Royal Bank of Scotland (RBS) Watch

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Updated March 31, 2014

          See also, "U.S. Human Rights Group Files Challenge to Takeover Bid," by Karl West, The Herald (Glasgow, UK), May 11, 2004; "Deal Brings Charge of Loan Bias at Citizens," by Damian Paletta, American Banker, May 11, Pg. 19. In this space, we will continue running updates. For or with more information, contact us.

Updated April 28, 2014


As US Bank Gets  Rubber-Stamp to Buy & Close RBS Branches, FOIA Pends

By Matthew R. Lee

NEW YORK, May 15 -- When Royal Bank of Scotland proposed to sell its 93 Chicago-area branches to US Bank, Inner City Press asked US Bank's regulator the Office of the Comptroller of the Currency how many and which branches it would close.

  Now in a May 14 letter the OCC only sent to Inner City Press on May 15, the agency has approved US Bank's application, without addressing the impact of the branch closings or Inner City Press' pending Freedom of Information Act appeal.

  Inner City Press is putting the OCC approval letter, which does not seem to have been reported anywhere else at least according to Google News, online here.

  The comment period to the Office of the Comptroller of the Currency was set to expire on February 20. After Inner City Press' request is was extended to April 25.

  US Bank submitted a list but cynically asked for "confidential treatment" for all of it -- that is, to withhold it from the public. Inner City Press submitted a Freedom of Information Act request, as it has done to the Federal Reserve Board (and on other topics, to the US State Department) - and on April 25, the OCC responded.

  From the document Inner City Press has obtained under FOIA, and now exclusively puts online here, along with the OCC FOIA letter to Inner City Press which will be appealed, US Bank would close at least 13 branches. In the until-now confidential filing with the OCC, US Bank says it would close RBS / Charter One's 10200 S. Ewing Street, Chicago branch in a low income tracts and send customers to a "receiving" branches in a non-low income tract.

  US Bank would also close its own branch at 8905 S. Commercial Avenue, Chicago in a low income tract.

This comes after Fair Finance Watch and other community advocacy organizations in NCRC commented to the OCC about lending disparities.

FFW commented, back in January, that

While on this disclosure of branches which would be closed the OCC should extend the comment period, for now, to ensure consideration, US Bank NA (Ohio)'s 2012 HMDA data reflect that in the Chicago MSA for home purchase loans both conventional and subsidized, US Bank made a smaller portion of its loans to Latinos than did even the aggregate, including lenders not subject to the Community Reinvestment Act.

For conventional home purchase loans in the Chicago MSA in 2012, US Bank made 1083 such loans to whites, 78 to African Americans and only 77 to Latinos. That is, US Bank made 14 such loans to whites for each loan to a Latino, a bigger disparity than is the case with the aggregate.

For the home purchase loans in Table 4-1 in the Chicago MSA in 2012, US Bank made 268 such loans to whites, 68 to African Americans and only 60 to Latinos. That is, US Bank made 4.47 such loans to whites for each loan to a Latino, a significantly bigger disparity than is the case with the aggregate.

  US Bank replied that it needn't disclose which branches it would close. Fair Finance Watch reiterated its request in Washington DC in mid-March, along with NCRC, and in supplemental comments. And on March 26, the OCC confirmed that the comment period is extended to April 25, and portions of US Bank's response released.

  The problem is that large portions of US Bank's response are withheld, or simply redacted in black Magic Marker, first Tweeted here by @FinanceWatchOrg, click here to view. Fair Finance Watch and Inner City Press immediately filed with the OCC a Freedom of Information Act request

Update of April 28, 2014

On US Bank's proposal to acquire 93 branches from Royal Bank of Scotland / Charter One, Inner City Press by a Freedom of Information Act request has just learned that US Bank would close at least 13 of them, and has put in a fourth comment to the OCC:

On behalf of Inner City Press / Fair Finance Watch (ICP) this is a fourth timely comment on the application of US Bank to acquire 94 branches from RBS Citizens / Charter One and close or consolidate some still unknown number of them.

Since our first comment, ICP has demanded to know how many and which branches US Bank would close or "consolidate." US Bank cynically withheld and requested confidential treatment, resulting in Inner City Press only receiving the information midday on April 25. This comment is submitted the next day, and in context must be considered as timely.

As a first comment on the wrongfully withheld and delayed information, US Bank says it will close 13 of the branches, including in low income census tracts.

For example, US Bank says it would close RBS / Charter One's 10200 S. Ewing Street, Chicago branch in a low income tracts and send customers to a "receiving" branches in a non-low income tract.

US Bank would also close RBS / Charter One's branches at 8905 S. Commercial Avenue, Chicago in a low income tract.

This militates for the public hearings ICP has request from its first comment. On the current record, US Bank's application should be denied.

On the current record, hearings should be held and the applications / notices should not be approved.


RBS Sale of 93 Branches to US Bank Stalled, Info Withheld, CRA Protests

By Matthew R. Lee

SOUTH BRONX, March 26 -- When Royal Bank of Scotland proposed to sell its 93 Chicago-area branches to US Bank, the comment period was set to expire on February 20. Today that was extended to April 25.

The extension or "re-publication of notice" came after Fair Finance Watch and other community advocacy organizations commented to the US Office of the Comptroller of the Currency, about lending disparities and US Bank's refusal to disclose how many and which of the 93 branches it would close.

FFW commented, back in January, that

While on this disclosure of branches which would be closed the OCC should extend the comment period, for now, to ensure consideration, US Bank NA (Ohio)'s 2012 HMDA data reflect that in the Chicago MSA for home purchase loans both conventional and subsidized, US Bank made a smaller portion of its loans to Latinos than did even the aggregate, including lenders not subject to the Community Reinvestment Act.

For conventional home purchase loans in the Chicago MSA in 2012, US Bank made 1083 such loans to whites, 78 to African Americans and only 77 to Latinos. That is, US Bank made 14 such loans to whites for each loan to a Latino, a bigger disparity than is the case with the aggregate.

For the home purchase loans in Table 4-1 in the Chicago MSA in 2012, US Bank made 268 such loans to whites, 68 to African Americans and only 60 to Latinos. That is, US Bank made 4.47 such loans to whites for each loan to a Latino, a significantly bigger disparity than is the case with the aggregate.

  US Bank replied that it needn't disclose which branches it would close. Fair Finance Watch reiterated its request in Washington DC in mid-March, along with NCRC, and in supplemental comments. And on March 26, the OCC confirmed that the comment period is extended to April 25, and portions of US Bank's response released.

  The problem is that large portions of US Bank's response are withheld, or simply redacted in black Magic Marker, first Tweeted here by @FinanceWatchOrg, click here to view. Fair Finance Watch and Inner City Press immediately filed with the OCC a Freedom of Information Act request

"for all withheld / redacted information from US Bank's March 21, 2014 submission in connection with its application to acquire branches from RBS Charter One. ICP / Fair Finance Watch commented on the application, and earlier today the OCC provided a redacted copy of US Bank's submission. Nearly the entire fair lending response is redacted, as is information about US Bank's claimed support to non-profits. Since such information is presumptively public, it must be unredacted and released. We are challenging each redaction, making this FOIA request for the entire, unredacted submission in this application process we timely challenged."

Now whether these withholdings can stand up must be ruled upon.

  In terms of commenting of what was released, ICP says "Now that US Bank has admitted to the Federal Reserve that it would eliminate Charter One's Credit Builder and energy efficiency loan programs, and make it more difficult for the customers it would acquire to avoid fees, the Fed should schedule public hearings."

  Prediction: the document put online yesterday will be reported in the Windy City.
Meanwhile Royal Bank of Scotland is looking to sell off its Citizen Bank unit in the Northeast, to Japan’s Sumitomo Mitsui Financial Group or another. Watch this site.

Update of February 24, 2014:

Inner City Press / Fair Finance Watch has put in a third comment on US Bank - RSB / Charter One:

On behalf of Inner City Press / Fair Finance Watch (ICP) this is a third timely comment on the application of US Bank to acquire 94 branches from RBS Citizens / Charter One and close or consolidate some still unknown number of them.

We write at the stated deadline for comments again requesting an extension of the comment period as, having belatedly received the "public" portion of the application, we find therein NO disclosure of the branches that would be closed.

After for example the precedent of Huntington (and, in the Northeast, of Rockville and United in Connecticut and Massachusetts), both of which disclosed which branches they would close during the comment period, Huntington even re-starting the comment period to do so, to not extend this comment period on 93 branches would be a major step backward for the OCC.

ICP submitted a first comment and request for at least the public portions of the application, on January 11. While the comment has been acknowledged, so far ICP has seen no questions put to US Bank by the OCC, nor any portion of the application. This stands in contrast to other Federal regulators processing of, for example, earlier still pending applications by Umpqua and Mercantile in Michigan. (The FDIC has also posed questions to Mercantile, see for the record http://www.innercitypress.org/merc1fdicicp012914.pdf).

The OCC should not be more lax, or less transparent. Information should be provided and the comment period should be extended.

On the current record, hearings should be held and the applications / notices should not be approved.

Update of February 10, 2014:

With the comment period on US Bank's application to acquire 94 branches from Royal Bank of Scotland set to expire on February 20, Inner City Press / Fair Finance Watch has put in a second comment:

Re: Second timely Comment Opposition and Requesting Hearings and an Extension of the Comment Period On the Applications of US Bank to Acquire 94 Branches from RBS Citizens' Charter One

Dear Director for District Licensing and others in the OCC:

On behalf of Inner City Press / Fair Finance Watch (ICP) this is a second timely comment on the application of US Bank to acquire 94 branches from RBS Citizens / Charter One and close or consolidate some still unknown number of them.

ICP submitted a first comment and request for at least the public portions of the application, on January 11. While the comment has been acknowledged, so far ICP has seen no questions put to US Bank by the OCC, nor any portion of the application...

In its January 11 comment, ICP analyzed the 2102 Chicago MSA HMDA data of US Bank NA (Ohio). In this second submission we look more closely at Ohio.

In the Cincinnati Ohio MSA for conventional home purchase loans in 2012, US Bank made 336 such loans to whites, only 16 to African Americans and only three to Latinos. For the home purchase loans in Table 4-1 in this MSA in 2012, US Bank made 225 such loans to whites, only 21 to African Americans and only three to Latinos. Thus, cumulated for all home purchase loans in this MSA in 2012, US Bank made 561 such loans to whites, only 37 to African Americans and only six to Latinos.

For refinance loans in the Cincinnati Ohio MSA in 2012, US Bank made 1232 such loans to whites, only 44 to African Americans and only six to Latinos. Its denial rate for whites was 18.2% but fully 35.7% to Latinos and 29.6% to African Americans. This is disparate.

In the Akron Ohio MSA for conventional home purchase loans in 2012, US Bank made 34 such loans to whites, only one to an African American and NONE to Latinos. For the home purchase loans in Table 4-1 in this MSA in 2012, US Bank made 13 such loans to whites, only one to anAfrican American and again none to Latinos. Thus, cumulated for all home purchase loans in this MSA in 2012, US Bank made 47 such loans to whites, only two to African Americans and NONE to Latinos.

For refinance loans in the Akron Ohio MSA in 2012, US Bank made 192 such loans to whites, only six to African Americans and again none to Latinos. Its denial rate for whites was 18.5% but fully 36.4% to African Americans. This is disparate.

In the Cleveland Ohio MSA for conventional home purchase loans in 2012, US Bank made 92 such loans to whites, only six to African Americans and NONE to Latinos. For the home purchase loans in Table 4-1 in this MSA in 2012, US Bank made 58 such loans to whites, five to African Americans and five to Latinos. Thus, cumulated for all home purchase loans in this MSA in 2012, US Bank made 150 such loans to whites, only 11 to African Americans and only five to Latinos.

For refinance loans in the Cleveland Ohio MSA in 2012, US Bank made 478 such loans to whites, only 21 to African Americans and only 14 to Latinos. This is disparate. Such disparities exist throughout US Bank's franchise, as we will further present including at the requested public hearings.

We are also timely putting into the record consumer complaint information [attachments]

Again, US Bank has a record of closing branches, and in connection with this proposed acquisition announced on January 7, US Bank spoke of "some overlap" between branches but "said it’s too early to say whether any will be closed." Chicago Tribune, January 7, 2014.

US Bank should have to disclose which branches it would close, during the comment period, as for example Huntington Bank recently had to do in connection with its smaller proposal to acquire Camco's Advance Bank. In that case, Huntington re-applied and gave public notice of which branches it would close -- that should be done here.

Update of January 13, 2014: After US Bank announced on January 7 it would seek to acquire 94 branches from RBS Citizens' Charter One, but that it is "too early" to say which of these it would close, Inner City Press / Fair Finance Watch four days later filed an initial comment with the Office of the Comptroller of the Currency (we will be putting in more regarding RBS itself) --

Dear Director for District Licensing and others in the OCC:

This is a request in advance for a full copy of, and a timely comment requesting an extension of the OCC's public comment period on the Applications of US Bank to acquire 94 Branches from RBS Citizens' Charter One and close some as yet unknown number of them.

US Bank has a record of closing branches, and in connection with this proposed acquisition announced on January 7, US Bank spoke of "some overlap" between branches but "said it’s too early to say whether any will be closed." Chicago Tribune, January 7, 2014.

US Bank should have to disclose which branches it would close, during the comment period, as for example Huntington Bank recently had to do in connection with its smaller proposal to acquire Camco's Advance Bank. See, e.g., "Huntington plans 9 branch closings in Camco deal," by Evan Weese, Columbus Business First, Dec 23, 2013. http://www.bizjournals.com/columbus/news/2013/12/23/huntington-plans-9-branch-closings-in.html

In that case, Huntington re-applied and gave public notice of which branches it would close -- that should be done here.

While this disclosure of branches which would be closed, the OCC should extend the comment period. For now, to ensure consideration, US Bank NA (Ohio)'s 2012 HMDA data reflect that in the Chicago MSA for home purchase loans both conventional and subsidized, US Bank made a smaller portion of its loans to Latinos than did even the aggregate, including lenders not subject to the Community Reinvestment Act.

For conventional home purchase loans in the Chicago MSA in 2012, US Bank made 1083 such loans to whites, 78 to African Americans and only 77 to Latinos. That is, US Bank made 14 such loans to whites for each loan to a Latino, a bigger disparity than is the case with the aggregate.

For the home purchase loans in Table 4-1 in the Chicago MSA in 2012, US Bank made 268 such loans to whites, 68 to African Americans and only 60 to Latinos. That is, US Bank made 4.47 such loans to whites for each loan to a Latino, a significantly bigger disparity than is the case with the aggregate.

