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RBS to pay $615 million as rate-rigging scandal unfolds

February 06, 2013|By Andrew Tangel
  • Pedestrians walk past a Royal Bank of Scotland Group branch in London.
Pedestrians walk past a Royal Bank of Scotland Group branch in London. (Simon Dawson / Bloomberg )

The Royal Bank of Scotland Group has become the latest financial giant to fork over hefty fines in an unfolding probe into the rigging of key interest rates.

RBS will pay $615 million to U.S. and British authorities in a settlement announced early Wednesday. 

Of that total, the bank will pay $150 million to the U.S. Justice Department, as one its subsidiaries, RBS Securities Japan, pleaded guilty to one count of wire fraud for manipulating the benchmark London Inter-Bank Offered Rate.

The U.S. Commodity Futures Trading Commission, which is to receive $325 million of the RBS fines, released a number of unflattering instant-message exchanges between RBS traders.

"its just amazing how libor fixing can make you that much money," one senior yen trader wrote.

In another exchange over setting interest rates, one Swiss currency trader wrote: "if u did that i would come over there and make love to you[,] your choice."

The Libor interest rate is tied to trillions of dollars in financial instruments around the world. The rate determines how much consumers and individual investors pay in interest in a wide range of financial products, from mortgages to derivatives contracts.

The California Public Employees' Retirement System last year said it was examining how much the rate-fixing scandal may have cost the giant pension fund, and that it could take action to recover any damages.

Last year, the British investment bank Barclays settled a similar Libor-rigging investigation and agreed to pay $450 million. The scandal wound up forcing out top executives, including Robert E. Diamond Jr. as chief executive.

In December, the Swiss banking giant UBS paid $1.5 billion to American and European regulators as one of its subsidiaries, also in Japan, pleaded guilty in a case brought by the U.S. Justice Department.

"As we have done with Barclays and UBS, we are today holding RBS accountable for a stunning abuse of trust," Assistant Atty. Gen. Lanny Breuer said in a statement.

The federal government's investigation is "far from finished," Breuer added. "Our message is clear: No financial institution is above the law."

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