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Banks (Finance)

Royal Bank of Scotland Under Fire for Backing Foreign Takeovers and Dodging Lending Commitments

Strategic Insights

— 1 min read

Royal Bank of Scotland, a part-nationalised bank, is facing criticism from unions and MPs who are concerned that it is acting against the best interests of the UK economy. The bank's loans to foreign companies, including Kraft's bid to buy Cadbury, are at the center of the controversy. Critics argue that these loans undermine the independence of British companies and do little to support UK businesses and individuals.

Key Takeaways:

  • Unite, the union representing Cadbury workers, is demanding an urgent meeting with Kraft's senior management to clarify its plans if the bid succeeds.
  • Labour MP Khalid Mahmood has written to Chancellor Alistair Darling, expressing concerns about mass redundancies if Kraft is successful in its £9.8bn takeover.
  • RBS is buying up loans held by foreign banks in order to meet government lending targets, rather than providing fresh funding to UK businesses and individuals.
  • Critics say this activity does little to support UK businesses and individuals, and that RBS is simply using the loan targets to meet its own financial goals.
  • RBS has been accused of selling some of its non-British loan portfolio in order to shrink its balance sheet and meet UK lending targets.
  • The bank has refused to disclose details of secondary loan purchases, citing client confidentiality.
  • RBS has committed to increasing its lending to £25bn by March 2010, including £16bn to companies and £9bn in mortgages.

Statistics:

  • £630m: the amount of RBS loan facility to Kraft, the US firm bidding to buy Cadbury.
  • £25bn: the amount of lending that RBS has committed to by March 2010.
  • £16bn: the amount of lending that RBS has committed to provide to companies by March 2010.
  • £9bn: the amount of lending that RBS has committed to provide in mortgages by March 2010.
  • £9.8bn: the value of Kraft's bid to buy Cadbury.

Sources:

  • [Unite union spokesperson]
  • [Labour MP Khalid Mahmood]
  • [Royal Bank of Scotland]
  • [The Guardian]
  • [BBC News]

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