Such disparities exist throughout US Bank's franchise, as we will further present along with RBS issues including at the now-requested public hearings. Also to ensure consideration and action as quickly as possible, we are entering this into the record, from the American Banker newspaper of January 4, three days before this proposal was announced:

Banks Keep Offering Deposit Advances, Six Weeks After Crackdown

U.S. Bank [is] still offering deposit advances six weeks after regulators finalized sweeping guidance that raised doubts about the product's viability. As of Friday afternoon, the two big banks were still offering the product — which bears a strong resemblance to the payday loan — on their websites, with terms that appear out of compliance with the guidance. Judging from public statements, the banks' primary regulator has not blessed the product's continuation, even in the short term. The Office of Comptroller of the Currency, which issued the guidance alongside the Federal Deposit Insurance Corp., says the document became effective in late November, and there is no grace period.

"Banks that fail to comply with the guidance should expect that the OCC will take appropriate supervisory action, and enforcement action if necessary, to prevent harm to consumers, ensure compliance with appliance laws, and address any unsafe or unsound banking practice or violations of law associated with these products," OCC spokesman Bryan Hubbard says in an email...

U.S. Bank declined to say whether they have made any changes to their deposit advance products since the guidance was issued in late November. But a review of their websites suggests that what they're currently offering is not in compliance with the guidance.

The guidance contains a provision stating that banks should allow at least one statement cycle (which is typically a month) to elapse between the repayment of one deposit advance and the offer of a second loan. Yet... U.S. Bank's site says that the bank may limit access to the product if a customer uses it in nine consecutive statement cycles.

So did the OCC mean what it said? This is a timely request for public hearings.

The comment period should be extended to accept further HMDA analysis as well as information on the prospective branch closings.

On the current record, hearings should be held and the applications should not be approved.

Update of November 11, 2013: Not only will RBS speed up its spinning off of Citizens - now it is settling some predatory lending / underwriting charges in the US: "Royal Bank of Scotland Group PLC (RBS, RBS.LN) has agreed to pay more than $150 million to settle Securities and Exchange Commission charges over a subprime residential mortgage-backed security offering in 2007. RBS Securities Inc., which was known as Greenwich Capital Markets at the time of the offering, didn't admit to or deny the allegations that it misled investors over whether the loans backing the offering met its underwriting guidelines. The SEC said nearly 30% of the loans were below the guidelines, even though the firm said they 'generally' met them." Predators....

Update of November 4, 2013: Royal Bank of Scotland is moving up its divestiture of Citizens Bank in the US: an stock sale of 20 to 25 percent in the second half of 2014, all of the rest by the end of 2016. And if an actual bid to buy the US subsidiary comes up before then?

Update of November 5, 2012: Royal Bank of Scotland has had to settle in Nevada for securitizing predatory loans -- meanwhile, it may have to sell off Citizens and Charter One in the United States. In Nevada:

RBS Financial Products will pay a $42 million settlement to resolve an investigation into the firm’s role in purchasing and securitizing subprime and payment option adjustable rate mortgages in Nevada. The assurance of discontinuance, filed in Eighth Judicial District Court, requires RBSFP to commit to certain changes in its practices to the extent it securitizes Nevada mortgages and to pay the State $42 million to be used for payments to affected borrowers, mortgage fraud enforcement, and foreclosure prevention, and attorney’s fees and costs.

Nevada Attorney General Catherine Cortez Masto specified it's about "misrepresentations by lenders, including Countrywide and Option One, to Nevada consumers who took out subprime loans and payment option ARMs that were bought and securitized by RBS." For shame...

Update of January 23, 2012: Royal Bank of Scotland's former boss, Sir Fred "the Shred" Goodwin, faces the loss of his knighthood, after he helped enable predatory lending by securitizing and trading in the loans through RBS Greenwich Capital Markets. PM Cameron said, "There’s a forfeiture committee in terms of honors that exists and it will now examine this issue. I think it’s right that it does so."

Update of January 16, 2012: Nickeled and dimed, per even the WSJ: Customers at Citizens Bank, a unit of Royal Bank of Scotland, now have to pay $50 a month if they fall below minimum account balances on some money-market accounts.

Update of July 19, 2010: While even in the vaunted financial reform bill, U.S. banks are hardly pushed to lend to small businesses, in the UK they are being summoned. Bosses of the U.K.'s biggest banks last week had to push back against government claims they aren't doing their part to grow the economy by lending more to small businesses, at a meeting held between top executives and Treasury officials to discuss lending and coming regulatory reforms. “It was a very constructive meeting that will help inform the Government's Green Paper on business finance which will be published shortly," said Chancellor of the Exchequer George Osborne and Secretary of State for Business Innovation and Skills Vince Cable in a joint statement following the meeting. Also at the meeting were Financial Secretary of the Treasury Mark Hoban and... Royal Bank of Scotland Group's post-Shred CEO Stephen Hester...

Update of May 17, 2010: J.P. Morgan Chase & Co. and Deutsche Bank have both removed themselves from the running for RBS Sempra's energy-trading and retail-energy-supplier businesses, largely because of expectations of a "Volcker Rule" that would force banks to exit from proprietary-trading businesses. Good.

Update of October 12, 2009: In the UK, there is talk of breaking up the large banks like Royal Bank of Scotland.

Update of March 9, 2009 --- Congress during the debate about bailing out the banks decided that non-US banks should not be getting TARP funds. Now it emerges that of the $50 billion the Feds have given to AIG's counter-parties, Deutsche Bank for example has gotten a full $6 billion. Also receiving hand-outs were HSBC, Royal Bank of Scotland and Societe Generale. Worse, the Federal Reserve is trying to avoid providing a listing of the companies who've gotten the public money, as reiterated by Fed Vice Chair Don Kohn on March 5. This is a new low, to be followed up in DC this week.

Update of February 9, 2009: As Royal Bank of Scotland, bailed-out by UK taxpayers, tries to pay bonuses to its second layer of executives, the UK's Gordon Brown says the Government would only support any bonus payments to RBS staff through UKFI if they were consistent with the taxpayers’ interest. Business Secretary Lord Mandelson added that RBS risked alienating the public by offering “exorbitant” bonuses to its traders and senior bankers.

Update of December 8, 2008: Royal Bank of Scotland, following its bail-out by the UK government, has suddenly announced a six month moratorium on foreclosures. It applies only in the UK. In the U.S., where RBS owns Cleveland-based Charter One and Citizens Banks in the Northeast, the government has imposed very few requirements for its funds. There's now a proposal in the Senate, sponsored by Senator Durbin, which would tell TARP-recipients that they cannot pay out more in dividends than in the previous year.  Since one would expect dividends to be decreasing, even keeping them at last year's level implies using the bail-out funds to keep dividends up, to the previous year's level.   

  Reportedly, Suntrust and Regions Bank, along with Morgan Stanley, are eying RBS' Charter One and Citizens, to buy them with TARP funds. Morgan Stanley, which the Fed declared to be a financial holding company with no public notice or comment or Community Reinvestment Act review, has now applied to buy up to 9.9% of something called Heritage Bank. On this one, Fair Finance Watch has commented, requesting public hearing on Morgan Stanley's subprime Saxon and the other issues swept under the carpet so that Morgan Stanley could get TARP.  What double-standards and sleaze are being swept under this TARP? Public hearings are needed.

Update of November 17, 2008: Global fragment of the predatory lending meltdown -- How will the UK run RBS, which owns subprime lenders in the US, and securitizes subprime loans through its subsidiary Greenwich Capital Markets? 

Update of November 3, 2008:  The War on Want continues: in terms of shareholdings in Britain's largest arms companies, Royal Bank of Scotland has a stake worth £36.4 million. There is a contradiction between RBS's claimed commitment to human rights and sustainable development and its support for the arms industry.

Update of October 13, 2008: RBS is pleading for a bailout from the UK... When Inner City Press / Fair Finance Watch commented, at length and over years, about RBS' involvement in and exposure to predatory subprime lending, RBS always said it wasn't true...

Update of August 11, 2008: Royal Bank of Scotland Group announced a first-half net loss of $1.56 billion), its first loss since the bank listed in the 1960s and one of the largest losses ever posted by a U.K. bank. Can you say, Greenwich Capital Markets?

Update of June 30, 2008: RBS has finagled approval from China's banking regulator to buy nearly 20% of Suzhou Trust Co., sources say, a follow-up to RBS' stake in Bank of China Ltd. in 2005. Desperate swashbucklers...

Update of June 16, 2008: This week, Inner City Press / Fair Finance Watch filed comments against the Federal Reserve's secret process with banks, in essence a rule-making excluding the public even those the topic, credit derivatives, has come up because of the subprime lending crisis. The financial institutions invited -- and now challenged -- included RBS. The Administrative Procedures Act (5 U.S.C. Section 553) and related laws require that when the government engages in rule-making, it must provide notice to the public, and allow and weigh public comments.  Press accounts make clear that the financial instruments and regulatory issues discussed behind closed doors at the FRBNY on June 9 are related to issues of public interest, which in fact are disproportionately impacting low- and moderate- income people and communities of color -- subprime and predatory mortgages.  Watch this site.

Update of April 7, 2008: In the first study of the just-released 2007 mortgage lending data, Inner City Press / Fair Finance Watch finds that Royal Bank of Scotland its U.S. subsidiaries in 2007 confined African Americans to higher-cost loans above the rate spread 1.76 times more frequently than whites. It denied over 66% of mortgage applications from African Americans, and over 62% of applications from Latinos.

Update of March 10, 2008: ABN Amro was fined $80 million in civil penalties in 2005 for transactions through its New York offices which the U.S. government said failed to meet the necessary controls on money laundering. RBS said in its annual results published last week that ABN is the subject of an ongoing criminal probe by the DoJ over the same issue. Negotiations over a possible $500 million settlement are ongoing, RBS said.

Update of August 27, 2007: On August 20, Royal Bank of Scotland told the Federal Reserve that its anti-money laundering policy should be withheld from ICP Fair Finance Watch. Quickly this counter-argument was filed:

RBS argues that its Anti-Money Laundering policy should be withheld, "since disclosure might provide information which might assist persons seek to circumvent those policies and procedures and to engage in money laundering."

  But Fortis and Santander provide their anti-money laundering policies. Therefore the record on this application contains a contradiction -- if RBS' argument is accepted, then Fortis and Santander are assisting and enabling money laundering. If, on the other hand, this is not what Fortis and Santander are engaged in, RBS' policy must be released.

 We note pervious RBS AML issues, including regarding sanctioned entities in Afghanistan. The policy should be released, including so that timely commenters, who timely requested the application, including but not only under FOIA, can review and comment on it.

            And lo and behold, by the end of the week RBS released its AML policy, which is now being analyzed...

Update of August 20, 2007:  In response to the July 24 comments of Fair Finance Watch opposing RBS's application to the Federal Reserve to acquire ABN Amro, including due to the fact that "RBS supports predatory lenders," RBS' outside counsel at Shearman & Sterling, Bradley K. Sabel, has told the Fed that

"When New Century filed for bankruptcy, RBS Greenwich Capital agreed to provide debtor-in-possession (DIP) financing to assist New Century in its efforts to reorganize... RBS Greenwich Capital also agreed to provide an initial bid on certain mortgage assets of New Century that were being sold... In exchange for providing that bid, RBS Greenwich Capital received a Bankruptcy Court-approved break up fee of $954,000."

            It's reminiscent of Royal Bank of Scotland's Greenwich Capital's predatory enabling of the predatory lender ABFI in Philadelphia...

Update of July 30, 2007: ICP's Fair Finance Watch has filed timely comments opposing the applications of RBS, Santander and Fortis to acquire ABN Amro:

July 24, 2007

Richard Walker
Vice President & Community Affairs Officer
Federal Reserve Bank of Boston
Public and Community Affairs Department, T-7
P.O. Box 55882
Boston, Massachusetts 02205

Re:   TIMELY COMMENT IN OPPOSITION TO THE PROPOSAL FOR ROYAL BANK OF SCOTLAND, BANCO SANTANDER AND FORTIS TO ACQUIRE ABN AMRO HOLDINGS AND SUBSIDIARIES INCLUDING REQUEST FOR HEARINGS

Dear Mr. Walker and others in the FRS:

  On behalf of the Fair Finance Watch and its affiliates, including Inner City Press (collectively, "FFW"), this is a timely comment opposing and requesting public hearing on, and complete copy of, the applications by Royal Bank of Scotland, Banco Santander and Fortis to acquire ABN Amro Holdings and subsidiaries. Even as the overall proposal faces legal challenges in Europe, the Federal Reserve Board's web site lists the initial comment period as running through July 25. This comment is timely. In light not only of the lending disparities set forth below, but also the legal issues raised by the proposal(s), RBS' engagement with predatory lenders, and legal and other questions about the deal, public hearings should be held on this and the other ABN Armo proposals.

 FFW understands that litigation and appeals continue in Europe; the FRB should extend the comment period until the reality or hypothetical natures of this proposal is clear.

In 2006 nationwide at  Royal Bank of Scotland's Charter One Bank unit, African Americans were confined to higher cost loans over the rate spread 1.49 times more frequently than whites.

In 2005, Santander's Sovereign was 3.10 times more likely to confine Latinos than whites to higher cost loans over the rate spread (of 3% over comparable Treasury securities on a first lien, 5% on a second lien). Also, Sovereign denied 26.96% of applications from Latinos, versus only 10.39% of applications from whites, a denial rate disparity of 2.59.

   Sovereign was 2.76 times more likely to confine African Americans than whites to higher cost loans over the rate spread. Sovereign denied 28.21% of applications from African Americans, versus only 10.39% of applications from whites, a denial rate disparity of 2.76.

RBS continues supporting predatory lenders. The NY Times of April 10, 2007 reported:
"New Century Financial, a subprime lender that has filed for bankruptcy protection, should not be allowed to sell $50 million worth of mortgages to a subsidiary of the Royal Bank of Scotland, a United States trustee said yesterday in court papers.

Before the sale is approved, New Century should be forced to eliminate or reduce a $1 million breakup fee associated with the deal and to say how it will protect consumer financial data, the trustee, Joseph J. McMahon Jr., said in court papers filed in Federal Bankruptcy Court in Wilmington, Del.

The breakup fee, which New Century would pay to the Royal Bank of Scotland if the sale was not completed, is nothing more than a '$1 million windfall' for Royal Bank, Mr. McMahon said in the filing. Federal trustees monitor bankruptcies on behalf of the Justice Department.

