U.K. Chancellor of the Exchequer George Osborne said that Royal Bank of Scotland Group Plc managers who oversaw the money-markets business should be held accountable for the alleged manipulation of interest rates.
“Those who were doing the supervising must also bear their share of the responsibility,” Osborne said in Bournemouth, southern England today. “The RBS board and the RBS senior management are well aware of that and decisions are in hand.”
RBS may pay as much as 500 million pounds ($786 million) in fines to U.K. and U.S. regulators as early as this week to settle allegations traders tried to rig the London interbank offered rate, two people with knowledge of the matter said last month. Investment banking chief John Hourican is expected to resign because he had responsibility for the parts of the company where the alleged wrongdoing occurred, even though he didn’t have direct knowledge of the behavior, the people said.
The bank, which started an internal probe in 2010, has so far dismissed four bankers and suspended at least three others, including Jezri Mohideen, head of rates trading for Europe and the Asia-Pacific region. Osborne gave his backing to Chief Executive Officer Stephen Hester.
Osborne also said that RBS should pay the U.S. portion of the fine by cutting investment-banker bonuses and clawing back discretionary awards from previous years.
“I’ve made it very clear to the bank, and the bank management accept this” that U.S. fines should be paid for by RBS’s bankers, Osborne said. “That could potentially have been the cause of real public anger this spring” and that has now been avoided, he added.
RBS will reduce its bonus pool by as much as 150 million pounds to offset the fines, a person familiar with the plan said last month. RBS paid staff at its securities unit about 390 million pounds in bonuses for 2011, the bank has said.
RBS traders and their managers routinely sought to influence the firm’s Libor submissions between 2007 and 2010 to profit from derivatives bets, according to transcripts of internal conversations seen by Bloomberg News and interviews with employees and lawyers. Traders also communicated with counterparts at other firms to discuss where rates should be set, the people said.
Regulators including the U.K. Financial Services Authority, the U.S. Commodities Futures Trading Commission and the Department of Justice are investigating claims that more than 16 banks altered submissions used to set benchmarks to profit from derivatives bets. While RBS’s fine will be smaller than the $1.5 billion charge UBS AG paid in December to settle claims it attempted to manipulate Libor, it will exceed the 290 million-pound fine Barclays Plc paid in June, the people said.
Libor is calculated by a poll carried out daily on behalf of the British Bankers’ Association that asks firms to estimate how much it would cost to borrow from each other for different periods and in different currencies. The top and bottom quartiles of quotes are excluded, and those left are averaged and published for individual currencies before noon in London.