RBS to pay $612 million for rate-rigging

The Commodity Futures Trading Commission (CFTC) ordered the Royal Bank of Scotland (RBS) Wednesday to pay a $325 million penalty for trying to manipulate a key interest rate.

The bank also agreed to pay $150 million to the Department of Justice, and another $137 million to British regulators for a total penalty of $612 million.

The new penalty marks the latest in an ongoing crackdown over widespread manipulation of the London Interbank Offered Rate (LIBOR), after it was revealed that a number of banks were providing false reports to boost profits or hide weaknesses. The interest rate, used by a number of currencies, serves as a key benchmark for other lending, including mortgages and auto loans.

In particular, the CFTC found that RBS traders worked to manipulate the LIBOR for the Japanese yen and Swiss franc across "hundreds of attempts." It also found that RBS helped other banks do the same, and spanned more than a dozen traders and offices across the globe.

One RBS trader said it's "just amazing how libor fixing can make you that much money," in a 2007 email.

Regulators determined that RBS traders pressured employees responsible for submitting the bank's interbank borrowing LIBOR report to falsely report the figure in a way that maximized their profit. The CFTC also found RBS employees continued to submit false reports even after press reports began to question the rates, and some even continued the practice while the bank was investigating problems with that very practice.

"Today’s Order against RBS demonstrates yet another clear case of a bank falsely reporting and attempting to manipulate or successfully manipulating benchmark rates to increase trading profits," said CFTC Chairman Gary Gensler. "Such false reporting of benchmark rates undermines the integrity of markets and shakes the public’s trust in our financial system."

CFTC Commissioner Bart Chilton called the penalty fitting for such "despicable" conduct.

"This is a solid and significant settlement which sends a signal to those who would monkey around with benchmark rates," he said in a statement.

With the RBS penalty, the CFTC has now imposed more than $1.2 billion in penalties to banks for rigging key interest rates like LIBOR.

The Swiss bank UBS agreed to pay $1.5 billion in December to U.S. and British regulators to settle its LIBOR-rigging charges, and the British bank Barclays set off the the scandal when it paid $453 million to settle LIBOR charges in June.

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