British lender Royal Bank of Scotland Group (RBS,RBS.L) said Wednesday that it has agreed to pay about $612 million to U.S. and UK regulators to settle allegations that the company's employees tried to manipulate key global benchmark interest rates.
"The RBS Board acknowledges that there were serious shortcomings in our systems and controls and also in the integrity of a small group of our employees. This is a sad day for RBS, but also an important one in continuing to put right the mistakes of the past," RBS Chairman Philip Hampton said in a statement.
The resolution is part of an industry-wide investigation by authorities that several banks, including RBS, sought to manipulate the London Interbank Offered Rate or Libor.
Libor is the average interest rate that lending banks in London charge when lending to other banks. The rate is considered as a benchmark for finance all around the world. Libor is based on rate submissions from a relatively small and select panel of major banks, including RBS, and is calculated and published daily for several different currencies by the British Bankers' Association or BBA.
RBS said it has reached settlements in relation to investigations with the UK's Financial Services Authority or FSA, the U.S. Commodity Futures Trading Commission or CFTC, and the U.S. Department of Justice or DOJ, on misconduct relating to the setting of Libor.
The CFTC has imposed a $325 million penalty, while the DOJ imposed a $150 million fine and the FSA imposed a penalty of 87.5 million pounds. The investigations uncovered wrongdoing on the part of 21 employees, predominantly in relation to the setting of the bank's Yen (JPY) and Swiss Franc (CHF) Libor submissions.
According to the regulators key findings, JPY and CHF derivative traders sought to influence the Bank's JPY and CHF Libor setters in the period October 2006 to November 2010. Two RBS traders based in London colluded with other banks and brokers in making and receiving requests for higher and lower JPY and CHF Libor.
Further, RBS's JPY, CHF and US Dollar money market traders on occasion considered their own money markets books as a factor in their Libor submissions.
However, none of the regulators in question concluded that RBS, as a firm, had engaged in any deliberate misconduct.
Stephen Hester, RBS Group Chief Executive, said, "I want to speak very clearly and on behalf of the 137,000 employees of RBS. We condemn the behavior of the individuals who sought to influence some LIBOR currency settings at our bank from 2006-10. There is no place at RBS for such behavior."
This settlement relates to industry-wide investigations into the setting of Libor rates across a range of currencies.
In June 2012, Barclays Bank plc reached a similar settlement with the three regulators and it agreed to pay 290 million pounds or $452 million to U.S. and UK regulators to settle allegations that the company's employees tried to manipulate two global benchmark interest rates, Libor and Euribor since 2005. The CFTC imposed a $200 million penalty, while the DOJ imposed a $160 million fine and the FSA imposed a penalty of 59.5 million pounds.
Later in December 2012, Swiss banking giant UBS AG (UBS) agreed to pay about 1.4 billion Swiss francs or about $1.53 billion in fines and disgorgement to settle LIBOR-related investigations on manipulation of key global benchmark interest rates. The CFTC imposed a $700 million penalty, the DOJ imposed a $500 million fine, the FSA imposed a penalty of 160 million pounds or $250 million, and the Swiss Financial Markets Authority (FINMA) fined it 59 million Swiss francs or $65 million.
In Wednesday's regular trading session, RBS is currently trading at $10.65, up $0.01 or 0.10% on a volume of 93,140 shares. Meanwhile, RBS.L is trading on the LSE at 338.80 pence, up 1.30 pence or 0.39% on a volume of 6.93 million shares.
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