Jeremy Warner's Outlook: Mistakes were made, but it is time to move on. Is this a credible defence from RBS?

So that's it then. The world has changed, we are where we are, no one individual is responsible, time to move on.

That broadly summarises Royal Bank of Scotland's riposte to the obvious question raised by the distress rights issue announced yesterday: why is no one resigning over this apparently comprehensive admission of failure?

The board is contrite and there is a high degree of humility, RBS says, but it's back to the basics of banking now, and using the words of Sir Tom McKillop, the RBS chairman, "to look for a sacrificial lamb just misses the whole plot".

So what is the plot and are shareholders likely to buy it? As Damascene conversions go, they don't come any bigger than the somersault that RBS has just performed.

Less than two months ago, RBS's chief executive, Sir Fred Goodwin, was so confident in his earnings outlook and underlying capital strength that he announced a 10 per cent increase in the dividend.

Everything was apparently going swimmingly and we were advised not to believe all the tales of gloom and doom we read in the press, still less the by-then deafening crescendo of comment that the bank desperately needed to address issues of capital adequacy.

To Sir Fred, it feels like a lifetime ago, and so it must, for it is virtually unheard of for such a complete volte-face to occur in such a short space of time. What happened so precipitously to change RBS's world view? According to Sir Fred, there comes a tipping point in events when the balance of probability no longer supports the strategy being followed.

At RBS, the imperative had been all about running an efficient balance sheet, with consequentially low levels of capital. Ample liquidity was taken for granted in a world economy apparently awash with the stuff. Yet as Sir Fred now admits, but apparently didn't recognise back then, there can be no substitute for having high levels of capital as a cushion for when the unforeseen happens.

The charge at the heart of the case against RBS is that it failed to provide this safety net, and indeed completely removed any protection that it might have had by paying top dollar for ABN's wholesale markets operation even though it by then knew that credit conditions were deteriorating fast.

RBS's only excuse is that it didn't foresee quite how bad things would become. Both the economic outlook and credit conditions worsened considerably again in March, leading directly to the additional £5.9bn of write-offs on bad debts announced yesterday. Somewhat unfortunately for RBS, a third of these extra provisions relate to the acquired ABN assets, making the takeover look more ill-judged still.

It's a funny thing about the financial services industry, but though by now the offending chairman and chief executive would have been hung, drawn and quartered had this extraordinary series of misjudgements and U-turns occurred in any industrial company, the City finds it virtually impossible to turn on one of its own. For the time being, there seems limited appetite for a scalp.

Investment banking is a tough old business right now, but, whether times are good or bad, there's always a bonus and a fee. Merrill Lynch, Goldman Sachs and UBS will share underwriting fees of up to £210m on an issue so deeply discounted that it would require a renewed plunge into the financial abyss of truly biblical proportions for things to go wrong.

According to Sir Tom, the board is unanimous in its view that the current executive team is the one to take the bank forward. In the absence of dissent or viable alternatives, continuity may be the only option, unsatisfactory though it must seem to many shareholders.

Three of the board's non-executives are to be replaced over the months ahead, but, according to Sir Tom, this would have happened anyway as they were all coming up for nine years' service. Sir Tom also implied that succession planning was in place for Sir Fred, though he didn't elaborate on timing or a likely replacement.

Yet the best argument that can be made for continuity is that, though there is plainly a very considerable issue around credibility here, what RBS needs right now above all else is calm and noise abatement.

To have sacked the board alongside the announcement of a £12bn rights issue, £4bn of asset disposals and a £6bn writedown might further have enhanced the sense of crisis and ended up frightening the horses to such a degree that there might have been a stampede for the door.

As it is, Sir Tom was almost convincing in arguing that RBS was fundamentally a brilliantly run bank with brilliant assets, but that the world had changed overnight and the chief executive was adaptable enough to change with it. Sir Fred is an obsessive, so no one should doubt the "focus" with which he promises to see RBS through the storm.

If RBS hadn't raised more capital, the bank would have been constrained in its ability to lend, and this would have been bad for the economy and thereby bad for the bank. In that sense, Sir Fred really did have no option but to change his mind. John Maynard Keynes, the economist, famously said: "When the facts change, I change my mind. What do you do, sir?". Sir Fred can claim a similar logic in announcing his volte-face.

There is obviously credit in the bravery of Sir Fred's admission that he was wrong, as well as the decisiveness with which RBS has moved to correct its errors. Yet saying sorry doesn't excuse the mistake, even if eventually doing the right thing is powerful mitigation.

Other banks will follow in Sir Fred's wake, which in time will make RBS's decision look less remarkable. Even so, this will come to be seen as one of the great capitulations of the present banking crisis and therefore part of the catharsis that will eventually result in its cure. What with the Bank of England's £50bn banking support operation, it's already been quite a week for reluctant U-turns.

Break-up of BAA moves a step closer

The case for keeping BAA together as a monopoly of Britain's major airports disappeared years ago, yet still the Competition Commission seems strangely reluctant to spell it out.

Instead, yesterday's "emerging thinking" report dances around the goalmouth, complaining that the present conglomeration of ownership may not serve the interests of either passengers or airlines, and that it might also lead to "sequential investment", one airport after another, in a manner which deprives the South-east of the extra capacity it needs.

Despite these self-evident points, the commission fails to put the ball in the back of the net by overtly calling for a break-up. This can surely only be a matter of time. BAA was privatised in its present form only for the sake of convenience and because the Government of the day knew it could raise more money by selling a monopoly than a series of competing airports. It also helped to ensure that ministers would continue to call the shots on where to locate capacity expansion.

Yet any remaining economic and commercial purpose in keeping the airports together disappeared when cross-subsidisation was banned and each one became individually regulated. This has made it more difficult to milk Heathrow for the purpose of Government-determined expansion of capacity elsewhere.

The next logical step is break-up, allowing each airport to pursue its individual needs and priorities in competition with the others. This is almost bound to lead to a better experience all round. Another possibility might be to separate the operating licences from ownership, which again might lead to competitive improvement.

After the fiasco of Terminal Five, Ferrovial, BAA's Spanish owner, says that the whole focus of its attention is to get Heathrow right. This rather makes the point. Focus on Heathrow by all means, but let someone else run the others. That way they might all raise their game together.