INVESTORS in Royal Bank of Scotland have voted overwhelmingly in favour of allowing the institution to buy back shares held by the UK Government – despite long-standing critic Neil Mitchell branding the move as “abhorrent”.

The bank convened a general meeting in Edinburgh to seek authorisation from investors to make off-market purchases of shares held by the Treasury.

Speaking before the vote, chairman Sir Howard Davies said the directed buyback would be a prudent use of excess capital and boost efforts to return the bank to private ownership.

UK taxpayers remain the majority shareholders in Royal Bank with a 62.3 per cent stake, a legacy of its £45.5 billion bailout at the height of the financial crisis in 2008 and 2009.

However, the plan was heavily criticised by Mr Mitchell, who said it was “abhorrent” for the bank to reduce its capital position while it continues to face potential litigation over its past conduct.

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Mr Mitchell is seeking a judicial review of the decision last year by the Financial Conduct Authority to not take action against senior management at the bank over the treatment of small and medium-sized businesses (SMEs) by its Global Restructuring Group (GRG). He noted that his application has now been “superseded by a hearing at the Royal Courts of Justice”.

Mr Mitchell also declared the bank was making the move now because it was “running scared of a General Election and the prospect of a Labour Government”. He pointed out that Shadow Chancellor John McDonnell has said the party would renationalise Royal Bank and turn it into a “development bank for the people”.

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However, a report in Reuters suggested that Labour has cooled on plans to fully nationalise or break up the bank. It quoted Shadow City minister John Reynolds as saying the party foes not have a “policy of day to day control of RBS”.

Responding to Mr Mitchell, Sir Howard said the bank had “carefully considered the issue of future liability” in tabling the resolution. He said the bank had been encouraged by the results of its most recent stress tests, which takes such potential liabilities into account, and said there was a “prudent case” for the buy back.

An overwhelming majority of the voted shares, 98.7 per cent, went in favour resolution. The UK Government did not vote its shares, which meant it was left to the remaining shareholders to decide the fate of the proposal.

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The Government reduced its shareholding to 62.3 per cent in June with the sale of 925 million shares. While the sale raised £2.5 billion it amounted to a loss for taxpayers.

The resolution allows the bank to buy back a maximum of 4.99 per cent of the ordinary share capital from the Treasury in any one year. The bank said this would reduce its Common Equity Tier One ratio by 70 basis points at current market prices.

Sir Howard noted that the bank had a CET1 ratio of 16.7% at the end of the third quarter of 2018, which was “above our medium target of more than 13%”.

Shares in Royal Bank edged up 2.8p, or 1.13 per cent, to 249.8p.