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Banking

RBS to pay regulators $610 million for LIBOR-fixing

Royal Bank of Scotland has earned a $610 million fine for misdeeds. RBS joins Barclays of the UK and UBS of Switzerland among institutions found to have rigged the London Interbank Offered Rate, or LIBOR.

A sign of Royal Bank of Scotland at a branch in central London (Photo: AP/Sang Tan)

Royal Bank of Scotland

Over 80 percent owned by the British government, and bailed out with the largest ever rescue effort in 2008, RBS will cut 2012 bonuses and demand payouts from the 21 staffers implicated as well as managers and current members of departments caught up in the scandal. Taking the 450 million euros from the corporation would amount to the money coming from taxpayers.

"What happened at RBS and other banks is totally unacceptable," British Finance Minister George Osborne said.

LIBOR provides the basis for mortgages, bonds and loans worldwide. The US Justice Department (DOJ) called the nearly 300-year-old bank guilty of a "stunning abuse of trust."

"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," RBS Chief Executive Stephen Hester said in a statement. "We will use the lessons learned from this episode as further motivation to reject and change the vestiges of that culture."

‘Size and scale'

US and UK regulators fined RBS $460 million: $325 million from the Commodity Futures Trading Commission (CFTC), 87.5 million pounds ($137 million/101.5 million euros) from the UK's Financial Services Authority (FSA). A unit of RBS pleaded guilty to the DOJ for a $150 million penalty.

All the staff members implicated have either already left the company or remain subject to proceedings. The CFTC found that as recently as 2010 and dating back to 2006, RBS employees "made hundreds of attempts" to rig the LIBOR for the yen and the Swiss franc, as well as making false submissions to benefit its trading positions.

"The size and scale of our continuing investigations remains significant," FSA enforcement and financial crime director Tracey McDermott said.

Too cozy

The FSA reported that RBS employed flawed systems and controls as recently as March. Traders originally sat with the employees who submitted LIBOR data on a desk in London "in one cozy ring," said David Meister, CFTC enforcement director.

When separated, traders switched to e-chats. Like peers at Barclays and UBS, RBS staff made no effort to hide their misdeeds, according to extracts of exchanges released by investigators.

Since the 2008 financial crisis, Britain's banking industry has seen a series of scandals. Executives at Barclays have also stepped down owing to LIBOR findings. Barclays' saw a $453 million fine and several executives resign, including the chief, Bob Diamond.

Switzerland's UBS paid $1.5 billion last year for LIBOR-rigging. A dozen other banks, among them the US institutions Citigroup Inc. and JPMorgan Chase & Co., face similar investigations.

The UK Financial Services Act means that as much as 35 million pounds of the fines will go to support Britain's Armed Forces community, and 5 million pounds more will go to the Imperial War Museum.

mkg/jr (AFP, Reuters, AP, dpa)

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