other recruits, the Bank
‘taking crumbs from other men’s tables’, as one board paper put it, 8 but nevertheless, the Bank did lend.
The total debt of Latin American governments quadrupled over eight years while at the same time economic recovery meant that interest rates rose. Inevitably some countries could not meet their
interest charges and repayments and panic ensued when first Mexico, then Argentina and Brazil teetered on the edge of default. The consequences for the banks were dire. The total capital of some US
and London banks would have been wiped out had they been forced to write off all their lending to the region. The IMF did have to step in, but the sums were so large that all it could do was extend
debt terms to allow banks time to write off their loans. Bank of Scotland had the least exposure of any UK clearing bank, but had it had towrite off the lot in one go, it
would have lost more than a quarter of its capital.
The international rescue bought time and although the Bank wrote off some debts, it adopted an innovative solution to others. David Jenkins, the Bank’s Economist, was pressed into a new
role, travelling South America to negotiate debt-for-equity swaps which saw the Bank acquire, among other things, a hotel on Copacabana Beach in Rio de Janeiro, a tomato-paste factory in north-east
Brazil, and a stake in the country’s third-largest paper producer. 9 Jenkins, short, bald, dapper, with a wry wit and ready smile, must
have cut an unlikely figure touring some of the more remote areas of Brazil and Chile. He turned his adventures into a series of humorous articles for
The Scottish Banker
magazine.
4
Cometh the hour, cometh the man
At the end of the 1970s a quiet revolution occurred at the top of Bank of Scotland. The appropriately named Tom Risk was appointed one of two deputy Governors. 1
Risk was a corporate lawyer who had been a director of the Bank for some time. Importantly, he had chaired its corporate banking subsidiary, initially named Bank of Scotland Finance Company, but
later relaunched with the old British Linen Bank name. His chief executive there had been Bruce Pattullo, the manager who had led the Bank to raise its profile in the oil industry. Risk was a
strategist and a shrewd judge of character. Along with some of the other board members he was concerned that the Bank’s lacklustre performance over the previous decade made it vulnerable to a
takeover. With the retirement of the Treasurer (Chief Executive) looming, he persuaded his fellow directors to leap a generation, ignore the potential candidates among the general managers and
promote Pattullo, who was made Deputy Treasurer and Chief General Manager in 1979 and promoted to the top post the following year at the age of 41.
It was not only Pattullo’s youth which was unusual. His background made him a very strange animal in clearing banking on either side of the border. Whereas most recruits had joined the
Bank from state schools, Pattullo had been educated at prep school, Rugby and Hertford College, Oxford. There he had developed an interest in economics and fancied a career in finance, but while
his university contemporaries might have gone into stockbroking or one of the blue-blooded London merchant banks, he opted to join Bank of Scotland as one of the first of a handful of candidates on
its new graduate programme. Recruiting from university was a radical departure forthe Bank, but any difference to its usual method of training stopped there. Pattullo was
still required to work in a branch ‘passing money over the counter’ and to study for the Institute exams, although having acquired the habit of studying on his own at Oxford, he opted
for correspondence, rather than night classes. He won the Institute’s first prize in his exam year. As with other recruits, the Bank
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