RBS ex­pects to pay fine to set­tle li­bor probe

The Pak Banker - - Front Page -

NEW YORK

Royal Bank of Scot­land Group Plc, Bri­tain’s big­gest tax­payer-owned lender, said it ex­pects to pay a fine in the com­ing months to set­tle reg­u­la­tors’ probes into al­le­ga­tions the lender tried to ma­nip­u­late Li­bor. Whether the penalty ex­ceeds the record 290 mil­lion pounds ($467 mil­lion) Bar­clays Plc paid in June or not “it will still be a mis­er­able day in RBS’s his­tory,” Chief Ex­ec­u­tive Of­fi­cer Stephen Hester told re­porters on a call to­day as the bank posted third-quar­ter oper­at­ing profit that beat an­a­lyst es­ti­mates. “I’d be dis­ap­pointed if we were talk­ing to you at our ful­lyear re­sults in Fe­bru­ary with­out hav­ing had more news.”

RBS is one of more than a dozen banks world­wide fac­ing reg­u­la­tory probes into al­le­ga­tions that they ma­nip­u­lated the Lon­don in­ter­bank of­fered rate, the bench­mark for more than $300 tril­lion of se­cu­ri­ties. The Ed­in­burgh-based lender has fired at least four traders fol­low­ing an in­ter­nal probe, and last month sus­pended its head of rates trad­ing for Europe and the Asi­aPa­cific re­gion, the first se­nior man­ager to be put on leave.

Li­bor is the big­gest reg­u­la­tory ob­sta­cle to over­shadow Hester’s at­tempts to over­haul the com­pany af­ter it re­ceived the big­gest bank­ing bailout in his­tory in 2008. RBS said to­day it would set aside a fur­ther 400 mil­lion pounds to com­pen­sate clients wrongly sold loan in­sur­ance and de­riv­a­tives, bring­ing the to­tal the bank has ear­marked to 1.7 bil­lion pounds.

The shares fell 1.8 per­cent to 282 pence as of 8:52 a.m. in Lon­don, lit­tle more than half the price the gov­ern­ment paid when it pro­vided RBS with a 45.5 bil­lion­pound res­cue dur­ing the fi­nan­cial cri­sis. The stock has re­bounded 43 per­cent this year. The net loss for the quar­ter was 1.38 bil­lion pounds com­pared with a 1.23 bil­lion-pound profit in the year-ear­lier pe­riod. An­a­lysts had pre­dicted a loss of 276 mil­lion pounds, ac­cord­ing to the me­dian es­ti­mate of sur­vey.

That loss in­cludes a 1.46 bil­lion-pound ac­count­ing charge on the fair value of RBS’s debt. So­called credit val­u­a­tion ad­just­ments re­quire banks to book losses when the value of their debt rises, and gains when it de­clines, on the the­ory that a loss, or profit, would be re­al­ized were the bank to re­pur­chase that debt.

“Eco­nomic pres­sures are re­strain­ing cus­tomer ac­tiv­ity lev­els and as a re­sult banks are run- ning hard to stand still in this en­vi­ron­ment,” Hester said to­day.

RBS has led a two-year in­ves­ti­ga­tion into its role in the Li­bor- rig­ging scan­dal. RBS traders and their man­agers reg­u­larly sought to influence the firm’s Li­bor sub­mis­sions be­tween 2007 and 2010 to profit from de­riv­a­tives bets, ac­cord­ing to em­ploy­ees, reg­u­la­tors and lawyers in­ter­viewed by Bloomberg. Staff also com­mu­ni­cated with coun­ter­parts at other firms to dis­cuss where rates should be set. “There is a spec­trum” of how ad­vanced talks are with dif­fer­ent reg­u­la­tors, Hester said to­day. “We have, in the end, to dance to the tune of the reg­u­la­tors.”

RBS fol­lowed Lloyds Bank­ing Group Plc is set­ting aside more money for pay­ment­pro­tec­tion in­sur­ance claims af­ter reg­u­la­tors or­dered banks to com­pen­sate clients who were forced to buy, or didn’t know they had bought in­sur­ance to cover their re­pay­ments on mort­gages, credit cards and other loans. Lloyds, Bri­tain’s big­gest mort­gage lender, set aside 1 bil­lion pounds more yes­ter­day, which to­gether with RBS’s pro­vi­sion brings the in­dus­try to­tal to al­most 11 bil­lion pounds.

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