RBS AGM 2016 – Our questions asked

May 4, 2016

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On May 4th 2016, Move Your Money attended the RBS AGM, via proxy shares kindly facilitated by ShareAction. Here’s the questions that we asked the board in full:

Fionn Travers-Smith, Campaign Manager of Move Your Money asked a question on branch closures destroying local communities:

I was at the RBS AGM this time last year, and though some of the faces have changed, many of the issues remain the same. Last year the outgoing Chairman warned that RBS would continue to close branches across the country, abandoning the very communities that saved this bank when it was on its knees and begging for our support.

Since then, Move Your Money research has shown that RBS is the worst bank in Britain for branch closures, with one third of all branch closures and half of all “last bank in town” closures being made by this, the taxpayer-owned bank.

Having spent the last year campaigning with the communities that are affected by these closures, I can tell the board that their decision to shrink our branch network is ruining communities and fatally undermining local economies across the country.

The bank likes to say that these closures are due to declining branch usage and the need to cut costs. But the retail bank is profitable, and there are widespread accusations of figure-fiddling to make branches in poor areas seem less used, and branches in rich areas seem more well used.

In other words, the bank is purposefully abandoning those areas that need it most. A recent poll by Populus for Move Your Money showed that 82% of the public agree that we own RBS so it should work for us, and act in the public interest.

Instead, impact assessments mandated by the Access to Banking Protocol are nothing more than box-ticking exercises that do nothing to genuinely assess the need of these communities, or the true impact that closures are having on them.

Given all of this, and the clear moral and financial imperative for the bank to repay the communities that saved RBS when it was fundamentally insolvent, will the bank and the board commit to reassessing its policy on branch closures so that the public interest is genuinely assessed and that community views are actually represented, rather than merely glossed over in these exercises; and will the chairman and the CEO agree to meet me to discuss these issues further?”

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Joel Benjamin, Campaigner for Move Your Money, PPL vs PFI, and Debt Resistance UK asked a question on exploitation of local authority finances:
My question is for Ross McEwan. RBS. “A bank which earns your trust”

As a former pupil of Napier Boys High School in NZ, it’s an unlikely chain of events that now bring me face to face with a noted Hastings Boys High alumni. Hawkes’ Bay rivals, talking in Edinburgh, of the collapse in trust in RBS, and across UK banking.

This is my third RBS AGM, and our third conversation, regarding RBS LOBO loans, sold to councils, which resulted in communities across the UK, including Edinburgh, saddled with unpayable debts, and mounting service cuts.

I want to see a resolution of this issue. Let’s hope it’s a case of third time lucky.

Ross, you have a reputation as a straight talker, so allow me get to the point.

In conversation with Martin Arnold for the FT in February 2015, you described “teaser rate” loans, not allowed in New Zealand or Australia, as a “personal bugbear” and a misleading practice you wanted stamped out at RBS. You stated:

“You would have thought you would get a better rate for staying, rather than a worse rate for staying and a better rate for going,”

RBS LOBO loans feature “teaser rates”, but with a series of punitive twists.

If base interest rates remain low, local authorities remain locked into RBS “inverse floater” LOBO loans, and must pay high interest rates, or crippling exit penalties to escape.

Should base interest rates rise, regular embedded options over the 70 year term allow RBS to unilaterally increase the interest rate in future, with as little as 24 hours notice to council.

Having been sucked into LOBO loans with teaser rates: councils including Edinburgh, Glasgow, Newham and Cornwall, find themselves paying crippling interest rates approaching 8%, with break penalties greater than 90% of the loan value, to exit the loans.

For these reasons, LOBOs are described as a Lose-Lose bet for councils.

Ross, as the sale of LOBOs to local authorities predates your time at RBS and the loans feature teaser rates, which you concede mislead customers, you are uniquely placed to resolve this issue.

When we last spoke on LBC radio in back November, you cut me off [it was actually Nick Ferrari who cut Joel off] stating Councils have professional financial officers, who “knew what they were doing.”

A string of municipal derivatives mis-selling cases, many involving RBS, from Saint Ettiene in France, to Belgium, Germany and Italy, demonstrate councils did not know what they were doing, when confronted with baffling derivatives products, cooked up by RBS financial engineers.

NZ’s Kaipara District Council also finds itself on the wrong side of RBS/ ABN Amro derivatives deals.

Treasury Advisers Butlers and Capita who advised councils to enter LOBOs were on the take, receiving kickback payments from Brokers ICAP and Tullet Prebon, who were in turn, paid large commissions from banks on LOBO loan trades.

CIPFA guidance for local authority treasurers notes the “informational asymmetry” between banks and local authorities – considered “retail clients” not sophisticated “market counterparties” when trading derivatives with banks.

LOBO loans are a busted flush. And it’s for RBS time to face the consequences.

Last Wednesday, Barclays agreed to get around the table and meet with Newham Council to discuss a way out of these loans.

Will RBS now take at last some genuine steps to “earn our trust” and get around the negotiating table with Newham, Edinburgh, and other councils sold LOBO products, to find a resolution to this problem and the removal of options & waiver of exit penalties.”

You can read our full recap of the event here, and follow our live tweeting of the event on our Twitter handle @moveyourmoneyuk

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