FSA joins probe into Scottish bank’s rigging of interest rates, officials say

Bloomberg

The Financial Services Agency has joined a probe into possible rigging of interest rates at Royal Bank of Scotland Group PLC, according to two regulatory officials with knowledge of the matter.

The FSA earlier this month began reviewing RBS’s Japan banking and brokerage units on issues including compliance related to the setting of London and Tokyo interbank offered rates, the officials said, asking not to be named as the matter is confidential.

The Securities and Exchange Surveillance Commission began its inspection last month, a government official with knowledge of the matter said at that time.

RBS, Britain’s biggest taxpayer-owned lender, is among banks facing allegations by regulators worldwide that they manipulated Libor, the benchmark for more than $300 trillion of securities. The Edinburgh-based lender and UBS AG, Switzerland’s largest bank, are close to following Barclays PLC in reaching financial settlements with authorities.

“It’s good to see Japan’s regulators are putting their shoulders to the wheel to make sure the markets are fair and sound,” said Mitsushige Akino, chief fund officer at Ichiyoshi Asset Management Co. “People in Japan haven’t been so concerned about Libor manipulation even though it’s become a big issue globally.”

The FSA was scrutinizing RBS’s Tokyo banking branch and RBS Securities Japan Ltd. as of Dec. 5, the agency said on its website without disclosing additional details. It informed RBS about the probe Nov. 27, one of the people said.

“We are fully cooperating with all of our regulators,” said Atsuko Yoshitsugu, a Tokyo-based spokeswoman for RBS. She declined to comment further.

Hiroshi Okada, a spokesman for the FSA, declined to comment. RBS hasn’t been accused of any wrongdoing by Japanese regulators, which conduct regular inspections of financial companies, according to the FSA’s website.

RBS has led a two-year investigation into its role in the Libor-rigging scandal. Traders at the bank and their managers regularly sought to influence the firm’s submissions to the benchmark interest rate 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 rate setting.

The bank has fired at least four traders and suspended at least three others. In October it suspended its head of rates trading for Europe and the Asia-Pacific region, the first senior manager to be put on leave.

An RBS employee in Tokyo on March 27, 2008, is alleged to have asked a derivatives trader in London to make sure the bank’s Libor rate submission in yen for the next day would increase, according to a transcript made public by a Singapore court and reviewed by Bloomberg before being sealed by a judge at RBS’s request.