RBS to liquidate £ 1 billion in disputed loans with local councils | Business

The Royal Bank of Scotland aims to reduce the amount of controversial bank loans held by local authorities across the country by around £ 1 billion after critics have revealed that high payments have embezzled funds consulting services.

The activists welcomed this decision, which follows Barclays' similar efforts in 2016 and comes as both lenders face a series of lawsuits.

The loans have been criticized by activists and the Chancellor of the Shadow, John McDonnell, who said the councils were about to pay high interest payments that could have been diverted to local services already limited by spending cuts. Activists against loans estimate that canceling borrower option loans, or loan loan, could save taxpayers £ 16 billion over the next 40 years.

The Guardian understands that RBS is working to reduce the loan portfolio by the end of the year. The main way to do this is to repay the loans: clients, including local authorities, can repay their loans earlier than the original contracts, some offering a rebate on their repayment as an additional incentive.

RBS, 62% owned by the taxpayer since its rescue in 2008, has significantly reduced the loan portfolio over the past two years and is expected to fully exit its lobos position by the end of 2019.

Birmingham, Kent, Northamptonshire, Sheffield and Newcastle are among the tips for taking advantage of the early exit offer.

Lobos were popular among boards in the early 2000s. One of the main attractions was the incentive interest rates, which kept costs low in the short term, but were costly because of austerity and reduction. spending. Loans granted banks the power to raise interest rates at certain points in their lives, which represented the lending option of the loan agreement. Although borrowers have the opportunity to refuse these conditions, this would trigger a clause requiring them to repay the full loan immediately.

A spokeswoman for RBS said: "Although we can not discuss individual cases, a number of clients of our local authorities have taken out long-term, historical loans in lobos. We work on a case-by-case basis with all our customers and, as always, the arrangements are confidential. We value all our clients and are willing to discuss the restructuring or refinancing of such loans when it is beneficial to the client. "

Its large bank, Barclays, converted its lobos into term loans two years ago, although interest payments were not necessarily affected and the costs of the breaks were not affected. only slightly reduced.

But efforts to phase out loans have spared no legal action from either bank. The New Hampshire Authority of East London has taken legal action against RBS and Barclays over the terms of the loan, borrowing around £ 578 million of lobos between 2003 and 2010, according to data compiled by the Debt Campaign Group. UK resistance.

A similar suit was filed against Barclays by seven city councils, including Greater Manchester and Leeds, for nearly £ 573 million in loans between them. Their request to the Supreme Court concerns the influence of interest rates on these loans on the interbank rate offered in London (Libor). Barclays is among the lenders who have been fined for rigging the Libor since the banking crisis.

A spokesman for Barclays said: "Barclays has filed a defense and will vigorously defend these claims."

Joel Benjamin, an activist with the anti-lobster lobby Research for Action, said: "It's a pleasure to see RBS finally liquidating its lobo loan portfolio, two years after Barclays decided to do the same. . "

But he said that he was surprised that RBS "suddenly offers boards big discounts to get out of the lobos at a discount sale," since RBS had previously stated that it was not a good idea. There was no problem with complex loans.

"Could it be that a deaf-and-dumb RBS has finally solved the problem of lobos lending to bankruptcy boards such as Northamptonshire, that's not a good idea?"

He added that the break fees of some loans had been reduced from more than 200% to around 70% to 80%, "resulting in a multi-million pound savings for municipalities and taxpayers, as well as" a corresponding loss for RBS taxpayers ".