The Royal Bank of Scotland, Lloyds TSB, Barclays and HSBC have all provided funding to the makers of cluster bombs, a weapons system that is inherently indiscriminate and routinely maims or kills civilians.
Britain is a signatory to the Convention on Cluster Munitions, a global treaty that bans the use, production, stockpiling and transfer of cluster bombs. To date, 108 countries have signed the treaty, which also forbids parties from assisting in the production of cluster weapons. Yet there has been no attempt to rein in banks and investment funds that continue to finance companies known to manufacture the weapons. None of these investments is illegal. Using a loophole in the legislation, financial institutions can continue to back cluster-arms manufacturers as long as they don't invest in the bombs directly. The report on the banks, a joint piece of research by the Dutch and Belgium NGOs IKV Pax Christi and Netwerk Vlaaneren, reveals that since May 2008, 166 financial institutions across the world have invested an estimated $39bn in the eight largest cluster-munitions manufacturers. Belgium, Ireland, Luxembourg and New Zealand are the only countries that have banned banks from directly or indirectly financing cluster bombs.
An investigation by Dutch arms experts into how financial institutions continue to invest in the industry has revealed that the 83% state-owned RBS is the UK's worst offender. In October 2010, RBS was part of a banking syndicate that provided the American arms manufacturer Alliant Techsystems with a $1bn (£600m) five-year credit facility, with RBS itself loaning $80m. It has also underwritten $110.1m in bonds to Alliant Techsystems and Lockheed Martin. The partially state-owned Lloyds has also invested in Lockheed Martin, the US arms giant that has a long track record of making cluster munitions. In November 2009, Lloyds contributed $62.5m as part of a 12-bank syndicate when Lockheed issued bonds for a total of $1.5bn. In April 2009, Barclays and HSBC were involved in a major financing deal with Textron, a US arms manufacturer that builds a "sensor fused weapon" – the world's most powerful cluster bomb. Alliant Techsystems makes the weapon's rocket motor. Textron issued $757.4m worth of bonds and shares with the financial aid of a 10-bank syndicate. HSBC and Barclays combined underwrote $44.6m worth of loans. Barclays then went on to invest a further $75m in a separate Textron bond deal five months later.
Oliver Sprague, an arms expert at Amnesty International , said: "High street banks like Royal Bank of Scotland are making a mockery of UK law by shamefully investing in companies that make weapons the UK Government and 108 other countries have clearly and quite rightly banned. Given the UK Government's clear decision to ban cluster munitions, no UK financial institutions should be assisting their production."