September 25, 2012

RBS Managers Condoned LIBOR Manipulation: Report

Practice was common among managers, say employees, regulators

RBS logoManagers at Royal Bank of Scotland (RBS) condoned and even participated in manipulation of LIBOR rates, according to a Bloomberg investigation. The behavior, said employees and others, extended beyond the four traders who were fired earlier in the year for their role in the practice.

Bloomberg reported Tuesday that employees, attorneys and regulators indicated that the practice was commonly accepted. Between 2007 and 2010 it was common for not just RBS traders but their managers as well to push the rate up or down to boost derivatives profits.

“This kind of activity was widespread in the industry,” said David Greene in the report. Greene, a senior partner at the law firm Edwin Coe in London, added, “A lot of the traders didn’t consider this behavior to be wrong. They took it as the practice of the trade. This is how things operated, and it seemed harmless.”

Two people familiar with the interchange were cited saying that in 2007, Jezri Mohideen, who then headed the Singapore yen products area, used an instant message exchange to tell U.K. colleagues to lower the bank’s submission of LIBOR on a particular day. He gave no reason in his message for the request, according to the sources, but the person on the other end complied and provided the figure that Mohideen had asked for.

Mohideen has denied that any such exchange took place, and was quoted in the report saying, “That didn’t ever happen.” Other managers who, along with Mohideen, were named in a lawsuit filed by one of the fired traders, Tan Chi Min, are also alleged to have taken part in LIBOR manipulation. Tan brought suit in the Singapore High Court against RBS in December, saying that he was wrongfully dismissed and alleging that rate manipulation was accepted at RBS, involving traders and managers throughout the company.

Regulators, according to two unidentified sources, are examining several parts of the bank’s fixed-income division, including Swiss franc, yen and U.S. dollar sales and trading. The bank itself began an internal investigation more than two years ago; it is still ongoing.

The sources said that swaps, foreign exchange and inflation trading teams are under the microscope along with money-market traders making daily LIBOR submissions. Email, phone and instant messages are all under scrutiny.

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