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RBS fined £324m by European Commission for rate rigging

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RBS fined £324m by European Commission for rate rigging

The Royal Bank of Scotland (RBS) is among seven banks that have been slapped with a collective £1.4 billion fine for participating in illegal cartels in markets for financial derivatives covering the European Economic Area (EEA).

Four of these institutions participated in a cartel relating to interest rate derivatives denominated in the euro currency.

Six of them participated in one or more bilateral cartels relating to interest rate derivatives denominated in Japanese yen.

The Commission said this collusion between competitors is prohibited under the Treaty on the Functioning of the European Union and the EEA Agreement. Both decisions were adopted under the Commission's cartel settlement procedure; the companies' fines were reduced by 10% for agreeing to settle.

As part of this RBS has been fined £324.45 million by the European Commission in relation to competition law breaches concerning interest rate derivatives referenced to the London Interbank Offered Rate based (Libor) on Japanese Yen Libor and the Euro Interbank Offered Rate (Euribor). Barclays was able to avoid a fine of around €690 million for its involvement, after the bank received full immunity for revealing the existence of the cartel. RBS’s fine was in fact much lower than the bank’s continental European counter-parts Deutsche Bank, which was fined €465.9 million, some 30% lower as a result of the leniency notice. Société Générale received a 5% reduction at €445.9 million.

RBS was one of seven banks and brokers implicated in respect of Yen Libor competition infringements and has agreed to pay a settlement penalty of a little over €260 million to resolve the investigation.

RBS was also one of seven banks implicated in the Euribor competition infringement and has agreed to pay a settlement penalty of €131 million to resolve the investigation. Barclays was able to avoid a fine of around €690 million for its involvement in the cartel after the bank received full immunity for revealing the existence of the cartel. Meanwhile, RBS’s fine was much lower than the bank’s continental European counter-parts Deutsche Bank, which was fined €465.9 million even with a 30% reduction as a result of the leniency notice. Société Générale received a 5% reduction at €445.9 million.

RBS said both of the payments would be covered by provisions that had already been made.

The announcement follows the settlement reached by RBS in February this year with US and UK regulators in relation to investigations into submissions, communications and procedures around the setting of Libor.

RBS said that since becoming aware of improper conduct in connection with rate setting in 2011, its management had taken action to strengthen systems and controls governing its submissions of Libor and other trading rates. 

Philip Hampton, RBS chairman, told the stockmarket: 'We acknowledged back in February that there were serious shortcomings in our systems and controls on this issue, but also in the integrity of a very small number of our employees.

'Today is another sobering reminder of those past failings and nobody should be in any doubt about how seriously we have taken this issue. The RBS board and new management team condemn the behaviour of the individuals who were involved in these activities. There is no place for it at RBS.'

Fines for setting Euro interest rate derivatives:

Participants Duration of participation Reduction under the Leniency Notice (%) Fine (€)
Barclays 32 months 100% 0
Deutsche Bank 32 months 30% 465.9 million
Société Générale 26 months 5% 445.9 million
RBS 8 months 50% 131.0 million

Fines for setting Yen interest rate derivatives:

Participant Duration of participation per infringement(s) Reduction under the Leniency Notice (%) Fine (€)
UBS (5 infringements) 1 month, 8 months, 5 months, 10 months, 1 month 100% for all infringements 0
RBS (3 infringements) 8 months, 5 months, 3 months 25% for one infringement 260.0 million
Deutsche Bank (2 infringements) 10 months, 2 months 35%, 30% 259.5 million
JPMorgan (1 infringement) 1 month 79.9 million
Citigroup (3 infringements) 1 month, 2 months, 3 months 35%, 100%, 40% 70.0 million
RP Martin (1 infringement) 1 month 25% 247,000

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