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Royal Bank of Scotland

RBS Japan head to roll over Libor rigging

Departure from brokerage unit expected soon as penalties mount

PUBLISHED : Friday, 12 April, 2013, 12:00am
UPDATED : Friday, 12 April, 2013, 6:13am

Royal Bank of Scotland's Japan brokerage unit head is preparing to resign as the company faces penalties for attempts to manipulate benchmark interest rates, according to two people with knowledge of the situation.

RBS Securities Japan chief executive officer Ryusuke Otani would leave the company as soon as this week, one of the people said, asking not to be named as the information is private.

The Financial Services Agency would announce penalties, including a business improvement order as early as today, the people said.

The agency oversees the Securities and Exchange Surveillance Commission, which recommended action against RBS last week.

The unit in February pleaded guilty to wire fraud as part of a US$612 million settlement with British and US authorities for rigging the London interbank offered rate, the benchmark for at least US$300 trillion of securities worldwide.

Atsuko Yoshitsugu, a Tokyo-based spokeswoman for RBS, said Otani was not available to comment as he was on "compliance leave".

Hiroshi Okada, an FSA spokesman, declined to comment.

From around mid-2006 to early 2010, an unidentified RBS trader and his colleagues asked employees responsible for making yen Libor submissions to change them to favour their derivatives portfolio, the commission said in a statement last week. The conduct was "seriously unjust and malicious", the commission said.

The Edinburgh-based lender apologised to customers following the commission's recommendation, saying it would take "appropriate steps" to address the issues raised by the regulator.

Otani, who became Japan representative of the brokerage in 2007, isn't the first top executive of a foreign bank to resign following interest-rate breaches in the country.

Citigroup's Japan brokerage head, Brian Mccappin, stepped down in January last year after the commission found that employees of the unit tried to manipulate benchmark rates.

RBS said in February it had dismissed six individuals from the bank for Libor-related misconduct. A seventh, Simon Green, who traded derivatives tied to short-term moves in interest rates in dollars and euros, was fired last month, two people with knowledge of the move said.

Libor is determined by a daily poll that asks banks to estimate how much it would cost them to borrow from each other for different time frames and in different currencies. The top and bottom quartiles are excluded and an average is taken of the remaining quotes.

Traders sought to influence where the rate was set to boost the profits of their derivatives positions, regulators found.