New Century, based in Irvine, Calif., specialized in making loans to home buyers with poor credit before it filed for bankruptcy protection on April 2. The company is planning to sell most of its assets within the next few weeks, including its remaining loans, loan servicing division and loan origination platform.

New Century said Carrington Capital Management had offered about $133 million for the loan servicing unit, which collects and manages mortgage payments. The Royal Bank subsidiary, Greenwich Capital, has agreed to pay $50 million for about 2,000 mortgage loans, most of which are in default.

Judge Kevin J. Carey in the Wilmington court will consider approving the rules governing the Royal bank sale in a hearing today, and the Carrington sale on Thursday.

Both offers would be considered opening bids in a court-supervised auction.

A New Century spokeswoman did not immediately return a call seeking comment. Officials at Greenwich Capital could not immediately be reached for comment."

  Public hearings should be held. ICP is a protestant to this proposal, and should be provided copies of all communications regarding this proposal -- including a full copy of the applications, forthwith --  and should be provided an opportunity to participate in any communications between the applicants and your agency. All documents and records related the proposal (on an ongoing basis), including complete copies of the Applications, and other records in your agency’s  possession related to the proposal, should be provides as quickly as possible, as they become available.

Very Truly Yours,

Matthew Lee, Esq.
Executive Director

  Then Banco Santander was reported to have continued to do business with sanctioned Bank Sepah until at least March 2007.  How this might impact the Santander - RBS - Fortis bid for ABN Amro, including their pending applications before the U.S. Federal Reserve, remains to be seen. Federal Reserve, take notice...

Update of April 23, 2007: From the mailbag --

Subject: RBS Watch news
From: [Name withheld in this format]
To: Inner City Press

Sent: Thu, 19 Apr 2007 4:56 AM
Fred The Shred received a massive pay rise
http://business.scotsman.com/index.cfm?id=597182007
http://thescotsman.scotsman.com/business.cfm?id=416292007
staff typically have received less than 2%
RBS have come down heavily on staff to force them to move their personal
banks to one of their group accounts:
http://news.bbc.co.uk/1/hi/business/6482979.stm
I work at one division, retail services, and staff are already receiving disciplinary notices for failing to take up a "YourBank" account. One of the things that particularly annoys people is that incurring an unauthorized overdraft is considered a disciplinary offence, which is a private matter and should be nothing to do with one's employer!

Update of April 9, 2007: In a study of the just-obtained 2006 mortgage lending data, ICP & Fair Finance Watch have identified disparities by race and ethnicity in the higher-cost lending of some of the nation's largest banks. 2006 is the third year in which the data distinguishes which loans are higher cost, over the federally-defined rate spread of three percent over the yield on Treasury securities of comparable duration on first lien loans, five percent on subordinate liens. Among other findings, nationwide at Royal Bank of Scotland's Charter One Bank unit, African Americans were confined to higher cost loans over the rate spread 1.49 times more frequently than whites.

Update of December 11, 2006: Last week, on Wednesday, Royal Bank of Scotland's Sir Fred (the Shred) Goodwin told reporters that RBS' Citizens does not lend to subprime borrowers. "We don't do sub-prime lending which puts us in an advantageous position,'' Goodwin said. But RBS' Greenwich Capital Markets enables other companies which engage in not only subprime, but also predatory lending...

Update of October 9, 2006: In Federal court in Brooklyn, NY, Judge Charles P. Sifton in Brooklyn has  denied motions to dismiss money laundering for terror  charges against RBS' NatWest...For or with more information, contact us.

Update of July 17, 2006: Royal Bank of Scotland is under investigation after an expose of one of its customers who committed suicide, heavily in debt.  Richard Cullen, a 65-year-old mechanic from Wiltshire, killed himself after building up debts of 130,000 pounds on credit cards. Cullen owed the Royal Bank of Scotland (RBS) more than 35,000 pounds through four different cards, despite having an annual income of just 15,000 pounds. In November 2004, two weeks after he was chased for arrears on his Mint card, which is operated by RBS, the credit limit on his Tesco Personal Finance card, also run by RBS, was increased by 1,000 pounds to 7,700 pounds. In January last year he was found dead in his garage after inhaling exhaust fumes...

Update of May 22, 2006: on March 24, 2006, subprime lender NovaStar simultaneously announced the purchase of a $940 million pool of payment option adjustable rate mortgages, and plans to structure its first securitization of the year as an on-balance sheet transaction. The $1.35 billion on-balance sheet deal closed April 28, led by RBS Greenwich Capital -- enabler of predatory lending... Update of April 10, 2006:  The 2005 Home Mortgage Disclosure Act data, which Inner City Press / Fair Finance Watch received in late March from Royal Bank of Scotland, reveal that, considering all conventional first-lien loans, RBS' US units in 2005 confined African Americans to rate spread loans 3.11 times more frequently than whites. The Federal Reserve has defined higher-cost loans as those loans with annual percentage rates above the rate spread of three percent over the yield on Treasury securities of comparable duration on first lien loans, five percent on subordinate liens. While comprehensive income comparisons will not be possible until the aggregate data is released in September, ICP / Fair Finance Watch has designed an innovative way to consider income correlations, by calculating upper and lower income tranches based on each lenders own customers. Nationwide at RBS's US units for conventional first-lien loans, upper income African Americans were confined to higher cost loans over the rate spread 4.01 times more frequently than whites. Income does not explain the disparities at RBS. More analysis will be forthcoming.  Some previous RBS-Watch reports:

Updated February 13, 2006: Fred the Shred strikes again. Last week RBS disclosed it has closed three of its Charter One bank branches in Ohio and plans to close eight more of them there by the end of March.  There was no Ohio overlap in the underlying deal, so this is pure shredding…

Update of January 17, 2006: RBS Greenwich Capital Markets now supports and enables subprime lending not only in the United States, but also the United Kingdom: it has just helped the UK subprime lender U.K.-based financial services firm Cattles plc to raise funds via a $118 million private placement. Cattles’ Shopacheck unit pitches high-cost loans and then collects on them weekly over the doorstep.  And what standards does RBS Greenwich Capital Markets use to review the subprime lenders it enables?  Few in the U.S., and none in the U.K., apparently…

Update of January 9, 2006: Royal Bank of Scotland, which is moving to dismiss litigation against it for allegedly providing financial services to terrorist organizations, has something of a history of doing business with groups designated as terrorists.  In the wake of the 9/11/01 attacks, it emerged that RBS’ Citizens Bank unit had transferred money for Al-Barakaat, which even RBS later acknowledged to the Federal Reserve “appears to have provided funds to Al-Qaeda.” RBS’ defense was that its wire transfers had been to the United Arab Emirates which “was not at the time of the wire (or today) in the high-risk for anti-money laundering category.”

            It also emerged that up to and after 9/11/01, Royal Bank of Scotland’s NatWest unit was a correspondent bank for Banke Millie Afghan Kabul, a nationalized company of the Islamic State of Afghanistan. Banke Millie was among seven corporations blacklisted by the United Nations in April 2000 as part of a sanctions regime against the Taliban. RBS’ NatWest, however, continued to be listed as a correspondent for Banke Millie long after the UN designation. While RBS’ chairman Sir Fred Goodwin characterized the issue, then raised by Inner City Press, as “nonsense,” even the Federal Reserve grilled RBS about it. A Federal Reserve memo obtained by Inner City Press reflects that

“Reserve Bank and Board staff called Greg Lyons, counsel for Citizens, to ask him to provide the following information in writing to the Reserve Bank: (1) an explanation of RBS's relationship with Afghan organizations, (2) a description of RBS's due diligence process regarding banks for which RBS offers correspondent services, and (3) a list of RBS's correspondent banks. Mr. Lyons agreed to provide a written response to our request. Staff also requested that a copy of the written response be provided to Inner City Press.”

  RBS withheld its list of correspondent banks. RBS was subsequently hit with the highest fine issued by the UK Financial Services Authority, for lack of anti-money laundering controls. The FSA's December 17, 2002, press release stated that its

“investigation revealed weaknesses in RBS's anti-money laundering controls across its retail network. The investigation found that RBS failed either to obtain sufficient 'know your customer' ("KYC") documentation adequately to establish customer identity, or to retain such documentation, in an unacceptable number of new accounts opened across its retail network.”

      Despite this history, RBS spokesman Mike Keohane has stated that that the issues raised against RBS have “no merit,” and RBS is arguing that it cannot be sued in the United States, despite its ownership of Citizens Bank in the Northeast, Charter One Bank in the Midwest, and RBS Greenwich Capital Markets, which does business nation- (and world-) wide, including with high-cost mortgage lenders.  The current case is 05-CV- 4622, before Judge Charles Sifton of in the U.S. District Court for the Eastern District of New York in Brooklyn, brought by plaintiffs including Tzvi Weiss, regarding RBS NatWest Account Number 140-00-08537933, for Interpal.  RBS has told Judge Sifton it will file a motion on January 26 seeking dismissal of the case, in which the plaintiffs are seeking treble damages.

Update of January 3, 2006: At a conference of the Chinese National Audit Office in Beijing between Christmas and New Years in China, it was announced that the “illegal abuse of 290 billion yuan during the first 11months of 2005” has been uncovered, leading to promises by the Audit Office to investigate Bank of China. Royal Bank of Scotland announced in August that it would invest in Bank of China as the leading investor in a deal that saw RBS and its partners take a 10 percent stake in the Chinese bank.  Under the deal, RBS’ Sir Shred Goodwin is slated take a seat on the board Bank of China, now under double-investigation (including for allegedly money laundering for North Korea).

Update of December 19, 2005: Inner City Press / Fair Finance Watch commented last week to the FDIC, opposing the agency’s proposal to like the OCC preempt state consumer laws. ICP used as its example of problematic FDIC-supervised lenders RBS’ Citizens Bank(s), and Citizens Mortgage Corp. (which in Pennsylvania in 2004 confined African Americans four times more frequently than whites to higher cost loans over the federally defined rate spread of 3% over comparable Treasury securities on first liens, 5% on subordinate liens)…

Update of December 5, 2005, from the mailbag:

Subject: Royal Bank of Scotland/Citizens Bank
Sent: Sat, 3 Dec 2005 12:55:07 -0500

From: Name withheld [see below]
To: RBS-Watch [at] innercitypress.org
  Thought you might be interested in recent developments at Citizens Bank/Charter One, the US arm of Royal Bank of Scotland. It's been kept very quiet, except for the Providence, Boston and Buffalo newspapers, but Citizens /Charter One has been laying off "colleagues" for the past week - to the tune of 250 to 300 people in Cleveland alone. I should know, because after 16+ years, I'm one of the affected "colleagues". I'm curious as to why nothing has been in the news here in Cleveland, since they promised a year ago to keep jobs in the Cleveland area when Citizens acquired Charter One. Articles have been in the Providence (RI) Journal the Wednesday before Thanksgiving… You have my email address, but I would prefer not to give my name, since I have to work there for another 2 weeks. My exit date, along with most of the other "Notified Colleagues" is December 16th...merry Christmas to us...

            Like the RBS ads put it, “Less talk, more action” – in this case, lay-offs / shredding…

Update of September 19, 2005:  When the going gets tough, the Royal Bank of Scotland gets... running. While Connecticut officials congratulated themselves on RBS’ move to Stamford from New York (even putting a number on it -- 550 Royal Bank of Scotland jobs will be leaving New York), no New York official said anything. Even in the week of the fourth anniversary of 9/11/01...

Update of September 12, 2005:  RBS was in full denial mode last week after reports that its target the Bank of China is under investigation for laundering money from North Korea's counterfeiting, drugs and weapons deals. RBS last month proposed to acquire a 5% stake in Bank of China, “in spite of concerns over human rights and corporate governance policies in the Far East giant,” at the Scottish press put it. The Herald quoted an RBS spokesman that “it certainly doesn't change our position there at all. It is yet to be understood what the scale of it is, and to establish the level of concern." The report emerged in the WSJ, which said that US authorities were investigating three Chinese banks - Bank of China, as well as Banco Delta Asia and Seng Heng Bank, both of which are based in the former Portuguese enclave of Macau. The report claimed that the banks were under scrutiny for possible connections to North Korea's illegal fund-raising network, which many believe finances Pyongyang's nuclear program. What will Zen-man Larry Fish have to say? Fred the Shred is slated to take a seat on the board of China's second largest bank...

Update of July 25, 2005:  Following up, a unit of RBS’ Citizens Bank agreed on July 22 to pay a $3 million fine to resolve a civil complaint over variable annuities sales to elderly customers and the unit's failure to keep e-mails sought by investigators. The RBS Citizens unit failed to keep e-mails detailing agents' sales pitches to elderly customers...

Update of July 18, 2005: Royal Bank of Scotland’s Citizens Financial Services Inc.'s policies in the sale of variable annuities to the elderly in Massachusetts is being investigated by the Securities and Exchange Commission, as reported by the Boston Globe on July 14. Massachusetts' Secretary of the Commonwealth William Galvin said in a press release Thursday, that it brought a complaint in February against the brokerage unit of Citizens Bank, CCO Investment Services Corp., alleging dishonest conduct in annuity sales and failure to supervise agents. That case continues. RBS Citizens told the Boston Globe it is cooperating with Galvin's office. We’ll see...

Update of May 31, 2005: RBS’ strange messages(s) -- in the midwest, Charter One (which retained its name in Ohio, Illinois, Michigan, and Indiana after the acquisition) offers free checking, but it has stopped advertising it in its midwestern markets.  Why is RBS spending to plaster its name across LaGuardia Airport and Penn Station in New York if it is not even renaming the banks that it buys? What are these advertisements marketing? The concept of decisiveness?

Update of May 23, 2005: In another reflection of RBS’ total lack of standards, American Business Financial Services Inc. has now converted its Chapter 11 liquidation to a Chapter 7 after defaulting on its $500 million post-petition loan. Chief Judge Mary Walrath in U.S. Bankruptcy Court for the District of Delaware in Wilmington signed the conversion order on May 17. RBS unit Greenwich Capital Financial Products gave ABFS three business days' notice that it planned to act on the default of its debtor-in-possession loan, filings show. That deadline was due to expire on May 18, and the convert motion was signed without a hearing. Greenwich Capital has the right under its DIP to demand full payment on the amount outstanding along with interest and expenses and $15.75 million in fees. ABFI could now be forced to quickly sell off its remaining assets before all of its cash runs out.  This, is who RBS does business with, while claiming to not be involved in the field of subprime lending (and still refusing to provide its 2004 mortgage data). For shame... For or with more information, contact us.

