RBS boss Stephen Hester is overseeing a bonus payout to staff
linked to the Libor scandal
UK crisis: RBS to pay £500 million in rigging deal
by Jamie Mann
A fresh scandal has emerged regarding controversial bank bonuses as RBS are set to pay out £250m in bonuses to its staff in a division linked to the Libor rigging scandal.
Both George Osborne and financial regulators face increased public displeasure as taxpayers, forced to bail out the bank, now face paying a combined £500mn to US and UK regulators following the manipulation of Libor rates by RBS traders.
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Meanwhile, US authorities are pushing the Libor implicated RBS division to plead guilty, rather than merely pay out fines, while the bank rejects the accusations according to The Wall Street Journal.
Taxpayers will bear the brunt of the charges regardless of an admission of criminality by RBS. Whether the Edinburgh-based bank will confess to criminality remains unclear.
For Barclays, prosecution by the US Department of Justice was was avoided due to its “admission of its misconduct, its extraordinary cooperation, its remediation efforts and certain mitigating and other factors”.
Deemed ‘too big to fail’ Barclays as an institution was safeguarded: “The non-prosecution agreement applies only to Barclays and not to any employees or officers of Barclays or any other individuals. “
However, the fate of RBS by contrast will unravel with the case.
Any resolution of the allegations would be faster reached with admissions of guilt, though only individuals are expected to be held accountable and not the institution itself unless RBS as an institution is found to be misleading authorities.
As Bloomberg extensively reported, a few RBS employees have been undoubtedly linked to submitting Libor rates in a market worth more than $300 trillion of contracts.
Paul White was one of those employees, joining the bank in 1984 and based at the RBS Group’s trading floor in London.
Mr White sat in front of derivatives trader Neil Danziger, whose boss Tan Chi Min, was last year accused by RBS of attempting to rig Libor rates between 2007 and 2011 to benefit his own trading interests.
Publically revealed by a Singapore court and reported by Bloomberg, Tan messaged Mr Danziger telling him to up the bank’s submission in Yen: “We need to bump it way up high, highest among all if possible,”
According to Bloomberg: “There were no rules at RBS and other banks prohibiting derivatives traders, who stood to benefit from where Libor was set, from submitting the rate -- a flaw exploited by some traders to boost their bonuses.”
Tan Chi Min, known to his western colleagues as ‘Jimmy’, successfully sued RBS in December 2011 for wrongful dismissal arguing that he could not have influenced rates as the British Bankers’ Association sets the Libor rate after receiving input from 16 banks, including RBS.
Speaking about the current prosecution, RBS spokesman Michael Strachan told the Wall Street Journal: "Discussions with various authorities in relation to Libor setting are ongoing. We continue to cooperate fully with their investigations,".
Should the bank fail to agree to the £500mn settlement with authorities in the next two weeks, which must entail an admission of guilt, the sum could escalate.
Regardless, the UK taxpayer will, as with its 2008 meltdown, be forced to bailout RBS for reckless gambling once again.
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