Heads may roll at RBS over Libor

RBS RBS is currently negotiating with regulators over fines related to Libor transgressions.

Royal Bank of Scotland is in the last delicate phase of negotiations with regulators in the UK and US on the fines to be paid for its Libor transgressions and other necessary remediation, including a possible senior resignation.

What is clear is that UK and US fines will run to several hundred million pounds, or more than the £290m extracted from Barclays.

What is as yet undecided is whether RBS will be punished on a similar scale to UBS, which was spanked to the tune of £940m. My understanding is that RBS believes its fines will be less than UBS's.

RBS is braced for substantial humiliation as and when the announcement is finally made.

Emails from traders cited as evidence for the Libor rigging are particularly lurid, according to sources.

Also, the market manipulation continued well into 2010, or long after RBS's management was replaced at the end of 2008 following the collapse of the bank and its partial nationalisation. RBS's board did not become aware of the wrongdoing until notified about it by regulators in 2011.

That said, I have learned that the bank's board does not believe the chief executive Stephen Hester needs to resign: no evidence has been found indicating that he knew about the attempt to make unfair profits by fixing the Libor rates; and he was fully occupied at the time trying to rebuild the bank's shattered finances.

However I understand the FSA is looking for personal responsibility to be taken.

RBS's board will not wait for an instruction from the FSA to change personnel. I have learned that it is considering asking the head of the investment bank, John Hourican, and the head of markets, Peter Nielsen, to quit.

That said, there is no evidence that either of them were aware of the Libor malpractices or in any way encouraged them. But after the financial crisis they were brought in to fix RBS's investment bank, and the concern is that they did not get to grips with the market rigging that continued on their watch.

"There is an issue about why the rotten culture wasn't cut out earlier", said a source.

Also, the FSA is arguing that bonuses earned by executives and investment bankers in the period should be repaid or clawed back. This can only happen in relation to bonuses that were deferred. So at risk are those who were promised bonuses in 2009 and 2010, but haven't yet received all their entitlement.

"The likelihood is that there will be a claw back from the 2009 and 2010 bonus pools" said a source.

As for the fines and penalties, they are set according to a formula based on the magnitude of the wrongdoing in each of Libor's myriad currency categories.

RBS traders tried to manipulate the Libor interest-rate benchmarks for dollars, Swiss francs and yen, inter alia, according to a source. But whether the cumulative impact of its market rigging was more or less great than UBS's is - I am told - still undetermined.

As I understand it, the UK's Financial Services Authority is trying to persuade US regulatory authorities, led by the Department of Justice in Washington, to go for a big bang announcement of punishments for RBS in the week after next.

Robert Peston, economics editor Article written by Robert Peston Robert Peston Economics editor

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  • rate this

    Comment number 67.

    I would like to see heads rolling but what we will probably see is more big payoffs for those responsible to leave. Whilst there is no proper sanction for such poor management it will go on. Unfortunately this is unlike the treatment handed out to many ordinary workers found to be culpably incompetent.

  • rate this

    Comment number 66.

    @55.Mark F
    It's about time that banker responsible for the financial crisis were arrested and brought to trial.

    I think that there may be more than one!

    On the other hand, if it is only the one, way to go!

  • rate this

    Comment number 65.

    I now fully understand where Cameron and Osbourne get the famous phrase "We are all in it together". What he actually meant was "All the Banks and Governments are in the scam together".

    By not taking action against corruption it should make people have no respect for MPs they voted in, but it wont. Certainly MPs only have respect for their wallets, not the people who got them in.

  • rate this

    Comment number 64.

    So let me get this straight the CEO didnt know that one of the corner stone figures that his company works on, and is of worldwide importance is not being manipulated.....

    Flap oink flap oink...

    Just what is his job again ?

  • rate this

    Comment number 63.

    Nothing will change until a few bankers spend a couple of christmas's in prison and not the cushy "open style" low risk ones.
    A few months in with some hard nosed violent criminals might sort them out. The irony is that they have taken the banks for much more than any armed rober ever did.

  • rate this

    Comment number 62.

    Robert Peston's standard wittering on about: "As I understand", "I have Learned" and "from a source". The only thing I cannot understand is why this poor excuse for a journalist has not been replaced by someone who does understand how to write a coherent article.

  • rate this

    Comment number 61.

    The horrible irony is - if RBS are fined due to Libor, we as taxpayers will pay.

    The correct situation would be to dock the fine from the salaries of chief execs. Don't hold your breath though.

  • rate this

    Comment number 60.

    "I hope this serves as a warning to others that cheating the system does not pay and will not be tolerated.”

    These are the words of a judge sentencing a single mother who went to jail for benefits fraud.

    Will the indivudual traders who committed Libor fraud be dealt with in the same way? They should.

  • rate this

    Comment number 59.

    "Super-rich hedge fund financiers emerged as the big winners from the Bank of England’s money printing programme in 2012, as pensioners and savers were made to struggle with shrunken incomes". http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9771755/Hedge-funds-reap-record-profits-from-bets-on-QE.html Clearly highlighting MP's only care for bankers & not bailout repayment priority

  • rate this

    Comment number 58.

    Where is Fred "The Shred" Goodwin?!?

  • rate this

    Comment number 57.

    We pay. Again. As the banks owners we're being skinned alive - £5bn pa interest on the bailout loans, we get the PPI hit, 30bn of share price destruction, this & all the other monster fines - they've taken huge pay rises instead of bonuses - and when all the cr*p from the fake boom has been dumped on us they'll write the lot down & flog it off cheap to a schoolfriend.

    Still nobody in jail

  • Comment number 56.

    All this user's posts have been removed.Why?

  • rate this

    Comment number 55.

    It's about time that banker responsible for the financial crisis were arrested and brought to trial.

    Treason would be a suitable charge.

  • rate this

    Comment number 54.

    We are in the hands of urine extractors who have already taken everything else including democracy(if there ever was any in any meaningful sense). Worldwide fascism brought to you, post-capitalism, by high-flying, out of the box, bonus clutching, blue sky geniuses(or more simply, establishment protected frauds).

  • rate this

    Comment number 53.

    As I understand matters the B of E & Whitehall were in on this conspiracy too ! Has this been forgotten ?

  • rate this

    Comment number 52.

    We're told that lottery jackpot style salaries and bonuses have to be paid otherwise we'll lose the talent, then the "talent" claims they didn't realise what was going on beneath their very noses.

  • rate this

    Comment number 51.

    Stand by for a minor figure or two being made the scapegoat as in the 'rogue trader' scenario. No very senior suit will loose their job. Sloppy management if you believe none of the senior people knew. The main thing is that had it not been for the US regulators the FSA would have sent them a letter and told them to stop it or if pushed would have fined them in the region of £500,000.

  • rate this

    Comment number 50.

    Maybe the money gets distributed between the Prudential Regulatory Authority and the Financial Conduct Authority when the FSA gets abolished in April. So maybe the billion or so will finish up in the BoE?

  • rate this

    Comment number 49.

    Bonuses at risk? This won't include the substantial hikes in basic salary given to many staff and new hires over the past several years to 'compensate for the uncertainty over bonuses'. So, uncertain bonuses have often been translated into certain (and pensionable) basic salaries. All while the public owns much of the bank. Do the regulators not investigate this practice?

  • rate this

    Comment number 48.

    Heavy fine for RBS. Now let's see, we (the government) own over 80% don't we. So that's a bit like passing the parcel.

    The Americans will get 100% of their fine and I bet they won't give it to those who are out of pocket from the fraud. I wonder if they'll extradite anyone- it's the only chance of gaol for anyone.


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