RBS Traders Sought to Manipulate Australian Rate, Regulator Says

Royal Bank of Scotland Group Plc traders sought to manipulate Australia’s bank-bill swap rate, the local equivalent of the London interbank offered rate, the country’s securities regulator said.

RBS derivatives and money-markets traders discussed their desks’ financial position when making submissions to the benchmark between January 2007 and April 2012, the Australian Securities and Investments Commission said in a statement today. The maximum possible benefit to RBS was about A$810,000 ($759,000).

Regulators across the world are probing banks over allegations traders manipulated key market benchmarks for profit. RBS, Britain’s biggest government-owned bank, was fined $612 million in 2013 for rigging Libor, the reference rate for more than $300 trillion of securities ranging from student loans to mortgages. RBS is the third lender to accept an enforceable undertaking from the Australian watchdog after Switzerland’s UBS AG and France’s BNP Paribas SA.

“RBS has co-operated fully and worked constructively with ASIC,” the Edinburgh-based lender said in a statement. The bank, which didn’t admit wrongdoing, said it has made “significant actions to correct and strengthen the systems and controls governing its processes around submissions for key financial benchmarks.”

The Edinburgh-based lender will make a voluntary A$1.6 million payment to fund financial literacy projects in Australia, according to the ASIC statement. UBS agreed to pay about A$1 million in December and BNP the same amount in January.

‘Substantially Differs’

At least nine firms have so far been fined more than $6 billion for manipulating benchmark interest rates, according to data compiled by Bloomberg.

Libor is calculated by a daily poll that asks firms to estimate how much it would cost to borrow from each other for different periods and in different currencies. Traders sought to manipulate the benchmark for profit by making artificially high or low submissions to influence the final rate, sometimes by working with counterparts at other firms, according to findings by regulators.

RBS employees didn’t engage in collusive conduct with counterparts at other banks, ASIC said.

The BBSW was calculated from submissions made by a panel of 14 banks until September, when the rate started to be calculated electronically. At least A$350 billion of Australian syndicated loans and floating-rate bonds are tied to the rate, according to data compiled by Bloomberg last year.

The benchmark “substantially differs” from Libor in that lenders were required to make submissions based on the average mid-rate observed on bank bills, while Libor is subjective and not tied to observable transactions, ASIC said.

Before it's here, it's on the Bloomberg Terminal.