An investigation by the UK newspaper, the Independent, revealed yesterday that British banks continue to invest in companies that manufacture cluster bombs.

The Royal Bank of Scotland, 83% owned by the tax-payer, reportedly invested over $190 million into two companies alleged to be making cluster munitions – Alliant Techsystems and Lockhead Martin.

HSBC, Barclays and Lloyds TSB are also reported to have made investments into similar companies. Although the banks have subsequently refuted such claims, anti-arms charities have pointed out that the companies concerned are yet to publicly deny the manufacturing of cluster bombs.

Britain has signed up to the Convention on Cluster Munitions, effectively banning cluster bombs. However the banks utilise a legal loop hole that permits investment in companies that manufacture cluster bombs, provided there is no direct investment into the bombs.

Anti-arms charities and Amnesty International have severely condemned such investments and called on the coalition government to close the loophole. This would bring the UK in line with Belgium, Ireland, Luxemburg and New Zealand who have banned the direct or indirect financing of cluster bombs.

Today, the Independent revealed that despite such calls, the government remains in favour of self-regulation.

A spokesperson for No 10 was quoted as saying, "The issue of indirect financing is for individual institutions to consider. We as a government have made it very clear that direct financing of cluster munitions is illegal. We would encourage NGOs to come together and engage with the banks to find a mutually agreeable approach to indirect financing.”

Cluster bombs, notorious for their indiscriminate destruction,  have been employed by the Sri Lankan government over Tamil civilian areas on multiple occasions.

In February 2009, Gordon Weiss, UN spokesperson at the time, condemned a cluster bomb attack on a hospital in Puthukkudiyiruppu. Fifty-two civilians were killed and 80 wounded.

The UN later refuted Sri Lanka’s use of cluster bombs.

Much in the same way it claimed only 8000 civilians were killed, before its own panel of experts supported Gordon Weiss’ estimated death toll of 40,000 Tamil civilians.