RBS fined £325m for rigging interest rates

The Royal Bank of Scotland is to pay a £325 million fine over its role in the latest rate-rigging scandal.

By SCOTT MACNAB Thursday, 5th December 2013, 12:50 am

RBS will pay 325 million pounds for its role in rate-rigging. Picture: Getty

The Edinburgh-based financial giant is among a raft of global banks involved in a record £1.7 billion settlement with European regulators after a fresh crackdown.

Eight banks have agreed penalties with the European Commission over allegations that they formed cartels to fix two key benchmark interest rates used to set the price of trillions of dollars of financial products, from mortgages to complex

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financial packages.

The Yen Libor and Euribor at the centre of the latest row are the Tokyo and eurozone equivalents of the London interbank offered rate (Libor). Barclays is immune from a potential £573m penalty after blowing the whistle on the Euribor cartel.

Sir Philip Hampton, chairman of RBS, said its bosses “condemn the behaviour” of those involved in attempted rate rigging.

He said: “We acknowledged back in February that there were serious shortcomings in our systems and controls on this issue, but also in the integrity of a very small number of our employees.

“Today is another sobering reminder of those past failings, and nobody should be in any doubt about how seriously we have taken this issue.”

Since its Libor-fixing settlement earlier this year, RBS has overhauled its systems and controls, while putting in place an independent rate-setting team with all submissions overseen by a review board. The RBS payments will come from provisions set aside by the bank.

The fine comes hot on the heels of damaging revelation this week that 750,000 RBS, NatWest and Ulster Bank customers were blocked from using their cards or getting cash for three hours on Monday – the year’s busiest online shopping day.

It was reminiscent of a far larger software problem that affected millions of customer accounts last year when an upgrade failed, preventing hundreds of thousands of transactions from taking place.

The latest Libor sanctions – the first from the EC on rate manipulation – are the highest yet for European antitrust enforcement. But US attorney general Eric Holder said there could be more to come.

Mr Holder, the United States’ chief law enforcement official, said US investigators and their European counterparts were continuing to look at possible manipulation of rate-setting.

“I doubt this is going to be the last development on the issue,” he said.

Barclays and RBS have already been fined following an investigation into the rigging of Libor, paying fines of £290m and £391m respectively.

Other banks fined in the Euribor case are Germany’s Deutsche Bank and French bank Société Générale. Those involved in the Yen Libor case are RBS, the Swiss group UBS, Deutsche Bank, US giants JPMorgan Chase and Citigroup, the and UK-based wholesale broker RP Martin. UBS avoided a £2.1bn fine after flagging up the Yen Libor cartel with the EC.

Joaquin Almunia, EC vice-president in charge of competition policy, said: “Today’s decision sends a clear message that the commission is determined to fight and sanction these cartels in the financial sector.”

RBS is still battling to restore its reputation following the 2008 financial crash, when it was bailed out by the taxpayer, and still remains a majority state-owned operation.

The bank has recently been caught up in allegations concerning its treatment of companies that banked with it.

A dossier compiled by government adviser Lawrence Tomlinson accused the bank of forcing viable firms into the bank’s Global Restructuring Group, pushing them into default, then seizing their assets at low prices.

The allegations have been denied by RBS, but the bank has launched its own inquiry.