Update of May 2, 2005:  From the Sunday Times of London of May 1, by Dominc Rushe, consider this: “Inner City Press, a New York-based pressure group, has now written to Spitzer asking him to widen his investigation to include Royal Bank of Scotland. Spitzer’s investigation centers on the controversial “sub-prime” lending market, in which personal loans, credit cards and mortgages are offered at high interest rates to those who are unable to get credit from mainstream lenders...A spokesman for Royal Bank of Scotland said it was not involved in lending to individuals in this market and ‘therefore by definition is not involved’ in the investigation.” But RBS’ lending to  and enabling of some of the worst predatory lenders is itself actionable -- time will tell.

Update of April 25, 2005: Royal Bank of Scotland and its Citizens Bank units have yet to respond to FFW’s request for their 2004 mortgage lending data. Meanwhile, RBS Greenwich Capital’s relationship with bankrupt subprime lender ABFI was reported on again by Dow Jones, on April 18, “American Business Fincl Creditors Ask To Sue Lenders... Secured lenders maneuvered early in the Chapter 11 case to recoup what they were owed. American Business Financial paid down its secured debt from the proceeds of the sales of mortgage loans it had in inventory, and from new bankruptcy borrowing. The Chrysalis $250 million loan carried about $44 million in lender fees, and about 90% of the money for the loan came from a Royal Bank of Scotland (RBS.LN) affiliate known as Greenwich Capital Financial Products Inc. Greenwich Capital also led the debtor-in-possession financing for American Business Financial's brief, failed effort to get back into business earlier this year.”  .  

Update of April 4, 2005: This week it’s logistic. On February 28, ICP Fair Finance Watch made a formal request for Royal Bank of Scotland’s / Citizens’ and Charter One’s   2004 mortgage lending data; the data by regulation must be provided “by March 31 for a request received on or before March 1.” Numerous other institutions began provided ICP with their data as early as March 4, usually in a single .DAT file, allowing analysis of holding company-wide patterns all at one time. But as of April 3, RBS had not provided any data. ICP has complained to the Federal Reserve. Click here to view the first of ICP’s studies; RBS will be in a future study, watch this space.

Update of March 21, 2005: The U.S. Senate’s report last week on Pinochet’s funds identifies accounts at among others Coutts & Co. (USA) while it was owned by the Royal Bank of Scotland. This didn’t appear in Fred the Shred’s phone-it-in interview with the WSJ, in which he called the critical press his friend, which seems dubious in light of RBS’ more recent sue-the-press approach...

Update of February 21, 2005:  Royal Bank of Scotland’s Greenwich Capital continues pushing the predatory envelope - in the bankruptcy proceeding of subprime lender ABFI last week, Chief Judge Mary Walrath of the U.S. Bankruptcy Court for the District of Delaware in Wilmington expressed outrage at RBS Greenwich’s Debtor-in-Possession loan with its the 3% commitment fee. That percentage would result in a $15 million payday for Greenwich Capital Financial Products, even if ABFI never drew down the full $500 million.  RBS also proposed that the commitment fee would rise to 3.5% in the case of default.  By contrast, the average commitment fee was $836,792 for the trailing 12 months ended Feb. 9, according to BankruptcyInsider.com, based on a sample of 12 DIP loans. The largest commitment fee in that group was for $4.5 million. Even as modified, the fees -- and RBS -- remain predatory...

Update of February 14, 2005:  Predatory but any other name... Massachusetts securities regulators last week charged the brokerage unit of RBS’ Citizens Financial Group with civil fraud and "unethical and dishonest conduct" in promoting the sales of variable annuities to elderly bank customers. In it administrative complaint, the Massachusetts Securities Division said employees at a Citizens Bank branch referred its depositors to stockbrokers at Citizens Financial's brokerage unit, which sold them variable annuities. Tellers at the bank earned compensation on a point system for making the referrals, the state said -- then switched elderly clients from safe, government-insured certificates of deposit into unsuitable-and higher-risk-investments. Secretary of the Commonwealth William Galvin said RBS could have "systemic" problems... Could?

Update of February 7, 2005:  Reporting on the bankruptcy of subprime lender American Business Financial last week, Dow Jones’ Christine Richard noted that ICP “petitioned the Federal Reserve last summer to make public a full list of RBS Greenwich's subprime lending affiliates when the bank was seeking to acquire Charter One Financial. RBS Greenwich relented, releasing a list of around thirty entities, including Aames Capital Corp., which is being investigated for predatory lending. Clearwing Capital, the entity involved with American Business Financial, also was on the list. Greenwich didn't return calls seeking comment on its relationship with Clearwing.”  The list was of the subprime lenders that RBS Greenwich Capital Markets lent to; RBS’ July 9, 2004, letter to the Fed claimed that

“Greenwich Capital has in place due diligence standards appropriate to its role as securitizer and warehouse provider... [T]he review often includes a compliance review to determine if the originator is complying with existing federal and state fair lending and consumer protection laws and regulations... If results of such a review were unsatisfactory, Greenwich Capital would review its relationship from both a credit and reputational perspective.”

But RBS Greenwich Capital has recently lent to ABFI despite its widely-reported (and readily-apparent) problems, and predatory ripping-off not only of borrowers, but also of its smaller unsecured investors...

  In other RBS news, following the announcement of Riggs Bank’s flawed plea bargain on January 27, the Federal Reserve and OCC announced cease-and-desist orders with Banco de Chile, for holding and concealing accounts for Augusto Pinochet.  Also reported to have been holding Pinochet accounts are Royal Bank of Scotland’s (and now Santander's) Coutts & Co. Int'l USA unit, as reported among other places in the newspaper Clarin...

Update of January 31, 2005: RBS’ questionable involvement in the lower depths of the subprime lending field through its Greenwich Capital units have continued.  Most recently, RBS Greenwich Capital is forging deeper links with the subpoenaed subprimer American Business Financial Services (ABFI), extending nearly half a billion dollars in debtor-in-possession funding. Those who were conned into buying ABFI’s unsecured debt, which was hawked from a boiler room-like phone bank inside ABFI, stand to be left out. [Dow Jones' Christine Richard has been reporting best on this.] The DIP financing will pay off ABFI’s previously lenders, including, it seems, units affiliated with RBS Greenwich Capital Management.  Fred the Shred has been suing of late those who question RBS’ new headquarters. This is just predatory lending, the growing skeleton in RBS’ (now larger) closet.... Meanwhile, it is rumored that Sir Tom McKillop, currently heading pharma’s AstraZeneca, may replace Sir George Mathewson as chair of RBS.  If so, Sir Tom should look in Fred’s subprime closets. And bring from AstraZeneca plenty of Crestor, Iressa and Exanta..

Update of January 18, 2005:  RBS’ scandals include, as we’ve noted, consumer gouging and fees. In Parliament last week, an MP representing Glasgow Anniesland identified RBS as "despicable" for "effectively levying a tax on the poor" via its disproportionate locating of fee-charging cash machines in poorer areas. Royal Bank of Scotland - in the guise of Hanco - is charging people £1.50 and more for withdrawals in the poorest areas. RBS should be "brought to brook" and rules imposed on ATM charges, particularly in poorer areas, the MP said. "In the rich part of the constituency there isn't a problem. They will not put in ATMs in these areas because these people can afford to travel and go to the free ATMS." Commons leader Peter Hain replied: "We are all concerned about this problem, especially as it affects poorer people who may not have the necessary transport to get to a bank and draw out money free of charge, especially older people or those without cars or on low incomes. It's a very serious matter which the minister will want to look at carefully." We’ll see...

Update of January 10, 2005: Rumors of a mega-merger were swirling last week: Royal Bank of Scotland reportedly eyed ABN-Amro, mostly for its operations in the U.S. Midwest (which could lead to massive cost-cutting for Fred the Shred, folding in the ex-Charter One).

Update of January 3, 2005: In continuing Enron fall-out, the report by Neil Batson, the examiner appointed by the Bankruptcy Court, has concluded that Royal Bank of Scotland was fully aware of Enron's accountancy juggling concerning the Teesside plant. Batson’s report to the court concludes that "RBS aided and abetted certain Enron officers in breaching their fiduciary duties". The report names four RBS executives: Iain Robertson, currently chairman of corporate banking and financial markets (CBFM) and a board member of RBS; Johnny Cameron, chief executive of CBFM; Tom Hardy, head of project and export finance; and Iain Houston, director of structured finance, stating that they were among those involved in the deal.

Update of November 29, 2004: Much ado about nothing -- RBS last week made much of imposing its logo on Citizens Bank, and imposing Citizens Bank’s colors, but not its name, on Charter One in the Midwest... Of this, the Boston Globe’s Sasha Talcott reported that “Citizens, in fact, is so good at market ing itself as a local bank that even many of its longtime customers have no idea its parent is based abroad. "The Royal Bank of Scotland? Maybe there's a big Scottish community here, and there will be a bank catering to them,’ said Jeremy Siew, a Watertown artist who has been a Citizens customer for about five years. ‘I don't know about the 'Royal' part. Maybe that's branding.’”   Yeah -- royalist branding that works really well in the United States, just check out Royal Bank of Canada’s experience in the U.S....

Update of October 18, 2004:  Among Royal Bank of Scotland’s effects in the United States has been to formalize the discussion between human right standards and regulatory review.  RBS is cited in the Federal Reserve’s Oct. 15 order, which reports that ICP

expressed concern that BNP’s involvement in financing certain foreign projects or its business relationships with energy companies doing business in a foreign country damaged the environment, caused additional social harm, or raised other unspecified concerns. These contentions contain no allegation of illegality or action that would affect the safety and soundness of the institutions involved in the proposal and are outside the limited statutory factors that the Board is authorized to consider when reviewing an application under the BHC Act. See, e.g., The Royal Bank of Scotland Group plc, 90 Federal Bulletin 87, 88 n.16 (2004)...

Ah, Royal Bank of Scotland...

Update of October 4, 2004:  London’s Daily Mail of Oct. 2 “confirmed that Charles 'Bud' Koch has joined [RBS’] board as a non-executive director, following the Scots' GBP 5.8bn takeover of Ohio-based Charter One bank this year. The bid brought Koch a GBP 55m windfall on his personal shareholding. The GBP 1m-a-year boss and four other directors bagged a total of nearly GBP 300m from shares and options in the deal.”

Update of September 20, 2004:  RBS Citizens’ sleaze is about employment raids as well as lending: In a court settlement dated Aug. 17 in New York State Supreme Court, Citizens Bank and Gaspo have agreed to pay KeyBank nearly $60,000. The settlement, reached before Judge Norman W. Seiter Jr., also prohibits Citizens from contacting or doing business with more than 60 KeyBank customers until November 1...

Update of September 13, 2004: A follow-up to last week’s report on RBS’ stealth moves for preemption: now they’ve applied to create and acquire a new national bank in Connecticut. The Federal Reserve’s H2A includes an application for “RBS National Bank, Bridgeport, Connecticut, a de novo bank”...

Update of September 6, 2004 -- Annals of preemption: ICP's review of the list of applications pending before the FDIC finds a series of applications including Charter One Bank, National Association and Citizens' FDIC-supervised state banks in PA, MA, CT, etc.. Apparently RBS' Citizens is moving toward an OCC charter and preemption of all states' consumer protection laws, something for which HSBC, Morgan Chase and other have been criticized. But as usually with RBS Citizens, it's being done stealthly -- sneakily, one might even say... Like the 900 layoffs, 400 of them in Cleveland, another 400 in Rochester, and 75 in Albany. Great effect on New York, no? In Cleveland, RBS Citizens hit-man Hollister is claiming that mayor Jane Campbell "misunderstood" him, about the full scope of layoffs. BofA in Boston gets skewered for such miscommunications; RBS Citizens dodges the bullet -- for now...

Update of August 30, 2004: RBS has publicly announced at least Last week, 800 layoffs across Charter One's operations, half in Rochester -- meanwhile it has sought positive press in Albany, for putting its NYS headquarters there. That'd be the old Albank, confessed discriminator in lending: shoes that RBS can fit into quite comfortably...

Update of August 23, 2004: After receiving Fed approval, in an order whose footnotes sketch the breadth of RBS’ scandals, now the move’s on to layoff at least 100 Charter One employees in Cleveland, where according to Dow Jones, "Mayor Jane Campbell said Thomas Hollister, the new chief executive of Charter One's Midwest region, told her Thursday that about 100 people would lose their jobs in Cleveland. Hollister would not confirm how many jobs are being eliminated, but said most of the reductions will be in management and technology... Citizens said Thursday it will keep the Charter One name for about 450 branches in the Midwest. That means customers won't have to worry about new checks, account numbers or ATM cards. Charter One's 160 East Coast branches will change to the Citizens name. 'It is unusual for large banks to operate two names,' said banking analyst Fred Cummings of KeyBanc Capital Markets in Cleveland."

  But slick RBS Citizens wants to dodge the lay-off bullets that BofA is facing...

Update of August 9, 2004: not unlike a vulture, Royal Bank of Scotland has another proposed acquisition in the U.S., of Lynk Systems, a "merchant acquiring business," for $525 million. The announcement came days after Fred The Shred Goodwin said that RBS' U.S. operation is focusing on completing the $10.5 billion acquisition of Charter One Financial that was signed in May. He said RBS would make no large U.S. deals soon, adding that after buying some of Mellon Financial's U.S. operations, it took the bank about 9 months to start seriously looking for another deal. RBS Chairman George Mathewson -- who's also a director of Santander, at least for now -- whined that barriers to cross-border deals still exist. "Most of the barriers are still there - the unions, political and cultural barriers are all still in place, so we can't kid ourselves that a cross-border deal is around the corner"... Yeah, basic antitrust: what a cultural barrier...

Update of August 2, 2004: What a joke -- on July 29, Charter One and RBS announced a settlement of the shareholders' class-action lawsuits (which they’d previously denounced as meritless). RBS has agreed to waive its rights to any termination fees in excess of $375 million under the merger agreement. This has become a ritualized game: banks setting absurdly high break-up fees to ward off other bidders, then agreeing to drop them (and pay other fees) later in the process, once no other bidder would step forward. The substantive problem -- the target’s board of directors dissuading any other bidders by including a crippling break-up fee in their initial proposed sell-off deal (in this case, netting Charter One’s executive parachutes that a platinum) -- is not solved. This is not good governance: it’s an abuse, and RBS is a main player in it...

Update of July 26, 2004: Charter One shareholders will vote on August 23; before that, comments are due on July 30 to regulators in Massachusetts [ICP met the deadline.]

