This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.guardian.co.uk/business/2013/feb/06/rbs-fined-libor-rigging-scandal

The article has changed 7 times. There is an RSS feed of changes available.

Version 1 Version 2
RBS fined £390m for 'widespread misconduct' in Libor-rigging scandal RBS fined £390m for 'widespread misconduct' in Libor-rigging scandal
(about 7 hours later)
Royal Bank of Scotland has been fined £390m for "widespread misconduct" in rigging the Libor rate until as recently as November 2010 – two years after it was bailed out by the taxpayer and even after regulators had begun to investigate the key benchmark rate. Royal Bank of Scotland was handed a £390m fine on Wednesday for "widespread misconduct" in rigging the Libor rate until as recently as November 2010, two years after it was bailed out by the taxpayer and even once regulators had begun to investigate the key benchmark rate.
Publishing a series of embarrassing electronic exchanges between RBS traders and those at rival banks and interdealer brokers, the Financial Services Authority said it had found at least 219 requests of inappropriate submissions were documented and an unquantifiable number of oral requests. Some of this carried on until last year. Regulators found corrupt payments of more than £100,000 were made to those involved and that the bailed-out bank had "abetted" Swiss bank UBS – fined £940m – in manipulating the rate used to set prices on £300tn of financial contracts around the world, from ordinary household mortgages to business loans.
Corrupt brokerage payments were made to one broker firm to "garner influence" and the firm "abetted UBS's attempts to manipulate" Libor in Japanese yen. The Swiss bank has already been fined £940m. "This is another day of shame for Britain's banks," Greg Clark, the financial secretary to the Treasury, told MPs.
One electronic exchange shows an RBS yen Libor submitter joking: "I'm like a whores' drawers." An interdealer broker is quoted saying to an RBS Libor submitter: "I'll send lunch around for everybody." One electronic exchange shows an RBS employee responsible for submitting official Libor rates joking: "I'm like a whores' drawers." A broker is quoted saying to an RBS Libor submitter: "I'll send lunch around for everybody."
Stephen Hester, the chief executive, condemned the behaviour of the 21 "wrongdoers" at the bank who have either left or been disciplined. Stephen Hester, RBS the chief executive, condemned the behaviour of 21 "wrongdoers" at the bank who have either left or been disciplined. Six of them remain employed. Another eight staff left before any action was taken against them.
"Libor manipulation is an extreme example of a selfish and self-serving culture that took hold in parts of the banking industry during the financial boom," said Hester, who will remain at RBS, which is 82% owned by the taxpayer. "This whole episode deeply disgusts me and depresses me. It is an extreme example of a selfish and self-serving culture," said Hester, who was appointed to run RBS after it received a £45bn taxpayer bailout in 2008.
John Hourican, the head of the investment bank, is to leave "in recognition of the management issues identified in relation to this settlement and the impact on the group's reputation". The bankers' bonus pot at RBS is to be reduced by £300m towards the cost of the fine, the majority of which will go to US regulators. The Commodity Futures Trading Commission (CFTC) has fined RBS $325m (£207m) and the US department of justice (DoJ) has imposed a fine of $150 (£95m). The FSA fine is £87.5m. The RBS chairman Sir Philip Hampton described it as a "sad" day and made clear the bank did not intend to claw back the £2m bonus Hester had been awarded for 2009 – some £700,000 of which is due to be paid next month.
As part of the agreement with the DoJ, the bank has entered into a deferred prosecution agreement on one count of wire fraud relating to Swiss franc Libor and one count for an antitrust violation relating to yen Libor. RBS's Japanese subsidiary has entered a plea of guilty to one count of wire fraud relating to yen Libor. Defending Hester's position, Hampton described the situation as "tough" on John Hourican, the head of the investment bank, who is to leave "in recognition of the management issues" and the impact on the bank's reputation. Hourican leaves with a pay off of £750,000 but forfeits £4m of bonuses.
The CFTC had asked RBS to conduct an investigation into US dollar Libor in April 2010 but while some employees involved in the misconduct were aware of the investigation, they continued their "manipulative conduct". Hampton added: " A small group of people in our company have exposed the organisation to considerable reputational damage. As at other banks, it has been revealed that pockets of individuals in this company seemed to have lost touch with basic principles of right and wrong".
The regulators said RBS "abetted UBS's attempts to manipulate" yen Libor by using wash trades – trades that generate commission but cancel each other out – and on at least one occasion. RBS also requested the assistance of an interdealer broker to influence the submissions of multiple panel banks in an attempt to manipulate yen Libor, the regulators said. Hampton said the bank had been in "hell of a mess" when the new management team arrived in 2008. "It was an absolutely horrendous mess," said Hampton.
The bank allowed the manipulation to go on for years. The FSA said RBS had "attested" in March 2011 that its Libor-related systems and controls were adequate. "This was inaccurate as RBS's systems and controls were inadequate," the regulator said. RBS had failed to identify the risks that submitters would make Libor submissions that took into account derivative trader requests and the impact on the profitability of transactions in their money market books. In total, the bonus pot at RBS is to be reduced by £300m to cover the cost of the fine and some 1,500 RBS bankers are to have bonuses clawed back following the intervention of the chancellor, George Osborne, who wanted to ensure that any fines to the US regulators, amounting to £300m of the £390m total, were not paid by UK taxpayers.
The CFTC said profitability of RBS's yen and Swiss franc derivatives positions, such as interest rate swaps, depended on yen and Swiss franc Libor, as did certain of RBS's money market positions. "What happened at RBS and other banks is totally unacceptable," said Osborne.
"RBS traders would ask their colleagues to make false Libor submissions that were beneficial to RBS's trading positions. The traders' requests were either for falsely high submissions or falsely low ones, whatever was needed to turn a profit," the CFTC said. "At my insistence, the bankers, not the taxpayers, will pick up the bill. Those people who did wrong will face the full force of the law... In 2013 our reforms are turning people's anger into a positive force for change."
RBS had allowed the manipulation to take place by placing derivatives traders and submitters together on the same desk, heightening the conflict of interest between the profit motives of the traders and the responsibility of submitters "to make honest submissions". Even when they were separated – for business, not compliance reasons – the misconduct continued through Bloomberg chats and an internal instant messaging system. Officials at the Unite union called on the bank to ensure that branch staff did not pay for the fine with their jobs: "Innocent bank staff must not be allowed to carry the can for the rate riggers".
Two US regulators – the Commodity Futures Trading Commission and the US department of justice – have fined RBS $325m (£207m) and $150m (£95m) respectively while the fine levied by the UK Financial Services Authority is £87.5m. This would have been substantially higher if RBS had not co-operated.
Hester warned that the Libor fine "will not be the last reminder of the scale of the changes that need to be made" inside the nationalised bank.
US authorities are investigating money laundering offences and the Libor investigation is continuing in Japan and Switzerland.
As part of the agreement with the department of justice, the bank has entered into a deferred prosecution agreement while its Japanese subsidiary has entered a plea of guilty to one count of wire fraud relating to yen Libor.
Hester, describing his four years at the bank as a "soap opera", said: "I can be dismissed if it's judged I haven't done a good job or if someone else can do a better job". I've made it clear to key stakeholders that if they don't have confidence in me, then my job is not doable."
Hester insisted that he wanted to "finish the job" of getting RBS back on the road to recovery.
Lord Oakeshott, the Liberal Democrat peer, said: "Hester had been far too slow to clear up (former RBS chief executive) Fred Goodwin's poisonous legacy. He can't conceivably keep a £2m bonus for a year when he ran a Libor-rigging bank".