RBS fined £390m for ‘criminal’ Libor fixing

RBS fined £390m for ‘criminal’ Libor fixing

6 February 2013

FINE

Royal Bank of Scotland (RBS) has been fined £390m ($610m) by UK and US authorities for its part in the Libor rate-fixing scandal. RBS is paying 87.5 million pounds to the Financial Services Authority (FSA), $150 million to the U.S. Department of Justice and $325 million to the U.S. Commodity Futures Trading Commission.

The FSA revealed that RBS qualified for a 30% discount on its fine because it agreed to settle at an early stage of the investigation – without the discount the fine would have been £125m.

RBS is 81% owned by the taxpayer. The bank said that the £300m owed to US authorities would be paid using money from employees (i.e. bonuses already paid, and reductions to future bonuses).

CHANCELLOR

Last night Chancellor George Osborne called the behaviour of traders “totally unacceptable” and said the bank, rather than taxpayers, would be paying the fines and promised those responsible would face the ‘full force of the law’.

21 EMPLOYEES

The bank has dismissed six individuals for Libor-related misconduct; two of them are managers. A further six have been “severely disciplined or are going through a disciplinary process,” the bank said. Eight more left the organisation before disciplinary action could be taken. In all, 21 of the bank’s 137,000 employees have left or been disciplined over Libor, RBS said.

According to FSA, RBS made at least 219 documented requests for inaccurate submissions.

WHAT HAPPENED

The FSA said the misconduct was widespread – it covered UK, Japan, Singapore, and the US and took place between January 2006 and November 2010.

Investigators found that RBS traders colluded with other traders to try to fix Libor rates. The practice was designed to make money by investing in interest rate swaps. RBS traders, working in several offices around the world, were involved and they focused on the manipulation of yen and Swiss franc Libor rates, using instant messaging systems to communicate with other traders.

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OTHER BANKS INVESTIGATED & SETTLEMENENT

6 February 2013

To date over twelve banks and brokerage firms are being investigated by regulators over the manipulation of benchmark interest rates such as Libor, and Euribor.

Recent reports have raised the possibility of other banks resolving liability through a group settlement, but in an interview on Wednesday, a top U.S. Justice Department official denied this possibility: “Criminal cases are not resolved in a group setting,” said Lanny Breuer, the head of the department’s criminal division. “We are going to go after each individual financial institution”.

LIBOR

6 February 2013

Libor is the key interbank lending rate, used to determine the mortgage and savings rate, and is linked to trillions of pounds of investments around the world.

The London interbank offered rate, or Libor, is calculated by a poll carried out daily on behalf of the British Bankers’ Association that asks firms to estimate how much it would cost to borrow from each other for different periods and in different currencies. The top and bottom quartiles of quotes are excluded, and those left are averaged and published for individual currencies before noon in London.

OTHER SOURCES

6 February 2013