US Seeking to File Criminal Charges Against Royal Bank of Scotland Group in Interest-Rate-Rigging Settlement Involving Libor

Authorities in the United States want to reach a settlement with Royal Bank of Scotland Group (RBS.L) that would require that the British bank plead guilty to criminal charges and pay about $790M in penalties to Britain and America over its alleged involvement in last year’s Libor-rigging scandal. RBS would be the third bank to settle over interest-rate-rigging allegations. UBS AG (UBS) and Barclays PLC (BCS) reached settlements last year that together totaled almost $2 billion. They both admitted to committing wrongdoing.

Prosecutors want an RBS unit where some of the alleged rate-rigging occurred to plead guilty to attempting to manipulate the rates. Currently, reports The Wall Street Journal, RBS executives are balking at making such an admission, especially because it could make exposure to securities lawsuits greater. However, ultimately the decision is up to the US Justice Department.

Meantime, at least a dozen other banks around the world are still under investigation for trying to manipulate Libor and Euribor. Bloomberg reports that it has obtained documents that show that for years traders at numerous banks worked with colleagues tasked with establishing the Libor benchmark to rig the price of money. The traders reportedly knew each other from work or from trips involving interdeal brokers. The manipulation of the Libor is believed to have gone on for years.

Libor is calculated everyday. This is done with surveying banks and finding out the cost to them to borrow in 10 currencies for periods as short as overnight to as long as a year. Bottom and top quartile quotes are left out while the remaining ones are averaged and made public in London before 12p. Since estimates and not actual trade data is used, participants need to act with integrity. Unfortunately, there were derivatives traders that failed to uphold the system’s integrity.

Regulators reportedly knew as early as late 2005 that there were banks using Libor submission that were artificially low to make them seem healthier. However, the Bank of England and The New York fed have said that they didn’t do anything about it because Libor was not under their oversight.

Related Web Resources:
Libor Lies Revealed in Rigging of $300 Trillion Benchmark, Bloomberg, January 28, 2013

U.S. Wants Criminal Charges for RBS, The Wall Street Journal, January 29, 2013

More Blog Posts:
LIBOR Investigation Leads to Three Arrests, Institutional Investor Securities Blog, December 11, 2012

Barclays LIBOR Manipulation Scam Places Citigroup, Credit Suisse, Deutsche Bank, JP Morgan Chase, and UBS Under The Investigation Microscope, Institutional Investor Securities Blog, July 16, 2012

US Supreme Court to Hear Appeals of Petitioners Over Stanford Ponzi Lawsuits, Stockbroker Fraud Blog, January 25, 2013