Update of July 19, 2004: We've now received, from Royal Bank of Scotland’s Citizens Bank, is a response to this Federal Reserve question: "With respect to your June 23, 2004 submission... please indicate whether Citizens Mortgage Corporation reports the loans generated in a correspondent capacity under the Home Mortgage Disclosure Act." This is an issue which ICP raised when, after the comment period closed, RBS Citizens off-handedly disclosed convoluted partnerships that it has with a number of questionable subprime lenders. RBS Citizens' July 9 answer -- well, the "public portion" of its answer -- to the above-quoted Fed question runs as follows: "CMC does not report any subprime loans that it originates in a correspondent capacity under the [HMDA]... CMC does not review the application for, or making the credit decision on, any such mortgage loan; rather, these actions are performed exclusively by the unaffiliated investor that underwrites the mortgage loan and to which CMC eventually sells the mortgage loan in the secondary market."

  So let's get this straight: a person is at RBS Citizens for a mortgage, and is shunted to an "unaffiliated" subprime lender, yet somehow RBS Citizens still appears to make the loan, to the extent of later selling it to the same unaffiliated subprime lender, now called an investor. This convoluted structure, ICP contends, does not comply with HMDA or ECOA, and also calls into question many of RBS Citizens' claims about its lending record.

Update of July 12, 2004: Better late than never, we suppose: after Inner City Press requested under FOIA the withheld portions of Royal Bank of Scotland’s list of funded subprime lenders, the Fed asked RBS to "reconsider" its withholding. Lo and behold on July 9, a longer version arrived, this time listing the following subprime lenders with which RBS does business:

Saxon Mortgage, Inc.; Aames Capital Corp.; Ameriquest Mortgage Company; Argent Mortgage Company; Asset-Backed Funding Corp; BofA, CDC Mortgage Capital; Centex Home Equity Company; CitiFinancial Mortgage Company; Clearwing Capital LLC; Credit Based Asset Servicing and Securitization, LLC; Delta Financial Corporation; Equifirst; Equity One, Inc.; Finance America, LLC; First Franklin; GMAC; Green Tree Investment Holdings II, LLC; Long Beach Acceptance Corporation; Long Beach Mortgage Company; NovaStar Financial, Inc., Option One Mortgage Corporation; Countrywide Correspondent Lending, Fremont Investment & Loan; Washington Mutual Bank; Residential Funding Corporation, Truman Capital Investment Fund LP, etc... We've put in a supplemental comment, and are preparing another.

Update of July 5, 2004: from Reuters of July 1, regarding Royal Bank of Scotland's Greenwich Capital Markets: " As part of an effort to diversify its bond business, RBS Greenwich Capital Markets is set to raid the ranks of Banc One Capital Markets, a unit of Bank One Corp... Sources said at least four Banc One professionals are expected to join RBS Greenwich Capital within the next two weeks. The bankers are said to include specialists in the rapidly growing asset-backed securities market, where bond deals are backed by consumer finance debt such as credit card debt. RBS Greenwich is best known on Wall Street as a specialist in bonds backed by real estate mortgage debt. It is expected to try to expand its reach into other asset-backed types like credit card debt and auto loans. Higher U.S. interest rates are expected to slow mortgage lending and this, in turn, is expected to slow the issuance of bonds backed by home loans and home equity debt. Sources told Reuters that Dan McGarvey, a credit card debt banker at Banc One, as well as Jeff Orr, a banker specializing in collateralized debt obligations and auto loan debt, have been hired by RBS Greenwich Capital. They are both expected to report to David Duzyk, who was hired recently by RBS to increase the firm's presence in non- mortgage debt underwriting. Others hired by RBS Greenwich from what was once Bank One's asset-backed business include two asset-backed bond traders, Bob Pucel and Don Chaney. A spokesman for RBS Greenwich would not confirm or deny the new hires. Calls to the four Banc One professionals were not returned. Asset-backed bonds are securities that pool regular payments made by consumers each month on debt like student loans, auto loans and credit card debt. These bonds are purchased by mutual funds, central banks and insurance companies. The process of repackaging this debt followed Wall Street's practice of reselling U.S. residential mortgage debt into securities and has grown dramatically in the last decade. Wall Street firms with a strong presence in mortgage and asset-backed bond markets were able to weather the downturn in equity underwriting in recent years. RBS Greenwich Capital is the fixed income unit of Royal Bank of Scotland Group Plc. In the first six months of this year, RBS Greenwich Capital was the No. 8 manager of asset-backed bonds, having managed $28.5 billion of bond issues, according to Thomson Financial."  

Update of June 28, 2004: ICP submitted initial comments on May 10, before RBS even submitted its application, detailing RBS's Greenwich Capital Markets' enabling of numerous subprime lenders, including Aames (which is being investigated by the FTC for predatory lending), analyzing HMDA data, and noting Citizens Mortgage Corporation's agreements with the subprime lenders Option One, Key / Champion and Freemont Investment & Loan.

  RBS did not respond on these issues prior June 17: the expiration of the comment period. On June 23 -- after the expiration of the initial comment period -- RBS responded to FRB questions of June 14, including about subprime lending issues. The FRB's Question #2 asked RBS to

"Discuss whether RBS, Citizens Financial, Charter One, or any of their direct or indirect subsidiaries have business relationships, including referral relationships, with any subprime lenders (for example, as warehouse lender, trustee, custodian, securities underwriter, or in any other financial capacity)... If so, identify the relevant parties and describe the nature of the relationships... Describe the due diligence concerning each lender's compliance with applicable fair lending laws that RBS, Citizens Financial, or Charter One typically conduct before and after extended a loan of providing a credit facility to such a lender."

  RBS has asked for confidential treatment for virtually all substantive portions of its response -- entirely inappropriately. ICP has identified from public sources many of RBS' subprime relationships; there is no basis for withholding information that is otherwise publicly available. ICP has submitted into the record Citizens Mortgage Corporation's referral agreements with at least three subprime lenders (Option One, Key/Champion, and Fremont). Does RBS' cynical request for confidential treatment for even the identities of its subprime "partners" mean that there are more such referral relationships?

  Beyond withholding the names of its subprime "partners," RBS' explanation of the relationships is unclear. It claims that CMC "delivers the application to either an unaffiliated investor or unaffiliated lender;" then RBS states that "CMC processes mortgage applications and funds and closes mortgage loans in CMC's name.. then sells the closed mortgage loans to the unaffiliated investors." Which is it? In this latter scenario, do these subprime loans get reported in CMC's HMDA data? What is CMC's compensation in these subprime arrangements? All of these questions need to be explored, including at the hearings ICP has timely requested. Clearly, these questions are not being resolved in writing -- by RBS' choice and strategy. And, so far, with the Fed's complicity. ICP has asked for the withheld subprime information, and that the comment period be reopened. We'll see. 

Update of June 21, 2004: Recently at Pennsylvania Station, it seems that every surface is covered with an annoying ad by Royal Bank of Scotland. "Less talk. More action," and variations thereon. What any of it has to do with banking, we're not sure. A more accurate one, © ICP 2004: "Less cred, more Shred."

Update of June 17, 2004: below is ICP's fourth timely comment; RBS is still resisting responding, even as more community organizations put timely comments in. The comment below among other things quotes at length from Citizens Mortgage Corp.'s agreements with subprime lenders:

June 17, 2004

Board of Governors of the Federal Reserve System
Attn:  Chairman Alan Greenspan, Governors, Secretary Johnson
20th Street and Constitution Avenue, N.W.
Washington, DC 20551

Re: Fourth comment in opposition to the proposal of Royal Bank of Scotland / Citizens Financial Group to acquire Charter One Financial

Dear Chairman Greenspan, Governors, Secretary Johnson, FRB:

   On behalf of Inner City Press/Community on the Move and its members and affiliates, including the Fair Finance Watch (collectively, "ICP"), this is a fourth timely comment opposing, requesting a hearing and extension of the public comment period on the proposal by Royal Bank of Scotland and Citizens Financial and Citizens Bank ("RBS") to acquire Charter One Financial and its affiliates ("Charter One").

ICP submitted initial comments as early as possible in this proceeding, detailing RBS's Greenwich Capital Markets' enabling of numerous subprime lenders, including Aames (which is being investigated by the FTC for predatory lending), analyzing HMDA data, and noting Citizens Mortgage Corporation's agreements with the subprime lenders Option One, Key / Champion and Freemont Investment & Loan. ICP submitted a second comment including an array of consumer complaints against RBS Citizens, some as recent as May 2004.

   Contrary even to the FRB's practice in other recent merger proceeding, the FRB stands ready to let the comment period close without RBS having submitted any substantive response to adverse comments (which ICP filed even before RBS submitted its application), and without the FRB having asked, or had answered, questions about the fair lending, including due diligence before securitizing subprime loans, practices of RBS and its affiliates, including Greenwich Capital Markets. Such questions have been asked in other FRB proceedings this year; most recent, BNP Paribas answered, and listed in the public portion of its response the subprime lenders it does business with. Why has this not happened in this proceeding? The comment period must be extended; on the current record, RBS' application could not legitimately be approved.

   Beyond the RBS Greenwich Capital Markets subprime connections ICP has documented (as securitizer, warehouse lender and so forth), note for the record RBS' Citizens Mortgage Corporation's formal agreements with the subprime lenders Option One, Fremont, and Champion / Key. Attached hereto as Exhibit 1 is an agreement

"by and between Option One Mortgage Corporation ('Option'), and Citizens Mortgage Corp. ('Seller'), with reference to the following facts.

A. Seller intends to originate loans secured by first and second mortgages, deeds of trust or comparable interests ('Security Instruments') in residential real property ('Loans') and desires to sell to Option all of its right, title and interest in certain loans ('Eligible Loans') which meet the criteria of Option's mortgage purchase programs ('Purchase Programs'), including all underwriting and appraisal guidelines ('Underwriting and Appraisal Guidelines')... Seller shall deliver to Option all loan documents required, by the Seller's Guide in connection with Loans submitted for purchase and such other documents and records, consistent with the Underwriting and Appraisal Guidelines, as are deemed necessary or desirable by Option.. Under the funding by Option of the purchase price, Seller shall be deemed to have assigned to Option all of its rights, title and interest in and to the Loan and all monies due and to become due thereunder and all right and remedies of Seller, if any, under the Note and Security Instruments... "

   Also, an even more recent agreement between RBS' CMC (defined in the agreement as the "Broker") and Fremont Investment and Loan (defined in the agreement as the "Lender"), providing that CMC as

"Broker agrees to submit, and Lender agrees to review, applications for Loans. Broker acknowledges and agrees that the decision to make or not make any Loan is made exclusively by Lender in its sole and absolute discretion. Broker shall not represent that Lender has approved or will approve any Loan until Broker is so informed by Lender in writing... Any compensation earned by or otherwise owning to Broker for any services in connection with Broker's services to Borrower pursuant to this Agreement shall be payable only after Broker provides Lender with evidence that Broker has made a full disclosure to the Borrower of the fees to be paid to Broker through the closing and fees paid or to be paid by the Lender to the Broker outside of the closing."

  RBS Citizens has agreements with at least three subprime lenders; the agreements are annexed hereto for timely inclusion in the record.

  Note also, for timely inclusion in the record as an extremely adverse managerial issue, that employees of RBS Natwest indicted in the Enron scandal are about to be extradited back to the United States. See, e.g., " NatWest Bankers Face Extradition Over Enron Allegations," Dow Jones Newswires, June 8, 2004:

NatWest bankers David Bermingham, Gary Mulgrew and Giles Darby are facing extradition hearings in London. They are charged in the U.K. with conspiring to defraud NatWest, now a subsidiary of the Royal Bank of Scotland (RBS.LN), through a limited partnership set up in conjunction with ex-Enron chief financial officer Andrew Fastow, and are alleged to have stolen $7.3 million from the bank, splitting it three ways. A U.K. judge Tuesday set an initial hearing date for the extradition case on June 21. Defense attorney Mark Spragg said Bermingham, Mulgrew and Giles deny the charges and want their case heard in the U.K. "What they object to is being dragged across to the U.S. when they were here, the alleged victims were here and the transaction allegedly occurred here," Spragg told Dow Jones Newswires outside court.
The three NatWest bankers were the first to be charged with Enron-related crimes in June 2002, but weren't arrested until April 23 this year. They were released shortly after their arrest. The timing of the extradition is hinging on two factors: Fastow's plea bargain in U.S. courts earlier this year and a new extradition law, enacted Jan 1, 2004, under which U.S. officials no longer have to produce U.K. courts with prima facie (first impression) evidence of an offense, just a statement of facts about the alleged offense.
This new "fast track" Anglo-American extradition law is also being used to ferry the hook-handed Muslim cleric Abu Hamza al-Masri to the U.S. An extradition lawyer, who has been following the case, said it appeared the U.S. government had delayed the application while it waited for the new law to come into force.
Fastow's plea bargain hinges on a private partnership called LJM - the initials of his wife and two children's first names - which was allegedly set up as a kind of private equity fund inside of Enron to buy assets and secure them with Enron and other companies' stock.
Credit Suisse First Boston Corp. (CSF.YY) and NatWest were investors in a subsidiary of LJM, called Swap Sub. But when Fastow, his close aide Michael Kopper and the NatWest bankers unwound the enterprise in Feb. 2000, they allegedly kept $19 million owed to NatWest and split it between them. The defense's strategy will be submitted to the judge next week, but at the pre-trial hearing Tuesday glimpses of their strategy were evident.
"We'd like to consider this case in stages, there are issues about the passage of time and human rights," James Hines, a lawyer on the defense team told the judge. "Why after all these months were they not charged here in the U.K?" he said. Once the judge makes a decision, the Home Secretary reviews the case, but can only reject an extradition recommendation if the defendant's face the death penalty or are likely to face an entirely different set of charges in the U.S.

  The comment period should be extended during the process, and as further facts emerge.

  There is more to be said - ICP will be submitting further comments (while still awaiting a substantive response by RBS to the issues raised, and copies of the FRB's Additional Information letter(s) to RBS).   ICP reiterates its request for a public hearings, and that, on the current record, RBS Citizens' applications be denied.

   If you have any questions, please immediately telephone the undersigned, at (718) 716-3540.

Respectfully submitted,

Matthew Lee, Esq., Executive Director, Inner City Press / Fair Finance Watch

To be continued; developing... For or with more information, contact us.

Update of June 14, 2004: The Fed finally asked Royal Bank of Scotland some questions; ICP on June 10 received by fax a copy of RBS' June 7 response. The questions were soft-balls: "describe due diligence performed," proposed "systems integration," and two purportedly confidential questions. Then again, these are (only) the questions of the Boston Reserve Bank. The Board, if they are even moderately consistent with other recent proceedings, will ask more and better questions. The June 17 closing of the comment period should be extended... See also, the Buffalo News of June 13, 2004. For or with more information, contact us.

