RBS severs ties with makers of cluster bombs

The Royal Bank of Scotland has agreed to pull out of conducting further financial deals with cluster-bomb manufacturers after its investments in the controversial industry were exposed by The Independent and arms campaigners.

In little over two weeks, more than 10,000 people have emailed RBS's chief executive Stephen Hester voicing their dismay that a bank which is almost entirely owned by the taxpayer was continuing to invest the reviled trade – despite a global ban outlawing the use of such weapons.

The campaign was led by Amnesty International which is lobbying the Government to close a legal loophole which allows high-street banks to invest in manufacturers of cluster bombs as long as they don't invest directly in the bombs themselves. Although the investments are not illegal, arms campaigners say they make a mockery of the cluster-bomb treaty which Britain signed up to last year.

The Independent has learnt that RBS will now email those who have written to them stating that the bank will "suspend further services" to any client involved in the manufacture of cluster bombs. "RBS will not knowingly support any application for funding that would lead to contravention of the Oslo Convention on cluster munitions," the email reads. "We will always seek to ensure that we only deal with defence-sector clients whose activities are compliant with both the letter and the spirit of the Convention."

"After discussions with various NGO groups we have identified some defence-sector clients whose activities could be considered to be outside the spirit of the Convention. As a result, we will be suspending all further services to any client where we cannot be certain that they are in compliance with our policy."

RBS last night would not comment on which arms manufacturers were blacklisted, but they are believed to be Alliant Techsystems and Lockheed Martin. The announcement will pile pressure on other British high-street banks such as Barclays, and Lloyds who have also been named and shamed for investing in some or all of the three American cluster bomb manufacturers – Alliant Techsystems, Lockheed Martin and Textron Systems.

Chris Atkins, a London based filmmaker who recently made a film for Amnesty International on cluster bombs, hailed RBS's decision as an example of how consumers can change corporate culture. "If you kick up enough of a fuss you can make a difference," he said.