Compliance

RBS Fined By UK, US For LIBOR “Failings”, Investigations “Ongoing”

Nick Parmée and Natasha Taghavi, London, 6 February 2013

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Royal Bank of Scotland has been hit with an £87.5 million fine by the FSA over the interbank interest rate rigging scandal, making it the third institution to be penalised as a result of ongoing international investigations.

The UK regulator, the Financial Services Authority, has fined the Royal Bank of Scotland £87.5 million (about $137 million) for misconduct relating to the London Interbank Offered Rate.

Additionally, the bank has agreed to pay $325 million and $150
million to the CFTC and DOJ in the US respectively, to resolve the
investigations, the bank said in a statement today.

In its statement on the issue, the FSA said the UK-taxpayer supported bank’s breaches of the FSA’s requirements encompassed a number of issues, involved a number of RBS employees and occurred over a number of years, according to the regulator’s findings. The individuals involved in the misconduct were located in the UK, Japan, Singapore and the US.

Between January 2006 and November 2010 the misconduct included:

· making Japanese yen and Swiss franc LIBOR submissions that took into account the bank’s derivatives trading positions.

· allowing derivatives traders to act as substitute submitters and make JPY LIBOR submissions that took into account its derivatives trading positions.

· making JPY, SFr and US dollar LIBOR submissions that took into account the profit and loss of its money market trading books.

· RBS derivatives traders colluding with other LIBOR panel banks and interdealer broker firms to influence the JPY LIBOR submissions made by other panel banks, including one derivatives trader entering into “wash trades” (i.e. risk free trades that cancelled each other out and for which there was no legitimate commercial rationale) in order to make corrupt brokerage payments to one broker firm to garner influence. The derivatives trader used this influence to get the broker firm to try to change other panel banks’ JPY LIBOR submissions.

· RBS derivatives and money market traders colluding with individuals at other panel banks and interdealer broker firms which sought to influence RBS’ JPY and SFr LIBOR submissions.

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