RBS fined $612 million for manipulating Libor
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Royal Bank of Scotland Group Plc, fined $612 million for manipulating benchmark interest rates, plans to claw back three-quarters of the money from bonuses and awards already paid out to the firm's employees.
Britain's biggest publicly owned lender will pay $325 million to the U.S. Commodity Futures Trading Commission, $150 million to the Department of Justice and 87.5 million pounds ($137 million) to the U.K.'s Financial Services Authority. RBS said it will recoup about 300 million pounds from employees. The bank's Japanese unit also agreed to plead guilty to wire fraud as part of the settlement.
"This is another day of shame for Britain's banks," Treasury Minister Greg Clark told lawmakers in London Wednesday. "This is an extremely serious matter, motivated by greed."
The penalty is the biggest blow to CEO Stephen Hester's attempt to overhaul the lender after it took 45.5 billion pounds from taxpayers in the largest bank bailout in history in 2008. The fine, the third to result from the global probe so far, exceeds the 290 million pounds Barclays Plc paid in June, and is second only to the $1.5 billion Switzerland's UBS AG paid in December.
"Libor manipulation is an extreme example of a selfish and self-serving culture that took hold in parts of the banking industry during the financial boom," Mr. Hester said Wednesday. "We will use the lessons learned from this episode as further motivation to reject and change the vestiges of that culture."
RBS is the parent company of Citizens Bank of Pennsylvania, the No. 2 retail bank in the Pittsburgh region.
"Today's news is interesting for the details, but less material in terms of the financial position," said Ian Gordon, an analyst at Investec Plc in London who estimates RBS will report a 1.7 billion-pound loss for the fourth quarter. "The main challenge for RBS isn't the one-off regulatory issues. It's anemic earnings growth. This is, if you like, a resolution of a legacy issue of the past."
Investment banking chief John Hourican, 42, will leave the bank after handing over his responsibilities, RBS said. He will forfeit all his unvested bonus and long-term incentive plan awards that are subject to claw-back, the bank said.
"While John had no involvement in or knowledge of the misconduct, and very notable business achievements while in office, both John and the board felt it was right that he leave the organization," the bank said.
More than a dozen RBS traders made hundreds of attempts to manipulate yen and Swiss franc Libor between mid-2006 and 2010 to benefit their trading positions, sometimes colluding with counterparts at other firms, the Commodity Futures Trading Commission said. That continued even after the commission commenced its investigation into the wrongdoing.
The London interbank offered rate, or Libor, is calculated by a poll carried out daily on behalf of the British Bankers' Association that asks firms to estimate how much it would cost to borrow from each other for different periods and in different currencies. The top and bottom quartiles of quotes are excluded, and those left are averaged and published for individual currencies before noon in London.
RBS also agreed to enter into a deferred prosecution agreement with the Justice Department Wednesday, the agency said.
First Published February 7, 2013 12:00 am