Update of June 7, 2004: ICP has submitted a third comment, summarized below. See also, "RBS 'Excludes and Denies' Black Americans," by Conal Walsh, The Observer (London), June 6, 2004:

June 7, 2004

Board of Governors of the Federal Reserve System
Attn:  Chairman Alan Greenspan, Governors, Secretary Johnson
20th Street and Constitution Avenue, N.W.
Washington, DC 20551

Re: Third comment in opposition to the proposal of Royal Bank of Scotland / Citizens Financial Group to acquire Charter One Financial

Dear Chairman Greenspan, Governors, Secretary Johnson, FRB:

   On behalf of Inner City Press/Community on the Move and its members and affiliates, including the Fair Finance Watch (collectively, "ICP"), this is a third timely comment opposing, requesting a hearing on and copy of all applications related to the proposal by Royal Bank of Scotland and Citizens Financial and Citizens Bank ("RBS") to acquire Charter One Financial and its affiliates ("Charter One").

ICP submitted an initial comment as early as possible in this proceeding, detailing RBS's Greenwich Capital Markets' enabling of numerous subprime lenders, including Aames (which is being investigated by the FTC for predatory lending), analyzing HMDA data, and noting Citizens Mortgage Corporation's agreements with the subprime lenders Option One, Key / Champion and Freemont Investment & Loan. ICP submitted a second comment including an array of consumer complaints against RBS Citizens, some as recent as May 2004.

RBS has yet to substantively respond to the issues ICP has timely raised. The initial comment deadline, June 17, should be extended. In the interim, hereinbelow ICP provides some additional analysis of Charter One Bank's lending, and annexes hereto as evidence two sample Uniform Commercial Code filings, evidencing RBS' Greenwich Capital Markets' funding of Aames, and of the subprime lender NovaStar. The former is being investigated for predatory lending by the FTC; regarding the latter, see the Las Vegas Review-Journal of Feb. 26, 2004, "Mortgage Lenders Dealt Fines," reporting on NovaStar getting fined and being subject to a cease and desist order for "unauthorized mortgage broker activity." A detailed inquiry into RBS' Greenwich Capital Markets' standards (or lack thereof) for enabling subprime lenders is needed, at the public hearings ICP has timely requested.

RBS is apparently unable or unwilling to respond on issues not only about Citizens' lending, but also about Charter One's lending. Here is the detail in a sample MSA:

In the Buffalo MSA in 2002, Charter One Bank made 1143 conventional home purchase loans to whites, and only 15 to Latinos and only 48 to African Americans. Meanwhile, Charter One Bank denied African Americans' applications 9.91 times more frequently than whites. This is much worse than other lenders.

RBS' lackadaisical customer service, and refusal to address problems even after they are raised, are systemic within the RBS holding company. See, e.g., "NatWest forced to eat humble pie over euro error: Sunday Telegraph uncovers exchange rate blunder after bank ignored complaint," SUNDAY TELEGRAPH(LONDON), May 30, 2004:

The fault went unnoticed for almost five months, despite at least one customer writing twice to NatWest to inform it of the problem. Michael Walshaw wrote to the bank to point out that the euro exchange rate appeared to be wrong. According to his statement, the exchange rate had jumped from 1.43 to 1.39 in the space of a day, a change of almost 3 per cent. As he pointed out, a movement of this scale, even over the space of a weekend, would cause anxiety on the financial markets.
But the bank failed to address his concerns. In a written response, NatWest said: "I can assure you these rates were correct, and the rates used to process your transactions can be trusted."
Following the intervention of The Sunday Telegraph last week, NatWest - which is owned by the Royal Bank of Scotland - finally admitted it had made the mistake. A spokeswoman said: "We apologize for the inconvenience. We do have robust systems and processes in place, but it appears that they did not work as we would have liked in this instance." The bank is now writing to all customers who have been overcharged with a pledge that they will get a refund. The bank refused to disclose the size of the transactions involved although it is one of the biggest card issuers in Great Britain...Anna Bowes, a financial adviser with Chase de Vere, was alarmed at how long the error went unnoticed. "This sort of error happens all the time, probably more frequently than we think. What is particularly alarming is that it took so long for the problem to be rectified. Even when a customer highlighted the discrepancy nothing was done to investigate."

The complaints ICP has submitted reflect this as well: even in those instances in which customers highlighted problems, RBS Citizens did very little, and the problems remain ongoing. ICP reiterates its request for hearing - including on further developments reflecting RBS' lack of anti-money laundering / trade sanctions compliance controls. See, e.g., the New York Times of June 6, 2004, " Lockboxes, Iraqi Loot And a Trail To the Fed," by Timothy O'Brien:

WHEN a United States Army sergeant broke through a false wall in a small building in Baghdad on a Friday afternoon a little over a year ago, he discovered more than three dozen sealed boxes containing about $160 million in neatly bundled $100 bills. Later that day, soldiers found more cash in other hideaways near the Tigris River, in an exclusive neighborhood that elite members of Saddam Hussein's government once called home. By the end of the evening, they had amassed 164 metal boxes, all riveted shut, that held about $650 million in shrink-wrapped greenbacks.... The investigation led quickly to the vaults of four Western banks that were among a select group handling the sensitive task of distributing freshly printed dollars overseas: the Bank of America, the HSBC Group, the Royal Bank of Scotland and UBS. ... After American forces in Iraq discovered an additional $112 million in hidden cash, on top of the $650 million they had already found, the Fed's cashiers tracked it to the same vaults and to a Fed vault at HSBC in Frankfurt, a Royal Bank of Scotland vault in London and to other locations the Fed has not disclosed. (Emphasis added).

  Particularly given RBS Citizens previously detailed involvement with Al Barakaat (unaddressed in RBS' May 28 submission), it is imperative that this matter be fully explored and disclosed, including at the public hearings ICP has timely requested.

  There is more to be said - ICP will be submitting further comments (while still awaiting a substantive response by RBS to the issues raised, and copies of the FRB's Additional Information letter(s) to RBS).   ICP reiterates its request for a public hearings, and that, on the current record, RBS Citizens' applications be denied.

   If you have any questions, please immediately telephone the undersigned, at (718) 716-3540.

Respectfully submitted,

Matthew Lee, Esq., Executive Director, Inner City Press / Fair Finance Watch

To be continued; developing... For or with more information, contact us.

Update of June 1, 2004: ICP has filed a second comment on RBS Citizens - Charter One:

June 1, 2004

Board of Governors of the Federal Reserve System
Attn:  Chairman Alan Greenspan, Governors, Secretary Johnson
20th Street and Constitution Avenue, N.W.
Washington, DC 20551

Re: Second comment in opposition to the proposal of Royal Bank of Scotland / Citizens Financial Group to acquire Charter One Financial

Dear Chairman Greenspan, Governors, Secretary Johnson, FRB:

   On behalf of Inner City Press/Community on the Move and its members and affiliates, including the Fair Finance Watch (collectively, "ICP"), this is a second timely comment opposing, requesting a hearing on and copy of all applications related to the proposal, announced May 4, by Royal Bank of Scotland and Citizens Financial and Citizens Bank ("RBS") to acquire Charter One Financial and its affiliates ("Charter One").

  ICP's first comment inter alia detailed RBS's Greenwich Capital Markets' enabling of numerous subprime lenders, including Aames, analyzed HMDA data, and noted Citizens Mortgage Corporation's agreements with the subprime lenders Option One, Key / Champion and Freemont Investment & Loan. Regarding the RBS-enabled Aames, note now that in a recent SEC filing, Aames has stated that the Federal Trade Commission is investigating it for predatory lending / servicing. Specifically, "in the SEC filing the company said the FTC made a 'civil investigative demand' of the lender on April 27.. [seeking] documents and data relating to the company's business and lending practices." American Banker, May 25, 2004. This again calls an inquiry into what standards RBS / GCM use, before securitizing for or otherwise enabling subprime lenders. Note also, regarding the RBS CMC partners Option One, Key / Champion and Freemont Investment & Loan, the attached complaints against this company, from two sample states: Massachusetts and Michigan.

  First, however, it is important to note that Citizens is known for weak customer service: long lines, under-trained tellers, repeated (and seemingly systemic, generally anti-consumer) errors. Here are some sample complaints against Citizens Bank of Massachusetts:

"Consumer stated never received a notice of loan decline or a free copy of credit bureau. Bank issued a new letter of decline and a memo to the credit bureaus requesting the free copy for the consumer. Apologized to the consumer from the inconvenience." Complaint # 102746, Page 15 of 70. ICP NOTE: beyond "inconvenience," this was and is a violation of the federal Equal Credit Opportunity Act.

"Bank delayed processing funds deposited by the consumer, which were intended to be used for tuition payment. Consumer was assessed a $300 late fee charged by the university. The Bank stated the delay in processing was due to internal error... Consumer upset that due to the acquisition of Cambridgeport Bank her loan was renamed a 'Home Equity Loan.'" Complaints # 105118, 116, Page 34 of 70.

"Consumer's loan was originated by Cambridgeport bank which was acquired by Citizens. Loan was then sold to Dovenmuehle. Dovenmuehle told the consumer they would have to obtain insurance coverage in the amount of the loan. Citizens spoke with Dovenmuehle, who agreed to honor the original amount of flood insurance coverage." Complaint # 105275, Page 36 of 70.

"Bank withdrew $420 for $20 ATM withdrawal." Complaint # 105551 (May 3, 2004), Page 45 of 70.

"Bank error caused numerous checks to bounce causing fees by payee." Complaint # 105591 (May 4, 2004), Page 44 of 70.

"Consumer complaint pertained to a debit in the amount of $841.29 that was inadvertently debited to consumer's account due to a processing error. Also that overdraft fees were charged as a result of the error. Consumer also complained about the untimely fashion in which the correction was made." Complaint # 104238, Page 62 of 70.

"Consumer complained about Bank's funds availability in regard to a deposit... A teller allegedly gave consumer the wrong information, stating that the funds would be available the next day. Citizens apologized for the alleged mis-statement," etc.. Complaint # 104371, Page 39 of 70.

"Citizens Bank admitted to having failed to credit the above parties' newly opened checking account, due to an internal error, thus causing two checks to be returned as NSF." Complaint # 104411, Page 40 of 70.

"Consumer complained of unauthorized withdrawal on her checking account. Bank explained that it was a mistake on their part regarding a foreign exchange transaction and a new teller. Bank credited account as a goodwill gesture." Complaint # 102205 (Page 4 of 70)

"Consumer's account was closed without her knowledge and a bank teller accepted a deposit on the account. The deposit was rejected by the bank causing the consumer to bounce a check. Bank apologized because the teller should not have accepted the deposits, and paid for the consumer's NSF fee from the payee." Complaint # 102235, Page 5 of 70.

"Consumer unhappy because bank teller did not know what she meant when she wanted to make a payment to her 'cash reserve' account. The account was technically an overdraft line of credit. Bank apologized that teller did not know what customer meant, and it will be addressed in training of bank employees." Complaint # 102868, Page 10 of 70.

"Consumer deposited a check for $500 into his checking account, but the bank only credited him with $400. Bank stated that the problem was the result of an encoding error and credited the consumer's account for the $100 difference." Complaint # 102985, Page 11 of 70.

"Consumer complained that he was asked why he was making a large withdrawal. It's part of their 'customer retention program' and such a practice is governed by bank policy." Complaint # 102596, Page 14 of 70. ICP NOTE: call it Citizens' inappropriate "customer trapping program."

"Consumer complained about way in which daughter was treated as she attempted to cash a check. Bank insisted that teller followed procedure but apologized for teller's inexperience and branch manager's attitude." Complaint # 102128, Page 27 of 70.

"Consumer complained about problems with conversion from USTrust. Bank apologized for service during conversion and that ATM card took so long to deliver." Complaint # 102101, Page 28 of 70.

"Consumer claimed confusing about ATM withdrawal. Bank admitted that withdrawal did not post until 10 days later and apologized for error." Complaint # 102082, Page 28 of 70.

"Consumer was incorrectly charged $400 for an ATM withdrawal that she did not make. Also the Bank lost a $25 direct deposit to her account. Upon an initial complaint to the Bank they investigated the wrong day. Upon receipt of a formal complaint through the DOB the Bank re-investigated the complaint and credited the consumer $425 for the mistakes." Complaint # 101940, Page 32 of 70.

   Citizens Mortgage Corporation has previously disclosed its contracts with the subprime lenders Option One, Key / Champion and Freemont Investment & Loan. Regarding these, note these sample complaints, in Michigan (per Michigan OFIS' May 17, 2004, letter to ICP:

   Option One, 2004: "Misrepresented terms of loan; disputing prepayment penalty; inaccuracies on account history; 2003: wants late fees waived and phone calls to stop; misrepresenting loans terms and price; alleges company sold mortgage back to itself for $17,000 higher than the balance; alleges property was quick claim deeded to someone without consumers knowledge; consumer alleging company is forcing him into foreclosure; 2002: company will not provide payoff amount; Western Union payment not credited, company did not repair credit; 2001: alleged fraud; forced-placed insurance.

  Re Champion Mortgage Co.: "Failure to pay lease, order of judgment entered."

  Re Fremont Investment & Loan: 2002: "Consumer complaining about high interest rates and prepayment penalty; consumer claims that were told at closing they could refinance in 6 months; possible fraud, unlicensed activity."

  It must be asked, by the FRB: what standards does RBS have, before securitizing for such subprime lenders as Aames, before partnering with such subprime lenders as Option One, Key / Champion and Freemont Investment & Loan? Apparently none....

  ICP reiterates its request for a public hearings, and that, on the current record, RBS Citizens' applications be denied.

   If you have any questions, please immediately telephone the undersigned, at (718) 716-3540.

Respectfully submitted,

Matthew Lee, Esq., Executive Director, Inner City Press / Fair Finance Watch

To be continued; developing... For or with more information, contact us.

* * *

OPPOSITION TO ROYAL BANK OF SCOTLAND'S / CITIZENS BANKS' PROPOSAL TO ACQUIRE CHARTER ONE FINANCIAL, INCLUDING REQUEST FOR PUBLIC HEARINGS, SUBMITTED AT THE EARLIEST POSSIBLE TIME BY INNER CITY PRESS / FAIR FINANCE WATCH

MAY 10, 2004

   On behalf of Inner City Press/Community on the Move and its members and affiliates, including the Fair Finance Watch (collectively, "ICP"), this is a comment at the earliest possible time opposing, requesting public hearings on and copies of all applications related to the proposal, announced by the Royal Bank of Scotland and its Citizens Banks ("RBS") on May 4, 2004, to acquire Charter One Financial and its affiliates ("Charter One").

