Royal Bank's US arm faces allegations of race discrimination

A Royal Bank of Scotland subsidiary is being accused by a US campaigning group of refusing loans to people on racial grounds.

There are also claims it has done business with US rivals accused of predatory lending.

The Inner City Press/Community On The Move group, a non-governmental organisation, cited these reasons for its challenge to stop Citizens, a Royal Bank subsidiary, taking over Port Financial in Massachusetts.

The organisation has filed its challenge to the takeover with the Federal Reserve boards in Washington and Boston and with Britain's financial services authority, the City regulator.

The pressure group's Fair Finance Watch project will also oppose any Royal Bank moves to take over Norisbank in Germany.

The organisation claimed that Citizens "disproportionately deny and exclude credit applications from people of colour [African Americans and Latinos]".

It also said that Royal Bank's investment banking arm, Greenwich Capital Markets, was involved in lending and underwriting to "questionable subprime lenders". Royal Bank of Scotland would not comment yesterday.

"Given the disparities in Citizens bank's mortgage lending record and Royal Bank of Scotland's lack of human rights and anti-money laundering standards we are opposed to RBS's continued expansion," said Matthew Lee, executive director of Fair Finance Watch.

Royal Bank has fended off such accusations in the past and is thought to have a high rating under the US community reinvestment act, which was set up in the late 1970s and requires banks to make capital available to low income areas.