Royal Bank of Scotland Group Plc, the U.K.’s largest government-owned lender, dismissed at least four employees in connection with a probe of potential interest-rate manipulation, two people briefed on the move said.
Citigroup Inc. and Deutsche Bank AG also have dismissed, put on leave or suspended traders as part of the investigation, according to two more people, who declined to be identified because they weren’t authorized to discuss the case. ICAP Plc, the world’s largest broker of trades between banks, suspended an employee in the past six weeks and put two others on leave, another person said.
Regulators’ requests for information from interdealer brokers marks a widening of the global investigation into whether there were attempts to manipulate the London, Tokyo and euro interbank offered rates, known as Libor, Tibor and Euribor.
The investigation is being handled by the U.S. Securities and Exchange Commission, U.S. Commodity Futures Trading Commission, U.S. Department of Justice, Japan’s Financial Supervisory Agency and the U.K. Financial Services Authority. European Union antitrust regulators and the Swiss Competition Commission are also examining Libor rates.
Libor, a benchmark for about $360 trillion of financial products worldwide, is derived from a survey of banks conducted daily on behalf of the British Bankers’ Association in London. The lenders are asked how much it would cost them to borrow from one another 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.
Traders at different banks appeared to be trying to influence the movement of Libor and similar benchmarks to profit from derivatives tied to the rates, the Financial Times reported yesterday, citing information submitted to regulators.
Banks including Citigroup, London-based Barclays Plc and UBS AG, based in Zurich, approached authorities with information about potential abuse of the rate-setting process after discovering e-mails or other evidence during their internal investigations, the newspaper reported, citing people familiar with the matter.
Regulators are investigating whether rate bids were low-balled during the financial crisis, if traders at banks and hedge funds sought to influence rate-setters to profit on interest-rate derivatives and whether traders received advanced word about which direction rates would move, the FT reported, without saying how it got that information.
RBS dismissed Paul White, Andrew Hamilton and Neil Danziger in London, a person said. Danziger and Hamilton left the bank on Oct. 21 and now are listed as inactive on the U.K. Financial Services Authority’s register of people approved to work in the industry. White, a trader, left the following month. Hamilton was an investment adviser, and Danziger a trader, the FSA said.
Attempts to reach all three through the Internet and directory assistance were unsuccessful. None of the three has been accused of any wrongdoing by regulators.
Spokesmen for RBS, Frankfurt-based Deutsche Bank and New York-based Citigroup declined to comment on the probes or provide contact details for the former employees.
RBS also dismissed Tan Chi Min, the former head of delta trading for RBS’s global banking and markets division in Singapore, for gross misconduct. He’s suing the bank over the dismissal and seeking to recoup $1.5 million in bonuses and 3.3 million RBS shares that he claims he’s owed. He hasn’t been accused of wrongdoing by authorities. Danziger hasn’t filed papers in the suit between RBS and Tan.
RBS alleged Tan sought to “improperly influence the defendant’s rate setters” by asking them to have RBS submit Libor rates “at particular levels in order to profit the plaintiff’s book and/or the defendant and to maximize profit generally,” according to a response to Tan’s lawsuit, filed in December in Singapore. Danziger also “made similar requests” to set rates, the bank alleged in the document.
ICAP units involved in broking cash deposits and derivatives based on Libor also received requests for information from government agencies in the investigation and are cooperating, the firm said in a November regulatory filing. A London-based ICAP spokesman declined to comment.
Tullett Prebon Plc and RP Martin also have received requests of information from regulators about information-sharing among brokers, banks and hedge funds, the Financial Times reported, citing unidentified people familiar with the talks. Officials at Tullett Prebon didn’t immediately return calls seeking comment on the report, while an RP Martin spokeswoman declined to comment.
$50 Million Write-Off
Thomas Hayes, a Tokyo-based trader for Citigroup, was dismissed last year for alleged involvement in the manipulation of interbank rates, one of the people said. No one else in London has been suspended or is under investigation, the person said. Hayes, who has not been accused of any wrongdoing by regulators, couldn’t be traced.
Citigroup was forced to write off $50 million as it exited trades made by Tokyo-based employees, said a person familiar with matter, who spoke on condition of anonymity because the details aren’t public.
A JPMorgan Chase & Co. trader in London who was under an internal investigation in the Libor probe left the firm on his own volition two weeks ago, another person said. A spokesman for the New York-based bank declined to comment.