   In this initial submission, in support of these requests, ICP sets forth troubling disparities in RBS Citizens' and Charter One's lending in the most recent year for which data is publicly available, as well as showing that RBS, through its Greenwich Capital Markets, enables problematic subprime lenders, and that RBS Citizens has partnerships with often-problematic subprime lenders including Option One, Key/Champion and Fremont Investment and Loan. It is imperative that your agency require RBS to fully disclose the specifics of its relationships with subprime lenders, as well as how its projected cost cuts -- one thousand "gross" lay-offs, according to RBS' chairman Fred "the Shred" Goodwin -- would be accomplished, and with what impacts on the convenience and needs of the communities to be served. See, e.g., the Times of London of May 6, 2004, "Fred the Shred Knows a Bargain," regarding RBS' "NatWest Bank acquisition, which looked like a bargain only after 'Fred the Shred' had demonstrated quite how much fat there was to be carved out of the bank." But what RBS views as "fat" ends up including services of import to low- and moderate-income communities. See, e.g., "Nearly Half of Port Jobs Gone After Citizens Buy," Boston Business Journal of October 20, 2003, reporting "That's one of the concerns [ICP] had," said [the] executive director of the New York-based financial services watchdog group Inner City Press.... [Citizens' spokeswoman Melodie] Jackson disputed [ICP]'s contention that fears of job cutting were being realized. 'We communicated from the outset that there would be layoffs,' Jackson said." (ICP's initial opposition was reported in the (London) Guardian of June 3, 2003).

  Here, RBS has projected cutting over 20% of Charter One's costs. All impacts of this proposal should be inquired into and disclosed, including at the public hearings ICP is requesting.

   Under this proposal, what is currently a relatively straight-forward bank, headquartered in Cleveland, would come to be owned by a company the stock of which does not trade in the United States, which makes far fewer, if any, disclosures in the U.S. -- a company that has only recently settled charges of money laundering, and which demonstrates around the global a lack of social and environmental standards. RBS' proposal -- net or "gross," in RBS' chairman's phrase -- portends badly for low- and moderate-income communities and consumers. ICP is requesting public hearings, and that on the current record, your agency deny RBS' applications.

RBS' CITIZENS BANKS CONTINUE TO DISPROPORTIONATELY EXCLUDE AND DENY AFRICAN AMERICANS' AND LATINOS' APPLICATIONS FOR MORTGAGE LOANS

   A review of the most recent publicly-available Home Mortgage Disclosure Act ("HMDA") data finds ongoing and worsening disparities in the lending records of Citizens Banks of Pennsylvania ("CBPA"), in Delaware ("CBDE"), and elsewhere: Massachusetts ("CBMA"), Rhode Island ("CBRI") and Connecticut -- both when considered separately, and when cumulated with Citizens Mortgage Co. ("CMC").

   These disparities are systemic within RBS' Citizens Financial Group: for example in the Philadelphia Metropolitan Statistical Area ("MSA") in 2002, CBPA received 15 applications from African Americans for conventional home purchase loans, and denied 14 of them (a 93.3% denial rate). Meanwhile, CBPA received 37 such applications from whites in this MSA, resulting in 15 denials (40.5% denial rate), and 13 originated loans.

Citizens and its parent RBS have tried to shrug off Citizens Banks' growing disparities by pointing to the data reported by Citizens Mortgage Company, which is analyzed below. But it is important to note that Citizens and RBS -- only after the issue was raised, by ICP and then the Federal Reserve -- have acknowledged that CMC has referral relationships with at least three higher-cost subprime lenders: Option One, Fremont Investment & Loan, and the Keycorp unit formerly known as Champion Mortgage (with its television ads, "when your bank says no, Champion says yes"). Citizens Mortgage Corporation, by it own admission, does business with, and therefore has its data intertwined with, these companies.

   Nevertheless, even when Citizens Mortgage Corp.'s data is added to Citizens Banks', the picture is not pretty. For example, in the Philadelphia MSA in 2002, CBPA combined with CMC (this cumulation is referred to below as "Citizens") denied the conventional home purchase applications of African Americans 2.85 times more frequently than whites. For refinance loans in the Philadelphia MSA, Citizens Mortgage Corp. denied the applications of Latinos 7.69 times more frequently than whites'.

  Pittsburgh is CBPA's headquarters MSA; in this MSA for refinance loans in 2002, Citizens Mortgage Corp. denied the applications of African Americans 3.57 times more frequently than whites.

   Wilmington is Citizens Bank (Delaware)'s headquarters MSA; in this MSA for refinance loans in 2002, Citizens Mortgage Corp. denied the applications of African Americans 6.41 times more frequently than whites.

  In the Boston MSA in 2002, CBMA received 17 applications from African Americans for conventional home purchase loans, and denied 10 of them (a 58.8% denial rate). CBMA received seven such applications from Latinos and denied five of them (71.4%). Meanwhile, CBMA received 120 such applications from whites in this Boston MSA, resulting in 31 denials (25.8% denial rate), and 79 originated loans.

  In the Providence, Rhode Island MSA in 2002, Citizens Bank of Rhode Island ("CBRI") denied all seven applications for conventional home purchase loans that it received from Latinos. But even cumulated with CMC, the combined Citizens in Providence in 2002 denied the conventional home purchase applications Latinos 2.44 times more frequently than whites, and denied the applications of African Americans 3.18 times more frequently than whites.

  Providence is RBS' Citizens' headquarters MSA, in which Citizens has a near 30% market share of race-specified home improvement loans. For this product in which Citizens has an anti-competitive market share, Citizens in 2002 denied 81 percent of applications from African Americans -- worse that its 2001 denial rate of 73.5%, and much higher than its 2002 denial rate for whites, of 43.4%.

  In the York, Pennsylvania MSA in 2002, Citizens Bank of Pennsylvania had a 100% denial rate for home improvement loan applications from African Americans, and a 100% denial rate for home improvement loan applications from Latinos. Its denial rate for whites was 27.9%. In this same MSA, Citizens Bank of Pennsylvania had a 100% denial rate for refinance applications from Latinos.

  In the Erie PA MSA in 2002, Citizens Bank of Pennsylvania had a 80% denial rate for home improvement loan applications from African Americans, and made no home improvement loans to Latinos. Its denial rate for whites was 34.3%. In this same MSA, Citizens Bank of Pennsylvania had a 75% denial rate for refinance applications from Latinos.

   Citizens and its parent RBS have already conceded some of the disparities in Citizens' 2002 lending record, for example that Citizens' denial rate disparity for African Americans in Rhode Island is higher than the aggregate, and that its percentage of loans in low- or moderate-income tracts was lower than the aggregate; that its denial rate disparity for Latinos in Connecticut is higher than the aggregate, and, again, that its percentage of loans in low- or moderate-income tracts was lower than the aggregate. These concessions are apparent in date-tables that RBS has put forth, including to ICP, and which will presumably be presented again in updated form by RBS in this proceeding.

   Citizens and RBS have acknowledged inter alia that in Massachusetts, Citizens HMDA denial rate for African Americans climbed from 42.5% in 2001 to 44.5% in 2002, while for whites it fell, from 23.9% in 2001 to 19.9% in 2002. For small business lending, RBS' number of loans in low income census tracts fell, for example in Rhode Island from 111 in 2001 to 83 in 2002, while its loans in upper income tracts rose from 350 in 2001 to 431 in 2002, according to data RBS supplied to the FRB.

  To address in advance certain defenses / obfuscations that RBS has raised elsewhere: a table RBS/Citizens submitted on Oct. 14, 2003, showed CBMA trailing the aggregate, 16.3% to 20.5%, in 2002 -- worse than 2001 -- and in fact worse than any of the years compared, going back to 1996. The data reflect that Citizens is become more, and not less, disparate.

   ICP is also reviewing Charter One's 2002 record, and finds for example that in the Detroit MSA in 2002, for conventional home purchase loans, Charter One Bank denied African Americans' applications 4.37 times more frequently than whites, and denied Latinos' applications 7.57 times more frequently than whites. This is much worse than other lenders: the denial rate disparities for the industry as a whole (the "aggregate") in this MSA in 2002 were 1.84 for African Americans, and 1.78 for Latinos. Charter One's much higher denial rate disparities are not explained by any greater-than-normal outreach with normal-priced credit to African Americans or Latinos. In the Detroit MSA in 2002, Charter One made 1942 conventional home purchase loans to whites, and only 15 to Latinos and only 102 to African Americans. Within these three groups, 5.0% of Charter One's loans were to African Americans (and 0.7% were to Latinos). All lenders made 6375 such loans to African Americans, 688 to Latinos, and 47,930 to whites in this MSA in 2002. For these three groups, the industry aggregate made 11.6% of its loans to African Americans, and 1.3% to Latinos. For Charter One, with its denial rate disparities, the figures were much lower: only 5.0% of loans to African Americans, and 0.7% to Latinos.

  These presumptively discriminatory patterns exists in other communities served by Charter One. In the Cleveland MSA in 2002, Charter One Bank denied the conventional home purchase applications of African-Americans 3.38 times more frequently than whites, and denied the applications of Latinos 3.86 times more frequently than whites. Using the methodology set forth above, only 4.7% of Charter One Bank's conventional home purchase loans were to African Americans, versus 9.0% for the aggregate. In the Canton, Ohio MSA, for conventional home purchase loans in 2002, Charter One Bank denied the applications of African Americans 3.45 times more frequently than whites. In the Chicago MSA in 2002, Charter One Bank denied the conventional home purchase applications of African-Americans 2.44 times more frequently than whites, and denied the applications of Latinos 2.63 times more frequently than whites. Using the methodology set forth above, only 4.7% of Charter One Bank's conventional home purchase loans were to African Americans, versus 9.0% for the aggregate.

In the New York City MSA, Charter One Bank in 2004 made 74 conventional home purchase loans to whites and only four to African Americans -- 18.5 loans to whites for every loan to an African American, while the aggregate made 5.24 loans to whites for every loan to an African American.

Throughout New York State, Charter One Bank's lending is disparate. In the Buffalo MSA for conventional home purchase loans in 2002, Charter One Bank denied the applications of African Americans 9.91 times more frequently than whites.

In the Rochester, New York MSA in 2002, for conventional home purchase loans Charter One Bank denied African Americans' applications 6.27 times more frequently than whites, and denied Latinos' applications 2.06 times more frequently than whites. This is worse than other lenders: the denial rate disparities for aggregate in this MSA in 2002 were 2.60 for African Americans, and 1.99 for Latinos. In the Syracuse MSA, Charter One Bank in 2004 made 295 conventional home purchase loans to whites and only five to African Americans -- 59 loans to whites for every loan to an African American, while the aggregate made 50.32 loans to whites for every loan to an African American.

  In the Albany, New York MSA in 2002, for conventional home purchase loans Charter One Bank denied African Americans' applications 7.9 times more frequently than whites, and denied Latinos' applications 3.15 times more frequently than whites. This is much worse than other lenders: the denial rate disparities for aggregate in this MSA in 2002 were 2.27 for African Americans, and 1.92 for Latinos.

   RBS, given its record, would only make this worse. In fact, it appears that Charter One may still be involved in subprime lender, only calling it "non-prime" or "near-prime." See, e.g., Mortgage Banking magazine of June 1, 2002, regarding "Charter One Financial Corporation's decision to incorporate its 'near-prime' mortgage-lending unit into Charter One Bank, Cleveland." See also, "The Bank of Jim Crow - Critics say Charter One is the poster child for the industry's ugliest practice," Cleveland Scene, August 16, 2001, noting issues ICP has previously raised concerning Charter One, and the bank's response thereto. RBS, given its record, would make these things worse.

RBS' AND CITIZENS BANKS' AFFILIATE, GREENWICH CAPITAL MARKETS, APPEARS TO HAVE NO STANDARDS FOR THE BUSINESS IT DOES WITH SUBPRIME LENDERS: RBS' CITIZENS IS AN ENABLER OF PREDATORY LENDING

   In the United States, RBS owns not only Citizens Bank(s), but also Greenwich Capital Markets ("GCM"), which among other things provides warehouse loans, mortgage-backed securities underwriting and other services to subprime (high interest rate) lenders throughout the U.S.. The controversy surrounding certain subprime lenders has been growing, in Congress and various state houses. RBS and GCM, however, continue blithely along with no standards for this business. For example, according to the Asset Securitization Report of March 15, 2004, "AmeriQuest Mortgage completed a $1.3 billion series 2004-R2 deal via... RBS Greenwich Capital Markets. Meritage Mortgage, a lending unit of Alpharetta, Ga.-based and Internet-based bank NetBank, completed its $646 million series 2004-2 deal via RBS Greenwich." Business Wire of June 4, 2003, reflects that RBS' Greenwich Capital Markets is lead manager for a securitization of subprime loans made by Delta Funding Corporation, a New York-based company sued as a predatory lender, and regarding which many in New York remain dubious and deeply concerned. A month prior, Business Wire of May 14, 2003, had controversial subprime lender Aames Financial Corporation announcing that "on April 25, 2003, the Company executed a commitment letter with Greenwich Capital Financial Products, Inc. ('Greenwich'), pursuant to which Greenwich agreed to provide the Company with a financing facility of up to $82.9 million secured by certain of the Company's residual interests and servicing advances..." (emphasis added). The public record is replete with adverse information about both Delta Funding and Aames. Beyond warehouse lending, GCM's past securitizations have included Delta Funding 2001-1 ($141 million); First Franklin Mortgage Loan Trust 2001-1 ($246 million); Long Beach Mortgage Loan Trust 2001-1 ($725 million); Soundview Home Equity Loan Trust 2001-1; and Aames Mortgage Trust 2001-1 ($150 million).

  To this list, add Capstead and, another low, Ocwen Financial, recently (2004) admonished by the Office of Thrift Supervision. We've asked, what are RBS's and Greenwich Capital Markets' standards? In response, RBS has claimed that "the scope of Greenwich's due diligence review of an originator depends on the nature of the transaction, but may include... a compliance review." May... ICP had pointed out that GCM underwrites for Delta Funding, which settled predatory lending charges with Federal and state authorities; RBS responded that the settlement is old, or "stale." But RBS' GCM underwrote for Delta during the time-frame for which Delta was sued: see, e.g., Business Wire of November 12, 1999 Delta Funding Sells $700 Million of Asset-Backed Securities," naming "Greenwich Capital Markets, Inc.". We ask: what are RBS's and Greenwich Capital Markets' standards? Apparently none.

