Announcement expected soon from Royal Bank of Scotland about the size of its penalty for attempting to rig rates
Royal Bank of Scotland is negotiating with the Financial Services Authority over the scale of its penalty for attempting to rig Libor, amid speculation that Swiss bank UBS is close to agreeing a £1bn fine with global regulators.
An announcement from RBS is expected in the coming weeks, as it settles with UK and overseas regulators on the manipulation of the key benchmark interest rate.
Stephen Hester, chief executive of RBS, in which the taxpayer owns a 82% stake, has already made clear that he expects the bank to face a large fine and that he wants an agreement to be reached by the time the bank reports its full year results in February.
RBS is thought to be continuing to exchange information with the FSA about the scale of its involvement in Libor amid reports from Switzerland that UBS will admit that 36 of its traders were manipulating the interest rate based on the yen currency. UBS is said to be prepared to admit to criminal wronging in its Japanese arm.
The potential UBS fine keeps rising as last week the Swiss bank had been expected to pay £630m – more than double the £290m that Barclays paid to settle allegations that 14 of its traders were involved in manipulating Libor. The FSA fined Barclays a record £59.5m and US regulators fined the bank £230m.
Estimates for the RBS fine are wide, ranging from £150m to £350m.
The regulatory reports into Barclays exposed for the first time the rigging of the key interest rate in the run-up to the 2008 financial crisis and highlighted concerns that during the crisis banks were inserting submissions into Libor that were deliberately too low in an effort to avoid any suggestion they were experiencing financial difficulty. Libor – which is now being reformed – required members to submit the price they expected to be charged by other banks to borrow over a number of time periods and in a number of currencies.
UBS has already had a major change of its top management in the wake of the jailing of Kweku Adoboli for incurring £1.5bn of trading losses, unlike Barclays whose chairman Marcus Agius, chief executive Bob Diamond and chief operating officer Jerry del Missier all quit in the days after the fine was announced in June.
The regulators published documents alongside the Barclays fine showing traders offering bottles of Bollinger for setting Libor and quips such as “done for you big boy”.
Court documents in Singapore have shown former RBS traders laughing and describing Libor as a cartel. The documents have been filed as part of case by Tan Chi Min, a senior trader at Singapore who was sacked last year.
The banks declined to comment as did the FSA.