RBS fined $612 million for Libor rigging

Royal Bank of Scotland (RBS) has been fined $612 million for its involvement in Libor manipulation.

It will pay £87.5 million, the equivalent of approximately $137 million, to the UK's Financial Services Authority (FSA), $150 million to the US Department of Justice, and $325 million to the US Commodity Futures Trading Commission (CFTC). RBS Securities Japan has also agreed to plead guilty to a criminal charge of wire fraud.

John Hourican, chief executive of the markets and international banking division, will leave the bank in the wake of the findings. RBS said he had no involvement in or knowledge of the misconduct, but both parties felt it was right he leave the organisation.

RBS made hundreds of attempts to manipulate yen and Swiss franc Libor rates from 2006 to as recently as 2010. At least 21 individuals, including derivatives and money market traders and at least one manager, were involved, and the fixing occurred at multiple offices around the world, including London, Singapore and Tokyo.

RBS said all of the 21 individuals involved had either left the organisation or had been subject to disciplinary action. Two managers with supervisory responsibilities had also left the group.

False Libor submissions were made that were beneficial to RBS's trading positions. "Its [sic] just amazing how libor fixing can make you that much money," wrote one senior yen trader involved in the rigging in an electronic chat message on August 20, 2007.

Another example of misconduct was highlighted in a chat message on December 4, 2008 between a Swiss franc trader and a submitter:

Swiss franc trader: can u put 6m swiss libor in low pls?
Primary submitter: Whats it worth
Swiss franc trader: ive got some sushi rolls from yesterday?

Unlawful conduct continued even after RBS traders learned that a Libor investigation had begun. On November 22, 2010, two yen traders were engaged in the following conversation over chat messaging:

Yen trader 1: at the moment the FED are all over us about libors
Senior yen trader: thats for the USD?
Yen trader 1: yes
Senior yen trader: dun think anyone cares the JPY libor
Yen trader 1: not yet

Traders merely tried to conceal their conduct by minimising their use of written messages to conduct the scheme.

"Was wondering if it suits you guys on hiking up 1bp on the 6mth Libor in JPY ... it will help our position tremendously," a senior yen trader asked a submitter in a chat message in November 2010.

The yen trader responded in a telephone conversation: "We're not allowed to have those conversations on [instant messages]", referring to an investigation by the CFTC into how the British Bankers' Association set Libor rates.

Senior yen trader: Oh, sorry about that. I didn't know.
Primary submitter: (laughter)
Senior yen trader: (laughter) Oh because of the, the BBA thing?
Primary submitter: Yes, exactly.
Senior yen trader: Ah, okay okay.
Primary submitter: So yeah, leave it with me, and uh, it won't be a problem.

RBS was also found to have aided and abetted UBS's attempts to manipulate Libor. UBS was hit by a $1.5 billion fine for Libor and Euribor rigging in December 2012. In the same year, Barclays also agreed to pay a total $450 million penalty for market manipulation.

The FSA found RBS did not have any Libor-related systems and controls in place until March 2011, despite telling the FSA its systems and controls were adequate. The bank also created an environment that encouraged manipulation by placing derivatives traders and Libor submitters together on the same desk. Derivatives traders were even allowed to act as substitute Libor submitters.

In a statement released today, RBS chairman Philip Hampton said it was "a sad day for RBS". He pledged to "put right the mistakes of the past" and "fix the culture in the banking industry".