  The Asset Securitization Report of June 9, 2003 stated that Option One is "in the market with a $1.2 billion 2003-4 offering via... RBS Greenwich Capital priced its triple-A A2s, with a 2.86-year average life at 32 basis points over one-month Libor and its straight triple-B M5 class at 375 basis points over one-month Libor." What we'd like to ask, at this time and at the hearing we're requesting, is what standards are in place not only at Greenwich Capital Markets (our answer is "none") but also at Citizens Mortgage Corporation itself. CMC partners with Option One -- a subprime lender which, after concerns were raised by ICP and other consumer groups, withdrew its application to the OTS for a savings bank charter.

  RBS has admitted that CMC does other business with Option One -- ICP will submit into the record a copy of the agreement and contract. Here is an indication of Option One's updated record, in 2002:

In the New York City MSA in 2002, for conventional home purchase loans, Option One reported 120 loans to African Americans, 154 loans to Latinos, and 188 loans to whites. Among these three groups, 26.0% of Option One's high-cost loans were to African Americans and 33.3% were to Latinos. The figures for the aggregate industry in 2000 were 13.87% and 13.47%, respectively. The "targeting index" for Option One was 1.87 for African Americans and 2.47 for Latinos. For refinance loans in the NYC MSA in 2000, Option One reported 409 loans to African Americans, 217 loans to Latinos, and 556 loans to whites. Among these three groups, 34.6% of Option One's high-cost loans were to African Americans and 18.4% were to Latinos -- in both cases significantly higher than the industry aggregate, indicating a targeting of protected classes with high-cost loans.

In the Los Angeles MSA in 2002, for conventional home purchase loans, Option One reported 91 loans to African Americans, 185 loans to Latinos, and 139 loans to whites. Among these three groups, 21.9% of Option One's high-cost loans were to African Americans and 44.6% were to Latinos. The figures for the aggregate industry in 2002 were 7.4% and 31.6%, respectively. The "targeting index" for Option One was 2.95 for African Americans --indicating a targeting of protected classes with high-cost loans.

  And this is a lender with which RBS's Citizens Mortgage Corp. does business (ICP notes and makes part of the record that Option One applied for a thrift charter, but then was multiply-opposed and withdrew its application, which it has yet to renew).

  RBS' Greenwich Capital Markets has become a central player in opposing consumer protection laws regarding predatory lending. See, e.g., Asset Securitization Report of November 17, 2003, "Greenwich says no to N.J. mortgages:"

Last week, RBS Greenwich Capital announced that it will not purchase or provide financing for high-cost, covered, manufactured housing, or certain refinance loans originated in New Jersey on or after Nov. 27 unless the state's soon-to-be implemented anti-predatory lending law is amended.... A report from Greenwich said that the New Jersey Home Ownership Security Act works the same way as the Georgia anti-predatory lending law that in it gives assignee liability relating to certain classes of mortgage loans. In other words, innocent buyers as well as assignees of certain loans may be held liable for all claims and defenses that borrowers could assert against the original lender, broker or any other relevant party, according to Greenwich. But New Jersey's measure is different from most anti-predatory legislation in that it extends to home loans that are originated, assigned or arranged by a seller of manufactured homes or home improvements. And since the term "home improvements" is not really defined under the new law, cash-out refinance loans would probably be covered....
Peter DiMartino from RBS Greenwich describes the market's reaction in the following way: "We believe that when the New Jersey act goes into effect later this month, the mortgage market will respond much as it did a year ago with respect to the Georgia act," he commented, adding that considering the importance of securitization, market participants will have to follow S&P's more rigid stance.
"We have already heard that some originators intend to stop originating loans in New Jersey," said DiMartino. "Such a market reaction likely will cause New Jersey to amend the New Jersey Act eventually, but there are no assurances that this will occur."

   RBS' Greenwich Capital Markets also pulled out of Georgia, when that state's residents enacted anti-predatory lending legislation: see, Asset Securitization Report of January 27, 2003, reporting that RBS' Greenwich Capital Markets was "said to have ceased conduit-lending activity to mortgage lenders who continue to originate loans that fall under GFLA guidelines."

   Royal Bank of Scotland attempting to affect and undermine consumer protection legislation enacted by duly elected legislatures is, to put it diplomatically, distasteful. RBS is a major player in, and one of the major creators of, the dual credit system -- not only via CMC's agreements with at least three subprime lenders, but also via RBS' Greenwich Capital Market's enabling of questionable subprime lenders. Beyond the above, see e.g., the May 6, 2003, Underwriting Agreement related to the Greenwich Capital Markets (and Asset Backed Funding Corp.) - underwritten and sold ASSET BK FDG CORP ABFC CER SER 03 AHL1, and other public documents regarding AHL (Accredited Home Lenders). Here is a sampling of Accredited's 2002 record: in the New York City MSA in 2002, for conventional home purchase loans, Accredited Home Lenders reported 37 loans to African Americans, 20 loans to Latinos, and 41 loans to whites. Among these three groups, 37.8% of Option One's high-cost loans were to African Americans and 20.4% were to Latinos. The figures for the aggregate industry in 2000 were 13.87% and 13.47%, respectively. The "targeting index" for Accredited was 2.72 for African Americans and 1.51 for Latinos. This is to say: while Citizens disproportionately denies and excludes African Americans and Latinos from normal interest rate credit, its mortgage company does business with, and its investment bank GCM enables and underwrites for, questionable subprime lenders who target these same groups with high-cost, often abusive credit. RBS's applications should be denied.

  RBS' Greenwich Capital Markets also securitizes, without standards, subprime auto loans. See, e.g., Asset Securitization Report of July 28, 2003: "Subprime lender Franklin Auto filed an amended shelf registration with the SEC to offer up to $1.2 billion of auto ABS. Franklin has historically securitized via RBS Greenwich Capital. " And, GCM enables questionable subprime mortgage lenders in ways beyond securitization -- for example, via warehouse lines, see, e.g., American Banker of November 5, 2003, reporting that ResMAE Financial Corp,. founded last year by three former executives of Long Beach Mortgage Co. (which Washington Mutual Inc. acquired in 1999), "has about $400 million of warehouse lines -- from... Royal Bank of Scotland's RBS Greenwich Capital." See, also., Asset Securitization Report of August 11, 2003: "Homestar Mortgage of Paramus, N.J. is planning its first term securitization, tentatively scheduled for early in the fourth quarter, a company official confirmed. The inaugural offering, backed by Alt-A collateral, will be roughly $200 million in size... Homestar is setting up a $300 million warehousing facility for liquidity between its term securitizations. The privately held company hopes to eventually become a quarterly Alt-A MBS issuer... The pending $300 million single-seller warehousing facility will be in addition to the three-facility syndicate Homestar currently has outstanding with.. RBS Greenwich."

   RBS Citizens' previous responses about its Greenwich Capital Markets, the major securitizer of controversial subprime mortgage loans alleged to be predatory, are vague and evasive, refusing to address, for example, why Greenwich was underwriting for a lender (Delta) during the same time frame for which its was subject to a governmental enforcement action for predatory lending. Similarly, RBS Citizens has refused to address the specifics of the subprime lenders to which CMC refers consumers. Rather than attempt to explain this, or specify any increased safeguards after this break-down in due diligence, Citizens refers to its work with the Bond Marketing Association (which lobbies against accountability for underwriters of predatory loans) and with Rep. Ney (who proposed preempting all state consumer protection laws). ICP's comments are not directed at Citizens' lobbying efforts, but rather at RBS/Citizens' Greenwich Capital Markets ongoing, demonstrable lack of standards in enabling (and CMC's ongoing referrals to) specific lenders alleged to be -- and in some cases settling charges of being -- predatory lenders. Similarly, on the human right issues raised, Citizen evades, and rather cites to a Dow Jones index largely concerning the environment (rather than any standards for RBS' enabling in, for example, Indonesia, and most recently an oil pipeline, in contravention its supposed commitment to the Equator Principles - see below).

RBS' CITIZENS BANK(S) HAVE A HISTORY OF SERVICE REDUCTIONS AND OTHER ADVERSE IMPACTS ON LOCAL ECONOMIES

  It is imperative that your agency require RBS to fully disclose how its projected cost cuts -- one thousand "gross" lay-offs, according to RBS' chairman Fred "the Shred" Goodwin -- would be accomplished, and with what impacts on the convenience and needs of the communities to be served. See, e.g., the Times of London of May 6, 2004, "Fred the Shred Knows a Bargain," regarding RBS' "NatWest Bank acquisition, which looked like a bargain only after 'Fred the Shred' had demonstrated quite how much fat there was to be carved out of the bank." As sketched below, what RBS views as "fat" includes services of import to low- and moderate-income communities.

  For the record, in 2002, RBS' Citizens Bank of Massachusetts acquired Medford Savings Bank and its 19 branches. Of these 19 branches, RBS / Citizens subsequently closed over 30 percent. See, e.g., the Boston Herald of February 7, 2003, "Citizens pruning"

Citizens Bank of Massachusetts will close six suburban Boston branches next week as it consolidates its retail outlets after buying Medford Savings Bank operations last year. Branches to be closed are two in Malden, and one each in Arlington, Burlington, Somerville and Waltham.

  In this light, it is imperative that RBS / Citizen disclose all with their applications, and at the requesting public hearing, all proposed cost cuts and their possible impacts. RBS / Citizens has a strategy of seeking to withhold such information. See, e.g., the (Harrisburg, PA) Patriot-News of October 1, 2002, regarding Citizens' post-Mellon in-market acquisition of Commonwealth:

There will be some branch closings because of overlap with Citizens offices, though it was too soon to determine how many layoffs would take place, said Stephen D. Steinour, chairman and chief executive officer of Citizens Bank of Pennsylvania. "We're not in a position to share with our very early thinking," Steinour said.

   But RBS / Citizens knew it would close branches, and, it seems, which ones -- by early January, it announced five (four) closings. See, e.g., the Reading (PA) Eagle of January 3, 2003, quoting Citizens Bank first vice president Sylvia Bronner that "[t]he bank will close a total of five branches." Later, in connection with Roxborough-Manayunk Bank, it closed yet more branches in Pennsylvania; see, http://www.pabulletin.com/secure/data/vol34/34-2/53.html

   Also in support of its request for public hearings, ICP notes RBS' global consumer abuse, in selling and also in refusing to pay on, "payment protection" insurance -- that is, credit insurance, of a type that is increasingly controversial in the U.S. and elsewhere. See, e.g., "Royal Bank Shamed on Card Cover," The Express of April 21, 2004:

Royal Bank of Scotland (RBS) refused to pay off the debts of a credit-card customer permanently paralyzed in a riding accident, even though she had paid for expensive insurance from the lender. The bank - which yesterday backed down after pressure from the Daily Express - tried to use a complicated loophole in the terms of its insurance to get out of paying the debt, even though the customer remains in hospital with a broken neck. The case is the latest in a series of scandals over payment protection insurance which consumer groups have repeatedly criticized as expensive and riddled with confusing small print.
John Wilson, 59, encouraged his wife, local government officer Sally, to switch her credit card account to RBS's newly launched Mint in January after adverts for an interest free offer on the plastic. "My wife transferred an initial balance of GBP 253, then used the card to buy a car costing GBP 3,000, " said John, who runs a racehorse transporting business.
After this spending, plus some other minor purchases, Sally owed GBP 3,843 on March 3 when she broke her neck and damaged her spinal cord in a horse-riding accident. As Sally, 49, had chosen to pay extra to take out payment protection insurance with the Mint card John assumed RBS would wipe the outstanding balance on her account following the accident. "Once I started trying to sort things out after the initial shock I called Mint to find out how to go about making a claim, " he said. "The woman I spoke to said there should not be a problem and sent me a claim form. I filled it in and asked my wife's doctor and employer to fill in the relevant parts, but some time later I received a letter from RBS saying her claim had been refused."
The lender refused to pay the claim because its policy's small print said borrowers would be covered only for the balance showing on their previous statement. As Sally had begun spending on her Mint card only in February she was totally uncovered, despite being charged GBP 29 for the insurance that month. John, who drives 100 miles from the couple's home in Lough, Lincolnshire, to visit Sally every day, said: "I could not believe RBS was refusing to pay up for this reason when my wife was lying paralyzed in hospital. "I have worked out the exclusion after reading the terms and conditions over and over again, but the wording is ridiculously difficult to understand and I feel completely conned." Consumer advisers believe payment protection insurance is generally overpriced and often mis-sold to borrowers.

See also, "A Cross-Sell Too Far?" in Financial Services Distribution of February 26, 2004:

We have said from time to time that UK banks could face another mis- selling scandal from aggressive marketing of poor-value credit insurance on loans and credit cards.
Now the Mail on Sunday has reported that two-thirds of borrowers from Lombard Direct, part of Royal Bank of Scotland group, buy its credit insurance and 60 percent of their premiums go straight to Lombard as commission.
The paper claims that "in 2001 and 2002, Lombard customers were persuaded to spend #85 million on cover. Of this, #53 million was commission for Lombard and about #10 million went to Lombard's insurance partner, Pinnacle. A mere #3 million was paid in claims. "Richard Mason, of MoneySuper-market.com, was quoted as saying that "similar cover can be bought direct from insurers for about a quarter of the price". So, nice business for the banks, but perhaps a little difficult to justify if the FSA starts investigating.

  Nor does RBS treat its employees well or fairly. See, e.g., the Scottish Daily Record of April 30, 2004, "THAT'S A BIT RICH; ROYAL BANK STAFF PROTEST AT PAY OFFER AS BOSSES REVEAL POUNDS 350M BILL FOR HQ"--

Furious bank staff yesterday accused their megabucks bosses of a pay scandal. They held a protest at the Royal Bank of Scotland's AGM over what they say is a below-inflation rise for many workers.
The outcry came as the Edinburgh firm who have recently posted record profits of more than pounds 6 billion announced the bill for their new head- quarters will top pounds 350 million.
Financial union Unifi said 25,000 of RBS's 120,000 workers had been offered a rise below the increase in the cost of living.
And they slammed chief executive Fred Goodwin's pounds 4 million-plus pay packet while 5000 staff will get no rise at all.

  It is also important that the record in this proceeding include the allegations of race discrimination at Citizens that were reported in the Boston Globe of October 3, 2003. For the record:

A Mexican-American woman's discrimination case against Citizens Financial Group in a trial this week provides a rare look inside what her attorney calls a "predominantly white" financial company.
In a case before the Massachusetts Commissi