25.03.19
RBS to wind down £1bn worth of controversial LOBO loans by end of the year
The Royal Bank of Scotland (RBS) is attempting to wind down the remainder of around £1bn in controversial LOBO bank loans.
Seven local authorities announced in February that they were suing Barclays over a combined £500m of the lender-option, borrower option (LOBO) loans which have come under heavy criticism from campaigners and the shadow chancellor John McDonnell.
Newham LBC followed in the councils’ footsteps and filed a lawsuit against RBS last month, claiming that £150m worth of LOBO loans were fraudulently set with high interest rates when sold prior to the financial crisis.
Now, as reported by the Guardian, RBS is working to wind down its loan portfolio by the end of the year.
The bank is doing this through loan redemptions: allowing local authorities to pay back their loans earlier than their contracts allowed with some also offered a discount on their repayment.
RBS’s LOBO loan portfolio has reportedly been reduced significantly over the last two years and is expected to fully exit its position on the loans by the end of 2019.
Several councils have taken advantage of the early exit offer, including Sheffield, Newcastle, Birmingham and Northamptonshire.
An RBS spokesperson told the Guardian: “Whilst we can’t discuss individual cases, a number of our local authority customers hold legacy, long-dated, LOBO loans.
“We work on a case-by-case basis with all our customers and, as ever, arrangements are confidential. We value all our customers and are open to discussing restructuring or refinancing of such loans where beneficial for the customer.”
Shadow chancellor John McDonnell last year called for a government investigation into the high-interest and risky loans, and campaigners Research for Action found that the 240 local authorities involved with the borrowing schemes could have borrowed up to £16bn over the lifetime of the loans.
It said that early repayment of the LOBO loans could save the 10 biggest borrowers, such as Newham LBC’s which has over £500m in LOBO debt, as much as £4bn by refinancing.
Barclays scrapped its LOBO loans in 2016 by turning them into fixed-rate loans but interest payments weren’t necessarily affected and is currently engaged in ongoing legal proceedings with local authorities.
Joel Benjamin, an activist with Debt Resistance UK, said it was “heartened to see local councils filing legal action against Barclays related to LOBO loans, which has resulted in hundreds of millions of pounds being skimmed from struggling town hall budgets.”
Image credit - Philip Toscano/PA Wire/PA Images