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RBS Condoned Libor Conduct, Sought Scapegoats, Fired Trader Says

RBS Condoned Libor Conduct, Sought Scapegoats
A businessman is reflected in the window outside the Royal Bank of Scotland Group Plc headquarters in London, U.K. Photographer: Chris Ratcliffe/Bloomberg

Royal Bank of Scotland Group Plc, which accused a fired Singapore trader of manipulating London interbank offered rates, had condoned such behavior and sought scapegoats in an internal probe, the former employee said.

RBS’s employees “were not at any time forbidden from communicating input or requests” to have the bank’s rate setters set rates at levels to maximize profits, Tan Chi Min, the former trader, said in court papers filed in Singapore’s High Court yesterday.

“Such requests and input were regularly made or given in order to maximize profit,” Tan said. RBS “was fully aware of this, condoned such conduct and waived any right to terminate employees on the basis of this.”

Patricia Choo, a Singapore-based RBS spokeswoman, declined to immediately comment on Tan’s claims.

Tan, the former head of delta trading for RBS’s global banking and markets division in Singapore, sued the bank in December over his dismissal and is seeking to recoup $1.5 million in bonuses and 3.3 million RBS shares that he claims he’s owed. RBS said Tan deserved to be fired because he was guilty of “gross misconduct,” according to its court filing last month.

Tan in his filing yesterday said RBS, Britain’s biggest government-owned lender, started an internal probe after inquiries by European and U.S. authorities on the conduct of banks in setting Libor.

U.S., Europe Investigations

RBS, based in Edinburgh, is cooperating with investigations by the U.S. Commodity Futures Trading Commission, U.S. Department of Justice and European Commission into whether Libor, which acts as a benchmark for about $360 trillion of financial instruments worldwide, had been manipulated.

The bank’s “internal investigations were intended to create the impression that such conduct was the conduct not of the defendant itself but the conduct of specific employees who the defendant has sought to make scapegoats through summary dismissals,” Tan said.

Tan tried to improperly influence RBS’s rate setters from 2007 to 2011 and persuade them to submit Libor rates at particular levels to his benefit, the bank said in its defense last month.

Tan said in his complaint dated Dec. 27 that he was in no position to influence the rate on his own. The bank failed to detail the allegations against him and didn’t specify how he had improperly influenced the setting of Libor, he said.

‘Common Practice’

The fired trader said it was “common practice” among RBS’s senior employees to make requests to the bank as to the appropriate Libor rate, according to his complaint.

Libor is derived from a survey of banks conducted each day on behalf of the British Bankers’ Association in London. The lenders are asked how much it would cost them to borrow from each other for 15 different periods, from overnight to one year, in currencies including dollars, euros, yen and Swiss francs. After a predetermined number of quotes are excluded, those remaining are averaged and published for each currency by the BBA before noon.

The delta trading desks at investment banks handle trades for clients, typically helping them to speculate on, or hedge the performance of, a basket of securities.

The case is Tan Chi Min v The Royal Bank of Scotland Plc S939/2011 in the Singapore High Court.

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