Local authorities

Legal actions

In July 2018, 14 local authorities announced that they were legally challenging Barclays on the basis that the LOBO loans they were sold were pegged to LIBOR. Newham announced shortly after they were doing the same. Since then, 7 councils withdrew from the legal action, leaving 7 councils in addition to Newham to file the claim (Leeds, Greater Manchester, Newcastle, North East Lincolnshire, Nottingham, Oldham and Sheffield).

Unfortunately a High Court judge refused to proceed with the claims from the councils which were on the grounds of fraudulent misrepresentation. We are yet to hear if the councils will be considering an appeal.

In 2018, Newham council also initiated a legal challenge on LOBO loans against the Royal Bank of Scotland, which was then withdrawn once the council exited their RBS LOBO loans.

Exiting loans

Since 2015 some councils have been able to exit some of their loans, either by approaching the banks or by being offered the opportunity from the banks themselves.

Up to now, 55 out of 210 councils have exited 140 loans totalling £1.65 bn: Barnsley, Birmingham, Blackpool, Bolton, Bradford, Brent, Brighton & Hove, Buckinghamshire, Cambridgeshire, Cornwall, Coventry, Croydon, Darlington, Derbyshire, Dorset, Dover, East Sussex, Edinburgh, Fife, Gateshead, Hampshire, Harrow, Hertfordshire, Hounslow, Inverclyde, Kent, Kingston upon Hull, Knowsley, Lancashire, Leicester, Lincolnshire, Luton, Newcastle upon Tyne, Newham, Northamptonshire, Northumberland, Nottinghamshire, Plymouth, Powys, Redbridge, Redcar & Cleveland, Rochdale, Rotherham, Salford, Scottish Borders, Sheffield, Shropshire, Solihull, Somerset, Staffordshire, Telford & Wrekin, Trafford, West Dunbartonshire, Wirral, York.

The banks that have allowed councils to exit their loans are: BAE Systems, Barclays, Commerzbank, EuroHypo, FMS Wertmanagement, Hypothekenbank Frankfurt, KA Finanz, Royal Bank of Scotland and Siemens Financial Services and State Street Nominiees.

Councillors taking action

In most cases, action on LOBO loans by councils has been the result of the work done by local councillors in bringing the issue to the attention of the council and demanding that action be taken.

Research for Action have supported councillors in doing so by providing details about their council’s LOBO loans and supporting documentation that could be useful for making their case. The aim of this site is to support more councillors in taking action.

It has been encouraging to see councillors take a stand in the name of the public interest of the residents they represent. However, they have not always been supported by their council.

Councillor Ferguson of Cornwall Council provided the following evidence in the 2015 parliamentary inquiry:

“I am disappointed that it needed so much digging on my part […]  It is essential that councillors understand the nature of the risks arising from these transactions (which are ongoing). Prior to the Dispatches Programme no information (or even the existence of LOBOs) was published at all by Cornwall Council. If the Council are so comfortable with these deals why the secrecy? ”

Councillors objecting to LOBO loans in other local authorities have described similar attitudes and incidents. In one case, a councillor was forced to withdraw their objection after having been verbally threatened by the Director of Finance.

The fact that information on LOBO loans was withheld from councillors and that those that tried to address the issue were treated with such abuse is of great concern. This site aims to provide councillors with the confidence of having a complete understanding of the issue so as to stand their ground.

Central government

The 2015 Parliamentary inquiry

A parliamentary inquiry titled “Local council bank loans” by the Communities and Local Government (CLG) Committee was announced on 15 July 2015, following the broadcast of a Channel 4 documentary on LOBO loans.

Three of the people who appeared in the documentary were asked to give oral evidence: financial expert Abhishek Sachdev, former Barclays banker Rob Carver, and Channel 4 reporter Antony Barnett. The hearing took place on 20 July 2015. A video and transcript are available online.

The following organisations provided written evidence (links take to the their submission):

As did the following individuals:

Unfortunately, the inquiry was discontinued without any explanation and since then very little public scrutiny has been applied to LOBO loans by any parliamentary department, despite the continuous campaigning.


The response to residents’ objections

Between 2015 and 2020, Debt Resistance UK and Research for Action supported more than 50 residents in submitting objections to their councils’ LOBO loans.

While auditors refused to publish public interest reports on LOBO loans, behind the scenes they were calling on councils and central government to take extreme measures to mitigate and resolve these cases.

An FOI request to the  National Audit Office (NAO) found that between 2016 and 2018, LOBO loans were continuously discussed in private via emails and in specially convened practice groups by auditors, regulators CIPFA and Ministry of Housing, Communities and Local Government (MHCLG) officials. A panel (called the ‘Local Authority Accounting Panel’) discussed how to respond to objections and the significant budget implications of specific loans.

Privately, they acknowledged the role objectors had played in drawing attention to the problem, as one NAO email pointed out:

“Public accountability – could be seen as enhanced…the objection process has unearthed a significant issue…it also highlighted a collective blind spot in how the Code was read/interpreted.” 

The NAO also urged all auditors to

“to consider whether it would be appropriate to exercise any of their additional public reporting powers, such as issuing a recommendation…or a Public Interest Report.”

They repeatedly advised that while objections had only been received in some local authorities, the issues raised should be considered “at other authorities where LOBOs are material” because there is a:

“risk of issues relevant to auditor’s responsibilities not being considered adequately, if consideration is only given to bodies where objections have been raised.”

However, the auditors, even if urged to do so, did not produce any public interest reports, nor did they publish any of the findings from the investigations they undertook for the objections.


The statutory override

One of the central issues raised by LOBO loans objections was that the full cost and financial risk associated with the loans was not being appropriately accounted for by councils.

The failure to properly consider the long-term risks of LOBO loans contracts was brought to light when new international financial reporting standards were introduced which forced councils to record the cost of derivatives in a more transparent way and set aside cash reserves against the hidden liabilities.

Emails disclosed via FOI showed that LOBO objections were an important factor in prompting action to avert what was described in one meeting by a civil servant as a:

“nightmare scenario of material options, that would wipe out a council’s reserves.”

The same batch of FOI documents show that information was being gathered to inform a potential statutory override to prevent councils declaring bankruptcy as a direct result of LOBO loans.

A statutory override is a central government decision to waive or override regulation. In the case of LOBO loans, the statutory override was introduced by MHCLG towards the end of 2018, and allowed councils to ignore the new financial reporting standards for the following five years.

Within two years of the statutory override, all of the most risky LOBO loans (inverse floaters) were cancelled by the lending bank – publicly owned Royal Bank of Scotland.


Since the exposure of LOBO loans, the Chartered Institute of Public Finance and Accountancy (CIPFA) has published specific guidance on the issue.

In 2018, CIPFA CEO, Rob Whiteman even suggested that councils should consider legal action against the banks when he was interviewed for the BBC World Tonight:

“If councils have made bad LOBO loan deals, they should not be defensive about that but go to litigation and challenge the banks and say, we think we’ve been mis-sold [these products]”

Whiteman thereafter withdrew his comments and since then CIPFA has avoided taking a clear position on LOBO loans when talking about them to the media.


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