Antitrust Law Daily Wrap Up, TOP STORY—RBS Resolves U.S., U.K. Charges over Role in LIBOR Rate Rigging Scheme, (Feb 6, 2013)
Organizations Mentioned:Barclays plc | RBS | Royal Bank of Scotland plc | U.S. Commodity Futures Trading Commission | U.S. Department of Justice | UBS AG | UBS, AG
By Jeffrey May, J.D.
The Royal Bank of Scotland plc (RBS) announced today that it has agreed to pay approximately $612 million in penalties under settlements with the United Kingdom Financial Services Authority (FSA), the U.S. Commodity Futures Trading Commission (CFTC), and the U.S. Department of Justice. The settlements resolve allegations that the financial institution was involved in a rate rigging scheme involving the London Interbank Offered Rate (LIBOR), the premier benchmark for short-term interest rates. The regulators contended that RBS succeeded at times in manipulating Yen and Swiss Franc LIBOR between 2006 and 2010.
RBS is the third financial institution to settle with regulators over the alleged rate setting. The settlements announced by RBS follow a similar deal reached by Swiss banking group UBS AG with U.S., U.K., and Swiss regulators in December 2012 and Barclays plc's agreement to pay the CFTC $200 million in July 2012.
Today, the Justice Department announced that, as part of a deferred prosecution agreement (DPA), RBS will admit that it engaged in wire fraud with respect to the manipulation of LIBOR benchmark interest rates, and that it conspired to rig the Yen LIBOR benchmark interest rate with other banks. A criminal information was filed in the federal district court in Connecticut. According to the Justice Department, the DPA requires the bank to admit and accept responsibility for its misconduct, to continue cooperating with the Justice Department’s ongoing investigation, and to pay a $100 million penalty.
RBS's Japanese subsidiary, RBS Securities Japan Limited, also has agreed to plead guilty to felony wire fraud and admit its role in manipulating the Japanese Yen LIBOR. RBS Securities Japan has agreed to plead guilty to charges filed in the federal district court in Connecticut.
Together with approximately $462 million in regulatory penalties and disgorgement—$325 million in the CFTC action and approximately $137 million in the FSA action—the Justice Department’s criminal penalties bring the total amount of the resolution with RBS and RBS Securities Japan to approximately $612 million, according to the Justice Department.
The prosecution of RBS was handled by a team from across the Justice Department, including the Antitrust Division, the Criminal Division, and Federal Bureau of Investigation.
“RBS secretly rigged the benchmark interest rates upon which many transactions and consumer financial products are based,” said Scott D. Hammond, Deputy Assistant Attorney General in charge of criminal enforcement at the Antitrust Division, in announcing the charges. “RBS’ conduct not only harmed its unsuspecting counterparties, it undermined the integrity and the competitiveness of financial markets everywhere.”
The Justice Department alleged that RBS Yen and Swiss Franc derivatives traders—whose compensation was directly connected to their success in trading financial products tied to LIBOR—engaged in efforts to move LIBOR in a direction favorable to their trading positions. Through these schemes, RBS allegedly defrauded counterparties who were unaware of the manipulation affecting financial products referencing Yen and Swiss Franc LIBOR. The Justice Department alleged that RBS employees sought to influence LIBOR submissions in a manner favorable to their trading positions in two principal ways: (1) internally at RBS through requests by derivatives traders for Yen and Swiss Franc LIBOR submissions, and (2) externally through an agreement with a derivatives trader at UBS AG's Japanese subsidiary to request Yen LIBOR submissions.
The Justice Department has not filed charges against RBS employees; however, two former senior UBS traders were charged back in December for their roles in the conspiracy. Former trader Tom Alexander William Hayes was charged with conspiracy to commit wire fraud, wire fraud, and conspiracy to fix prices. Former trader Roger Darin faced a single wire fraud conspiracy charge.
Companies: Royal Bank of Scotland plc; UBS AG; Barclays plc
MainStory: TopStory Antitrust AntitrustDivisionNews