RBS fined £391m for rate-rigging

Stephen Hester, chief executive of RBS, said he would stay to “finish the job” at the bank despite damning evidence from US and UK authorities over the bank’s role in the Libor scandal, dating back to 2006 and continuing through to late 2010 – when investigations had already begun.

RBS, which is 81 per cent owned by the Government, will recoup around £300m from its staff bonus pool and clawing back previous awards to pay for the fines.

While Mr Hester and chairman Sir Philip Hampton have been spared the axe, RBS said investment banking boss John Hourican would step down, forfeiting around £9m in bonuses and long-term incentive shares.

Chancellor George Osborne condemned the “totally unacceptable” behaviour at RBS and said it was right that the “banks not the taxpayers will pick up the bill”.

RBS said 21 staff were involved in attempting to manipulate interbank lending rates – specifically Japanese Yen and Swiss Franc Libor submissions – from 2006 to as recently as November 2010.

All 21 have left or been subject to disciplinary action and two managers with supervisory responsibilities have stepped down.

Six staff have been dismissed, including two managers, while six have been severely disciplined or are going through a disciplinary process.

Another eight left the organisation before disciplinary action could be taken and one was dismissed for misconduct not related to these findings, added RBS.

All staff that have left the bank as a result of the investigation received no bonus for 2012 and saw full claw-back of any outstanding past awards.

Evidence from the regulators revealed yet more shocking exchanges between traders, with the United States Commodity Futures Trading Commission (CFTC) revealing one saying: “It’s just amazing how Libor fixing can make you that much money.”

In another conversation, a trader said: “It’s a cartel now in London.”

The Financial Services Authority (FSA) uncovered bribery among bankers, with false or “wash” trades being set up, generating at least £211,000 in fees to broker firms for their help in colluding to bring down Libor rates. At least 30 so-called wash trades went undetected between September 2008 and August 2009, according to the FSA. Sir Philip said it was a “sad day for RBS”, but vowed to “put right the mistakes of the past”.

RBS is now the third bank to have been fined for attempting to rig Libor after Barclays agreed a £290m settlement last year, followed in December by Swiss bank UBS, which was hit with nearly £1bn of penalties.

But it is thought around 20 banks are being investigated over involvement in manipulating the rate, which governs the price of more than $500 trillion-worth of loans and transactions around the world, including household mortgages.

Under its settlement, RBS will pay £87.5m to the FSA, $325m (£207.7m) to the CFTC and $150m (£95.8m) to the US Department of Justice (DoJ). The bank has also agreed a deferred prosecution agreement with the US Department of Justice (DoJ) – a deal that could see it face tough sanctions if it commits any form of criminal offence during the period – while its Japanese arm has pleaded guilty to wire fraud.

The DoJ said it was holding RBS accountable for a “stunning abuse of trust”.

The CFTC slammed the bank for failing to enforce any “meaningful” controls surrounding Libor submission until June 2011.

Comment: Page 12.