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  • Dec 27, 2014
  • Updated: 6:01am

Libor

Libor (London interbank offered rate), is meant to represent how much banks pay to borrow from one another. It is also a benchmark for at least US$550 trillion worth of contracts spanning interest rate derivatives to residential mortgages. A scandal erupted after banks were found to be rigging the system. Barclays was fined US$453 million by global regulators in June 2012 for manipulating Libor, and UBS was hit with a US$1.5 billion bill in December 2012. In February 2013, RBS was fined US$612 million to settle US and UK regulatory charges of misconduct, manipulation, attempted manipulation and false reporting of yen, Swiss franc and dollar-denominated Libor. 

BusinessBanking & Finance
REGULATION

Royal Bank of Scotland fined US$612m for rate rigging

Hong Kong regulator to impose new rules to prevent illegal fixing of local interbank lending rates of the kind uncovered in London

PUBLISHED : Wednesday, 06 February, 2013, 9:45am
UPDATED : Thursday, 07 February, 2013, 5:17am

Royal Bank of Scotland is to pay US$612 million in fines to regulators in the United States and Britain for rigging interbank lending rates, the kind of market manipulation the Hong Kong Monetary Authority sought to stave off yesterday by unveiling new measures in setting rates in the city.

More than a dozen traders at RBS offices in London, Singapore and Tokyo manipulated the London interbank offered rate, which is used to price trillions of dollars worth of loans, from at least 2006 until 2010.

Britain's financial regulator, the Financial Services Authority (FSA), said at least 21 people from RBS were involved in rate rigging.

The lender will pay US$325 million to the US Commodity Futures Trading Commission, US$150 million to the US Department of Justice and US$137 million to the FSA, the commission said.

RBS Securities Japan has agreed to enter a plea of guilty to one count of wire fraud relating to yen Libor, the British bank said.

RBS chairman Philip Hampton said: "This is a sad day for RBS, but also an important one in continuing to put right the mistakes of the past."

Meanwhile, Deutsche Bank suspended five traders in Frankfurt amid an internal probe into alleged attempts to rig interbank lending rates, said a person familiar with the matter. The bank declined to say whether it had suspended any employees.

In Hong Kong, the HKMA's deputy chief executive Arthur Yuen Kwok-hang said new measures, to be rolled out in the next six months, would improve the setting of the Hong Kong interbank offered rate (Hibor) and would bring the city's rules in line with reforms elsewhere.

Hibor, which is used to set rates for everything from mortgages to credit card and personal loans, is fixed at 11am every working day, based on quotations provided by 20 banks.

The reforms follow a review of the system in July, made after the Libor scandal erupted in June.

In December, the HKMA announced it was investigating the Swiss bank UBS in connection with Hibor, a day after the lender agreed to pay US$1.5 billion in fines to US and European regulators for its role in rigging Libor.

Yuen said the UBS investigation would take a while, but the Hibor reforms would not be delayed until its completion.

The reforms include shifting the Hibor administration from the Hong Kong Association of Banks to the Treasury Markets Association.

A code of conduct on Hibor rate submission guidance and the surveillance structure will also be introduced.

The system of taking quotes from 20 banks will be maintained but the list of banks will be reviewed every year instead of every two years.

Additional reporting by Reuters

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