RBS

Release Date: 6th February 2013

To access the original FSA document, click here.

Summary

The Final Notice issued by the FSA to The Royal Bank of Scotland plc (RBS) on 6 February 2013 imposed a financial penalty of £87.5 million due to breaches of principles relating to the manipulation of the London Interbank Offered Rate (LIBOR). RBS qualified for a 30% discount under the FSA’s settlement procedures for settling at an early stage, which otherwise would have resulted in a penalty of £125 million.

RBS’s misconduct, occurring between January 2006 and March 2012, involved inappropriate efforts to influence LIBOR rates for Japanese yen (JPY), Swiss franc (CHF), and US dollar (USD). These actions were taken to benefit the bank’s derivatives trading positions. RBS engaged in manipulating its own submissions and colluding with other banks and broker firms to influence LIBOR submissions. At least 21 individuals at RBS were implicated, including derivatives traders and the managers responsible for LIBOR submissions.

Principle breaches highlighted by the FSA included:

Manipulation of Submissions: RBS traders frequently requested adjustments to LIBOR submissions to benefit their trading positions.
Collusion with Other Banks and Brokers: RBS traders made requests to other panel banks and brokers to influence their LIBOR submissions.
Management Oversight Failures: Certain managers at RBS were aware of the inappropriate requests and in some cases encouraged or facilitated such actions.

RBS also failed to have adequate risk management systems in place to prevent these manipulations, with insufficient internal controls and oversight to detect or prevent inappropriate submissions. The systemic failure extended to the management’s inadequate oversight and a corporate culture that prioritised profits over compliance with regulatory standards.

The case against RBS demonstrates the importance of maintaining the integrity of financial benchmarks and underscores the need for financial institutions to have robust compliance mechanisms.

Firms must ensure that:

There are clear lines of accountability and oversight.
Employees are aware of compliance standards and the repercussions of their breach.
Effective monitoring systems are in place to detect and prevent misconduct.
The FSA’s actions against RBS serve as a warning to other firms about the consequences of compromising market integrity and the regulatory focus on ensuring fair and transparent financial practices.