The main lenders

Currently councils have LOBO loan contracts with a 34 different counter-parties. Below we provide information on the main lenders.


Barclays was the largest LOBO loan lender, having  sold at least £3.8 billion of loans to councils mainly between 2001 and 2008.

In 2016, it decided to unilaterally transform all of its LOBO loans into fixed rate loans by removing the option. It did so by notifying the councils with a deed poll which indicated they were waiving their right to call their options. No right to object was given to the councils.

Though such action has removed the derivative risk from the loan, councils are still locked into long term expensive loans, with no clarity on what penalty fee they would incur should they want to exit the loans.

As the fair value of the loans has remained the same or increased since the removal it is likely that the penalty fee would still be high.

Royal Bank of Scotland

The Royal Bank of Scotland was one of the last banks to enter the LOBO loan market with their loans being issued between 2007 and 2012.

The bank sold at least £1.4 billion in LOBO loans to local authorities and provided some of the most toxic types of loans, the so-called inverse floaters.

Between 2018 and 2019 it decided to get rid of all of its LOBO loans by offering councils the opportunity to exit the loans on favourable terms. Most LOBO loans were exited, except for one currently held by North Lanarkshire. A few other were transformed into fixed rate loans by removing the option and were then acquired by ReAssure, Phoenix Life Assurance and Lancashire County Council.

It is likely that the bank chose to exit the loans due to the introduction of new financial reporting standards that made accounting for inverse floaters in the council’s financial accounts extremely costly.

Foreign banks

A few foreign banks have also allowed councils to exit their LOBO loans, totalling £438 million across 59 loans:

  • Commerzbank exited 19 loans in 2017 and 2018 totalling £172.3 million
  • EuroHypo exited 4 loans in 2018 and 2019 totalling £60.5 million
  • FMS Wertmanagement exited 3 loans in 2015 totalling £3 million
  • Hypothekenbank Frankfurt exited 3 loans in 2017 totalling £16 million
  • KA Finanz exited 19 loans in 2018 and 2019 totalling £77.8 million
  • Siemens Financial Services exited 11 loans between 2016 and 2019 totalling £108.5million