rbs
  • $325m to be paid to US CFTC
  • $150m to be paid to US Department of Justice
  • £87.5m to be paid to UK Financial Services Authority
  • John Hourican, Chief Executive of the Markets and International Banking division, to step down
  • RBS Securities Japan Ltd pleads guility to one count of wire fraud

The Royal Bank of Scotland Group has been ordered to pay a record £390m ($612m/€451m) to settle charges related to the manipulation of the benchmark lending rate known as Libor.

RBS was charged by the US Commodity Futures Trading Commission (CFTC) with false reporting, manipulation and attempted manipulation of the interbank lending rate that was denominated in yen and Swiss francs between 2006 and 2010 and allegedly involved more than a dozen RBS derivatives and money market traders, the watchdog said in a statement published on its website. It was ordered to pay $325m in fines.

"The integrity of LIBOR depends on truthful information provided by a select group of some of the world's most important banks," said the CFTC's enforcement director David Meister. "The public is deprived of an honest benchmark interest rate when a group of traders sits around a desk for years falsely spinning their bank's LIBOR submissions, trying to manufacture winning trades. That's what happened at RBS." 

"The whole episode on the one hand disgusts me and on the other hand deeply depresses me," said CEO Stephen Hester in a prepared video statement. "There should be no place in our industry for that kind of behaviour and they've let everyone down ... it's an extreme example of a selfish and self-serving culture which the whole banking industry, pre-crisis, was tagged with. It's a huge job we all have to make sure that lable does not have validty in the future.

An RBS subsidary, RBS Securities Japan Limited, pleaded guilty to one criminal charge of wire fraud, although the bank entered what's called a deferred prosecution agreement under which it cooperate with the US Department of Justice, pay a $150m fine and have that charge and another antitrust charge deferred. 

RBS was also ordered to pay an additional £87.5m to the UK's Financial Services Authority.

"The misconduct was widespread," the FSA said in a statement published on its website. "At least 219 requests for inappropriate submissions were documented - an unquantifiable number of oral requests, which by their nature would not be documented, were also made.  At least 21 individuals including derivatives and money market traders and at least one manager were involved in the inappropriate conduct." 

The FSA said the fine was reduced by 30 percent under terms of its so-called discount scheme. 

John Hourican, the bank's investment chief, will leave the bank at the end of next month, RBS said in a published statement.

"This was a difficult decision. While John had no involvement in or knowledge of the misconduct, and very notable business achievements while in office, both John and the Board felt it was right that he leave the organisation in recognition of the management issues identified in relation to this settlement and the impact on the Group's reputation," the statement said. "John will leave the business after handing over his responsibilities. He will receive 12 months' notice and his other contractual entitlements, however, he will forfeit all his unvested bonus and Long Term Incentive Plan awards that are subject to claw-back." 

RBS, which is 83 percent owned by the UK taxpayer, will be the third bank to reach an agreement over libor failings, after Barclays and Swiss bank UBS, which paid around $1.5bn to regulators in the UK, the United States and Switzerland last month. More than a dozen other global lenders are said to be under investigation.

Switzerland's biggest bank also said it had pleaded guilty to one count of wire fraud with the US Justice Department in relation to rate manipulation in the market for yen libor.

The UK's Financial Services Authority agreed to a fine of £160m, while fines paid to the US Commodity Futures Trading Commission and the US Department of Justice will amount to around $1.2bn the bank said. Finma, the Swiss regulator, collected a fine of 59m Swiss francs.

The FSA said it found at least 2,000 documents showing attempts to manipulate the benchmark interbank lending rate, which underpins around $500tn worth of global financial securities.

RBS shares were trading at 339.4 pence each in London immediately after the announcement of the fine, a gain of around 0.5 percent on the session.