Bloomberg magazine lifts the lid on what could be 'biggest blow' for RBS
Managers at Royal Bank of Scotland Group "condoned and participated in the manipulation of global interest rates," indicating that wrongdoing extended beyond four traders the bank has already fired, according to Bloomberg News in a report yesterday.
RBS : The probe goes on
The US magazine described the rate-rigging allegations as" the biggest blow" to the Edinburgh-based lender since it took £45.5 billion from taxpayers in the largest bank bailout in history and Stephen Hester replaced Goodwin.
In an instant message in 2007 Jezri Mohideen, then the bank’s head of yen products in Singapore, instructed colleagues in the U.K. to lower RBS’s submission to the London interbank offered rate on one specific day, two people with knowledge of the discussion, told Bloomberg.
No reason was given in the message as to why he wanted a lower bid. The rate-setter agreed, submitting the number Mohideen sought, said the people interviewed by the American magazine..
Other RBS traders and their managers routinely sought to influence the firm’s Libor submissions between 2007 and 2010 to profit from derivatives bets, according to employees, regulators and lawyers interviewed by Bloomberg.
Traders also communicated with counterparts at other firms to discuss where rates should be set, one person said.
“This kind of activity was widespread in the industry,” said David Greene, a senior partner at law firm Edwin Coe LLP in London. He told Bloomberg,“A lot of the traders didn’t consider this behaviour to be wrong. They took it as the practice of the trade. This is how things operated, and it seemed harmless.”
Analysts estimate the scandal may cost RBS, the country’s third-biggest bank by assets, more than any U.K. competitor.
RBS, 81 percent owned by the British government, is one of at least a dozen banks being probed by regulators worldwide over allegations that traders colluded to manipulate the benchmark interest rate.
Barclays, Britain’s second-biggest bank, was fined £290 million in June for rigging the rate. CEO Robert Diamond and Chairman Marcus Agius resigned .
Regulators are now said to be probing RBS’s yen, Swiss franc and U.S. dollar sales-and-trading businesses, all part of the fixed- income division Fred Goodwin expanded before he was ousted as CEO in 2008, said two people who asked Bloomberg not to identify them.
The Royal's internal investigation, begun more than two years ago, is still going on. One person told Bloomberg the bank was considering disciplinary procedures against some employees, .
Analysts estimate the scandal may cost RBS, the country’s third-biggest bank by assets, more than any U.K. competitor, said the US report.
RBS fired four employees last year for allegedly rigging Libor rates. So far no senior managers have been suspended or fired, according to a person with knowledge of the matter.
Mohideen denies he pressured anyone to submit false rates.
“That didn’t ever happen,” he told the Bloomberg reporters on the phone.
Former RBS chief Fred Goodwin didn’t respond to a request for comment through his public-relations firm.
The Libor scandal may cost the industry about £7.8 billion in fines and settlements of civil lawsuits,according to a London-based banking analyst. For RBS, the bill may be as much as £1.1 billion, he told Bloomberg.
Hester, 51, probably will survive any fine, Simon Maughan, a banking analyst at Olivetree Securities in London told the US magazine. Hester took over in 2008, after the alleged Libor manipulation began, and couldn’t have been expected to have oversight of all of the business immediately.
“There’s no doubt that this isn’t going to be good for Hester,” Maughan said. “But I’d be very surprised if he’s forced out” because of it.