Royal Bank of Scotland Group Plc executives told lawmakers they believed it was impossible to rig Libor, less than a week after regulators found traders at the lender manipulated the benchmark for more than four years.
“None of us thought of this as a risk that needed this level of attention,” said John Hourican, who resigned as investment-banking head after the fine, told a hearing of the Parliamentary Commission on Banking Standards in London today.
RBS was fined $612 million last week for rigging the London interbank offered rate and similar benchmark interest rates. More than a dozen traders made hundreds of attempts to manipulate yen and Swiss franc Libor between mid-2006 and 2010 to benefit their trading positions, sometimes colluding with other firms, the U.S. Commodity Futures Trading Commission said. That behavior continued even after the CFTC started its probe.
“It just didn’t occur to anyone that it could be fiddled,” former investment banking chairman Johnny Cameron told lawmakers. “You can’t impose standards on people who don’t wish to be moral.”
RBS received the world’s biggest banking bailout in 2008, and is 81 percent owned by the British taxpayer. Treasury Minister Greg Clark described the lender’s fine as a “day of shame” for British lenders.
“For 2009 and 2010, we focused almost exclusively on things that broke the bank,” said Hourican. RBS had suffered a “cardiac arrest,” he said. “Fixing that occupied everybody.’
RBS managers didn’t view the risk that traders could rig the benchmark for profit as “significant,” head of markets Peter Nielsen told lawmakers today. He said he had considered resigning over Libor, but Hourican had persuaded him to remain.
“It was my opinion that the bank would be better served by Peter remaining at the bank,” Hourican said. “It was my recommendation to the board that Peter would be better serving all stakeholders were he to remain in post.”
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